Global Equity High Conviction IMA

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Partner: API Capital

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FACT SHEET

Underlying Returns

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The TAMIM Global Equity High Conviction IMA is a portfolio of global equities from major developed global exchanges. The portfolio holds approximately 25 of the best ideas from our investment manager’s portfolios. The portfolio uses a systematic and consistent approach to stock selection and portfolio construction to deliver strong risk adjusted returns to our clients while focusing on attempting to preserve their wealth.
 
The security selection process seeks to identify companies with a superior combination of value, quality, and momentum features:

• Value - identify securities where consensus expectations of growth and return are too low.
• Quality – Assess companies based on financial and operating leverage, stability of earnings growth and return on equity.
• Momentum – We look for positive indicators from short and medium term volatility adjusted relative performance. The market is often right.

 

Why choose the TAMIM Global Equity High Conviction IMA
The Portfolio is designed for investors who seek:

• to invest in the wealthiest global companies;
• diversification away from the Australian economy;
• a focused portfolio of the most attractive global companies;
• a risk aware approach to global investing.

 

Investment Philosophy
Equity Markets are inefficient and good active managers can add value.

• What we mean by inefficient is that information on companies in these markets is misinterpreted and that other investors, against which we compete for our returns, make mistakes which are both predictable and persistent.

 
Investing in a disciplined and systematic way, with the use of quantitative models, helps us to identify both risks, and opportunities. 

• All investing is the result of decisions made by humans – it’s all judgment. However the use of quantitative models (designed by humans) can reduce the tendency to extrapolate the recent past and to ignore signals which run counter to our own beliefs.
• Combining forward looking ‘fundamental’ research work with the historic based ‘quantitative’ modelling approach mitigates the errors that each discipline alone tends to make.

Key Articles:

The VMQ Ranking System

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Running the Numbers

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Stock Articles:

Investment Theme - US Infrastructure

JP Morgan (JPM.NYSE)

10 Stocks that Benefit from Emerging Market Growth

Bank of Montreal (BMO.TSE)

Pfizer Inc. (PFE.NYSE)

Rolls Royce (RR.LON)

Gilead – When is a tech stock not a tech stock?

Stock Review - Macy's (M.NYSE)

Upsetting the Apple cart - is it still right to hold?

A value biased approach is not the only way to invest of course but we have found that the most cost effective way to make money is by using a value approach.

• The value approach tends to reward investors with higher cash payments in the form of dividends, strong asset backing relative to the price paid in the market, and lower transaction costs in that we are typically buying when others are selling and vice versa. We like this.
• We know that a value process tends to have limitations in that we may be drawn to invest in companies whose asset values and earnings power are in terminal decline. We work hard to identify a catalyst which convinces other investors that returns on capital have potential for improvement or that the company’s profit stream is less risky than believed

 
A commitment to research, and to incorporate discoveries in the investment process,  is vital to maintain any competitive advantage

• It is our contention that an investment process, or team, which doesn’t change and/or adapt is likely to be superseded and lose any competitive advantage it held.
• Most clients would like no change to an investment process but we believe that other investors are smart and motivated, and are also looking for the inefficiencies we are trying to spot.
• Therefore, within the confines of our “Value” approach and our commitment to a systematic process, we continue to look for new ways to beat the competition and expect to add new tools to our process once we are happy that they are persistent and have a connection to the real world. We are, for example, unlikely to use planetary alignments to pick stocks even though we can create high correlations with astronomy and relative stock returns.  

Management of the return volatility is critical  “Winning by not losing”

• We don’t use a macro economic framework to pick countries but prefer to identify cheap stocks with the prospects for change and assemble a portfolio where the predicted total volatility is less than that of the index.
• We aim to be patient and expect lower levels of stock turnover – this benefits investors by reducing transaction costs
• No single stock position should jeopardise fund performance - a diversified portfolio means prudence

 
Communication between team members is crucial in detecting investment opportunities and focusing on the correct management of the portfolio.

• Portfolio management is not best done by consensus. 
• However we do like the portfolio managers’ thesis to be tested since they are unlikely to have a monopoly on good ideas, nor able to keep abreast of every relevant development for the portfolio
• We have found over many years that a team approach is the best way to avoid errors that an individual can make

 
Investment Objectives
The TAMIM Global Equities High Conviction IMA invests in equities listed on the major developed market exchanges. The IMA uses a systematic and consistent approach to stock selection and position sizing combining experienced judgment with fundamental research, and quantitative modelling tools which enable the team to assess over 1700 global securities.

The fund will hold approximately 25 positions representing the ‘best ideas’ of the team. Risk is carefully monitored using a combination of manager experience and sophisticated risk software.
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We aim to provide investors with strong risk adjusted returns over the medium to longer term.
 
The Portfolio is designed for investors who seek:

• to invest in high quality overseas listed companies;
• diversification away from the Australian economy;
• a broadly-based portfolio of typically, larger companies;
• a risk aware approach to investing.

 
 
Investment Benchmarks
The TAMIM Global Equity High Conviction IMA benchmark is the Reserve Bank of Australia Cash Rate plus 2.5% p.a. While indices may be useful in comparing investment returns, we do not use benchmark equity indices as a tool for active portfolio construction. Securities are selected on their individual merits and the portfolio constructed of equities with a superior combination of value, quality, and momentum features.
 

Investment Parameters
The portfolio will comprise of approximately 20-25 holdings which are listed, liquid, and traded, on the world’s major stock markets. The portfolio will attempt to be a representation of the major regions and industry sectors, to provide a more stable investment return. It is intended to be a global portfolio based on global revenue sources. No leverage will be used nor will the manager hold large amounts of cash in an attempt to ‘time the market’. The portfolio will typically be un-hedged unless the Australian $ is significantly undervalued based upon various purchasing power parity measures employed by TAMIM.

 

​Investment Process 
The security selection process seeks to identify companies with a superior combination of value, quality, and momentum features. We call this VMQ.
 
We screen over 1700 companies from the MSCI AC World Index universe and sort and rank them into portfolio candidates based upon their VMQ characteristics. 

• Value - identify securities where consensus expectations of growth and return are too low.
• Quality – Assess companies based on financial and operating leverage, stability of earnings growth and return on equity.
• Momentum – We look for positive indicators from short and medium term volatility adjusted relative performance. The market is often right.

 
Once we have identified the most attractive candidates from the top 20% by VMQ rank we use knowledge, fundamental research, and risk controls to select up to 25 names which represent a cross section of cheap companies with stable balance sheets, and evidence of upward price movement.
 
Position size varies between 2% - 7% and is a function of the market size of the company and the conviction we have about its return prospects.
 
We review and rebalance the portfolio routinely but will make decisions based upon events in the market rather than a simple calendar basis.
 
We are patient and expect to hold positions for over a year with normal market conditions.