Institutional Strategies

Investment Philosophy

The underlying principles that form the foundation of the strategy include:

• Growth companies typically have a natural high failure rate as competition enters markets, ultimately eroding growth and profitability
• Focused on finding global growth businesses that can overcome competitive pressures due to unique business models that prevent erosion of growth and profits. These structurally advantaged businesses have more sustainable growth rates and tend to have higher margins as they mature
• The market tends to overvalue short term earnings growth and undervalue long-term sustainable growth

The strategy focuses on the following possible sources of sustainable competitive advantage:

• Brand equity
• Patent protection / intellectual property
• Control of distribution channels
• Scale
• Switching costs

Investment Process

The investment process is driven by fundamental bottom-up research with a macro overlay. The strategy strives to exploit opportunities where the market has not fully appreciated long term sustainable growth. The portfolio manager is supported by a global equity analyst team who conduct detailed fundamental analysis on securities around the globe. The process results in a concentrated portfolio of only 50 to 70 stocks of only the highest conviction and is constructed irrespective of the index. Portfolio manager Sarah Ross, CFA has full discretion over the entire investment process.

A broad Global Equity universe (approximately 3,000 securities) is initially narrowed by looking for the following characteristics:

• Above average earnings growth
• Inflection in profit margins
• High net profit margins
• High return on capital or potential to reach with a large total addressable market

Core of the Investment Process
At the core of the investment process are two main elements; bottom-up selection and macro overlay.

I. Bottom-up Selection (Structural Assessment)

The cornerstone of the strategy is the identification of the competitive advantages or unique business models that will enable the company to sustain long-term growth. The portfolio manager is supported by a global equity analyst team who help conduct detailed fundamental analysis on securities around the globe and meet with executives from company management teams. They narrow the investment universe through fundamental analysis of:

• Competitors
• End markets/size of addressable market
• Margin trends
• Earnings quality
• Sustainability of growth
• Changing competitive landscape

Each name within the portfolio falls within a growth bucket (Accelerating Growth, Controlled Growth or Cyclical Growth) that is determined by the competitive advantage it holds and relative external factors that may enhance or hinder growth.

II. Macro Overlay

The second aspect of the fundamental research and screening process involves a macro overlay. The portfolio manager leverages the firm’s strong collaborative culture to capture macro-economic insight to determine factors affecting sustainable growth and to help mitigate risk. The firm has a daily morning meeting attended by all investment professionals including global economists, currency specialists, other international portfolio managers and global research analysts. Through these daily interactions and debates, the portfolio manager obtains proprietary insight on:

• Geographical economic environments
• Political environments
• Regulatory policy
• Geopolitical risks
• Currency environments

Upon conclusion of the two fundamental research steps above, the portfolio manager selects the securities with the greatest superior business models, timeliness and capital discipline. The end result is a concentrated portfolio with generally 50-70 securities which are a byproduct of the investment process and not constructed around the index.