As Swiss companies tend to be operational on a global scale, it is important to have a worldwide vision and expertise of the global market’s competitive structure when managing Swiss equity. Therefore it is of advantage to manage Swiss & global strategies within one investment team. UBP’s Geneva-based Swiss & Global Equity team has been working together and following the same investment approach since 2006.
The Swiss and US equity markets offer the highest levels of Cash Flow Returns on Investment (CFROI®)* for equity markets. CFROI® is the financial measure which best enables an investor to gauge a company’s value-creation ability. With an investment framework based on companies’ CFROI® lifecyles in place since 2006, UBP’s Swiss and Global Equity investment team focuses on attractively valued opportunities. They build convictions through bottom-up analysis of companies and their environment, incorporating strict environmental, social and governance (ESG) criteria into the process.
The post-Covid-19 environment is expected to offer limited visibility on prospects for economic recovery, with earnings uncertainty lingering and numerous companies withholding guidance for the medium term.
An active investment approach with an experienced stock-picking ability, focusing on the medium to long term rather than short-term movements, should provide equity investors with the needed stability and agility to navigate this volatile period.
The Swiss equity market remains one of the most resilient markets, offering superior risk-adjusted returns over the short and longer term versus other regional and global equities. This structural outperformance is driven by Swiss equities’ superior value creation and ESG profiles.
UBP’s Swiss & Global Equity strategies continue focusing on value-creating quality companies and remain well positioned for short-term momentum as well as long-term structural drivers, without the need to time markets or themes.
*Concept of the CFROI® life cycle
During a typical company’s life, its business generates varying levels of cash flow return on investment (CFROI®) reflecting its stage of development: growth, maturity or decline. While superior CFROI®s tend to fade down to the Cost of Capital (CoC) as value creation attracts competition, inferior returns may “fade up” to the CoC as a result of restructuring or competitors exiting the market. The team seeks to identify companies with consistent, superior CFROI®s that steadily create value over the long term which is not yet discounted by the market. The team also looks for turnaround stories that are undervalued and for companies experiencing a phase of accelerating growth that may not yet be fully appreciated in terms of the magnitude and duration of the widening positive spread between CFROI® and CoC.
CFROI® - Source: Credit Suisse HOLT