As the world continues to be disrupted by new technologies and traditional companies find themselves at the mercy of new players, adopting a global approach to equity investing is vital for finding businesses that can compound up and grow, and deliver high returns on capital.
Nikko Asset Management’s Global Equity team is based in Edinburgh. Their unique approach — a combination of experience, future quality and execution — means they’re continually ‘joining the dots’ across geographies, sectors and companies, to find the opportunities that others simply don’t see.
The team’s philosophy is based on the belief that investing in a portfolio of future quality companies will lead to outperformance over the long term.
The four pillars of future quality
The team defines future quality as a business that can generate sustained growth in cash flow and high improving returns on invested capital at attractive valuations. Their portfolios consist entirely of companies that exhibit these characteristics.
Quality of franchise: They believe superior and sustainable returns on capital over the long term will deliver better compound returns.
Quality of balance sheet: They prefer to invest in businesses that can finance future organic growth using their own capital resources.
Quality of management: The team looks for management with a strategic vision, strong internal leadership, disciplined capital allocation and a high standard of corporate governance.
Quality of future valuation: The team seeks companies where the future is not reflected in today’s valuations.
Based on this criteria, the team believes future quality companies can ride through the cycle and maximise returns whatever the investment climate.
A team effort
The team’s deliberate flat structure fosters individual accountability and collective responsibility. It is designed to take advantage of the diversity of backgrounds and areas of specialisation to ensure the team can find the investment opportunities others don’t.
Their detailed bottom-up research approach leads them to fresh, lesser known winners and away from accepted growth stocks where returns are already priced in. This method allows them to delve into the detail and identify businesses ranging from traditional companies, which are reshaping, to younger companies that are delivering tomorrow’s technologies and business models.
With over two decades in the market the team is better prepared for what may come next. By focussing on future quality companies, the team is well placed to navigate whatever markets throw at them for long-term rewards.
A spotlight on the Fund
The Nikko AM Global Share Fund is a high conviction global share strategy that has exposure to 40-50 stocks — weighted to reflect the alpha conviction in individual stock selections. The strategy is benchmark and style agnostic with an active share of 90% - 95%.
The Fund targets excess return of 3% p.a. before fees, tax and expenses over rolling three-year periods.
This material is issued by issued by Nikko Asset Management Australia Limited ABN 34 002 542 038, AFSL 229664 (Nikko AM Australia) who is the responsible entity and issuer of units in the Nikko AM Global Share Fund ARSN 092 026 269. Nikko AM Australia is part of the Nikko AM Group. The information contained in this material is of a general nature only and does not constitute personal advice, nor does it constitute an offer of any financial product. It is for the use of researchers, licensed financial advisers and their authorised representatives, and does not take into account the objectives, financial situation or needs of any individual. The information in this material has been prepared from what is considered to be reliable information, but the accuracy and integrity of the information is not guaranteed. Figures, charts, opinions and other data, including statistics, in this material are current as at the date of publication, unless stated otherwise. The graphs, figures, etc., contained in this material include either past or backdated data, and make no promise of future investment returns, etc. Past performance is not an indicator of future performance. Any economic or market forecasts are not guaranteed. Any references to particular securities or sectors are for illustrative purposes only and are as at the date of publication of this material. This is not a recommendation in relation to any named securities or sectors and no warranty or guarantee is provided.