The U.S. Large Cap Value investment process has followed an “absolute, high conviction” investment strategy since the products’ launch in 1998. The manager employs an actively managed approach focusing on long-term investment in well established companies identified by the portfolio manager’s “circle of competence”. The strategy seeks to generate superior returns by investing in high-quality businesses with strong cash-flow generation, trading at a significant discount to what the investment managers believe to be the stock’s intrinsic value.
We employ a stock selection process that begins with an investable universe comprised of approximately 600 large-cap US based companies. Each name is modeled using a highly conservative Triple-Discount Valuation Mechanism developed by the portfolio manager and employed since the product’s inception in 1997. We follow with a thorough fundamental assessment to narrow our investable universe to a “circle of competence,” establishing a superior opportunity set of 90 to 110 stocks. Similar to a private equity approach, our process assumes purchasing the business outright for cash with no leverage targeting a 13%+ IRR for new investments. From our Circle of Competence, we construct high conviction, concentrated portfolios of 20 – 40 holdings, the top 10 holdings will typically comprise 50% of the portfolio and holdings generally represent a minimum of 7 of the 11 GICS sectors. As part of our risk monitoring process, the model is applied frequently to portfolio holdings to validate the investment thesis for any name held.