In the long term, markets are efficient at rewarding risk. Through consistent exposure to a well-structured, diversified portfolio of risk premia, investors can achieve positive real returns. We seek outcomes through factor-based investing, and allocate to traditional and alternative betas within the risk-premia spectrum. In doing so, we combine the discipline of a systematic process, which helps to avoid behavioural biases, with the pragmatism of judgment calls as the past often fails to repeat itself in the same way.
We first identify the underlying drivers of a given inflation benchmark. From a global universe, we then identify a range of liquid assets whose risk premia can either contribute to matching inflation or delivering an attractive excess return. Next, we extract specific risk factors from these assets and manage these exposures in a dynamic way, combining systematic rigour with fundamental judgment, to exploit the dynamic relationship between assets and inflation.
To achieve investment outcomes for our clients, we analyse assets, deconstruct them to identify their component parts, and re-purpose them according to our needs. This involves extracting risk premia that help to achieve desired performance outcomes, rather than adhering to asset class categories. This factor-based approach enables us to be more precise in seeking a defined outcome while remaining agnostic about assets, thereby allowing us to swiftly adapt to changing market conditions.
We follow a three-step investment process:
Why Mendelssohn White Multi Asset?
Flexibility: Our method of identifying inflationary drivers, factor extraction and asset bucketing, can be applied to different inflation benchmarks.
Customisable: The solution is customisable to clients’ liquidity tolerances, benchmarks and asset mix guidelines.
Inflation is core: Unlike other multi-asset solutions, inflation guides both asset selection and asset allocation.
Outcome focused: Our asset class expertise enables us to generate both growth and inflation protection investment outcomes.
Experience: Our asset selection and allocation skills are complemented by Mendelssohn White’s inflation expertise in our inflation-linked bonds, credit, real estate and infrastructure teams.
Small and Mid cap
We believe that a carefully selected portfolio of high-quality stocks, bought at a discount to their intrinsic value, will produce the best returns over a three to five year period. Our capabilities give us a truly insightful perspective, and we apply this to our whole range of strategies. Irrespective of circumstances, we follow the same, well-established, relatively low risk and long-term strategy.
Why Small & Mid Cap?
Small and mid cap stocks offer long-term investors a compelling blend of targeted exposure to growing companies at share prices that are frequently below intrinsic value.
The market is inefficient due to limited coverage and a lack of understanding of the fundamentals of these businesses, leading to anomalies that we, as professional investors, can exploit.
Small and mid cap companies have significantly outperformed large cap stocks over a long period. Risk is higher, but it can be significantly mitigated and the focus of the team is on generating strong risk-adjusted returns for investors. Small and mid cap exposure should also act as a diversifier as part of a balanced equity portfolio.
Potential for superior returns
The smaller companies’ universe consists of thousands of dynamic businesses – with exposure to all areas of the economy and at different stages of their development – that have much greater potential for growth than their larger, more mature counterparts. Such broad choice represents a great opportunity for managers who can identify companies currently undervalued by the market.
Smaller companies generally perform well during the upward phase of the economic cycle. In our view, there are still many attractive opportunities, despite the strong gains recorded over the last few years.
Philosophy & Approach
We believe that long-term investment in high quality companies, bought at a discount to intrinsic value, produces the best risk-adjusted returns for the client.
We identify these stocks through detailed fundamental analysis. Our focus on cashflow highlights their lifetime potential, and a constant consideration of risk ensures effective portfolio construction.
How we add value
We aim to concentrate as much risk as possible on stock selection, with portfolios of 50-70 holdings. Portfolio risk is monitored very closely though the use of industry standard as well as proprietary risk models.
We believe our genuine long-term philosophy is a real differentiator. The temptation to sell too soon is a very strong one, but great small and mid cap stocks can produce above average growth for their industry year after year. Hence our emphasis on finding businesses with these characteristics and with the management teams who can deliver it, even if much vaunted catalysts for outperformance are not readily apparent. Thus our clients can benefit from a stock’s lifetime potential rather than simply profiting from short-term corrections.
A consistent and effective process
Focus on stock selection
Picking stocks lies at the core of our process. We employ a bottom-up selection process focused on identifying quality companies that have the ability to perform well throughout the economic cycle.
Our investment process has been consistently employed for many years and proved effective at generating strong risk-adjusted returns.
We target companies that offer a durable competitive advantage, sustainable growth, a sound and capable management team and a strong balance sheet. They also should be able to demonstrate capital discipline, good cash generation and compelling value.
We generate ideas through a multiplicity of sources such as conferences, broker and industry research and screens, but we find most ideas come from meeting company management teams.
Meeting companies, especially through visits to their operating locations, is one of the best ways to learn more about businesses. Our managers hold numerous company meetings, in all the regions in which we invest. These direct contacts allow us to assess the quality of management, understand the business model and its key drivers, as well as gaining insights into competitors, customers and suppliers. Crucially, with all of our regional teams based in Singapore, the benefit from information gleaned from management meetings and company visits can be shared amongst the whole team.
Once a stock idea has been generated, further analysis is conducted including visiting the company if possible and carrying out a detailed valuation to understand its intrinsic value. The results of the work are distilled into a investment report which is then formally discussed with peers. If accepted, the stock’s fit within the existing portfolio and its risk parameters are evaluated.
We monitor all holdings on an ongoing basis and conduct a monthly portfolio review. This utilises a proprietary model which compares a stock’s implied portfolio ranking compared with its actual position. The implied position is determined by a combination of the portfolio manager’s perception of the quality of the business, a quantitatively derived measure of financial strength and its discount to intrinsic value.
On top of industry benchmarks, our team makes use of our in-house factor-risk model. This can be run with customised variables and is used to identify unintended risks within portfolios. Sense checks and a consideration of a company's lifecycle are also part of the risk management process.
Every stock we hold is continuously monitored. We sell or reduce a stock if there has been either a marked change in fundamentals, an unjustifiable rise in price above intrinsic value and/or the discovery of a stronger investment opportunity.
Why Mendelssohn White Small & Mid Cap?