Investment case and philosophy
European equities currently present a compelling investment opportunity. We have identified the following points that support this view:
- The UK refendum result has increased political and economic uncertainty in Europe;
- The economies that have enacted structural reforms are performing the best (e.g. Ireland, Spain);
- Core Europe has shown resilient consumer confidence and continued, though modest, growth;
- European valuations remain attractive and the corporate sector is in good shape;
- Dividends have been an important factor in a low-yield environment;
- Equity markets have been progressively pricing in less deflation, reflecting the turn of the commodity cycle.
Our philosophy is based on having a high active share with no neutral positions or underweights, while controlling the systematic risk with careful sector allocation. Our pragmatic investment approach focuses on capital structure. We find value in under-researched stocks and adapt our themes to changing scenarios.
The team’s four portfolio managers and senior portfolio analyst have a long history of working together, having joined UBP from Threadneedle, where their portfolios consistently beat the benchmarks. The team’s co-heads, Rob Jones and Scott Meech, have worked together for the past nineteen years.
- A disciplined approach bringing consistent returns over the past eight years in both bull and bear markets.
- First-quartile performances over three years, and among the 2.09% of peers who outperformed in 2011, 2012, 2013, 2014 and 2015.
- Since reaching its three-year track record, the team has onboarded three institutional European equity mandates.
The European Equity team’s investment process is a combination of analytical skills and quantitative instruments.
The various steps are as follows:
- Top-down analysis based on thematic ideas, macroeconomic analysis and sector views;
- The investment universe is reduced by being screened for suitability, while applying a market-cap and liquidity filter, along with looking at free-float and other factors;
- In-depth, fundamental analysis of all stocks on the resultant focus list taking valuations, growth, income, returns and momentum into account, backed up by regular company meetings;
- Portfolio construction with a strict risk-management approach for country and sector diversification, coupled with ongoing risk-control at the stock, sector, country and overall portfolio levels.