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  • November 13, 2018
    Equities Stewardship
    Hermes ESG Shows Social Rising
    Geir Lode
    Companies with good or improving social characteristics have tended to outperform their lower-ranked peers on average by 15bps per month, according to new research from the Global Equities team at Hermes Investment Management.
  • January 31, 2018
    Equities
    Do not spoil your portfolio return
    Geir Lode
    The rapid ascent in the oil price has caught many off guard. With the Brent spot price at US$70/barrel investors are asking themselves if this is the beginning of a new bull market, according to Geir Lode, Head of Global Equities at Hermes Investment Management. The global oil demand will pass through 100 million barrels a day in 2018, outpacing supply and indicating a bullish outlook for the oil price. Given the listing of Aramco and Russia’s dependency on high oil prices, we believe OPEC will stay disciplined in 2018. The forward market for oil, which indicates a lower oil price towards the end of the year, is looking too bearish. The increasing oil prices will undoubtedly lead to capital expenditures. E&P companies with exposure to North America raised their capital expenditure by 50% in 2017 versus a depressed 2016. However, with limited spare capacity globally this is not a concern - the current level of capital expenditure is needed just to maintain current production rates. A lack of skilled labor could be a further bottleneck limiting the potential for production growth.
  • July 26, 2017
    Equities
    Amazon – valuing a game changer
    Geir Lode
    While the technology giants have challenged and transformed the multitude of industries in which they operate, they are now challenging the traditional methods of stock valuation. Amazon, for example, has changed both consumer and competitor behaviour. The business may appear overvalued according to the standard metrics, but Geir Lode, Head of Global Equities at Hermes Investment Management, believes its outlook is bright.
  • July 19, 2017
    Equities
    Valuation not value - When paying a higher price can be justified
    Geir Lode
    We assess a company’s value based on a wide range of characteristics: from growth and profitability, to capital structure, corporate behaviour, ESG metrics, and market sentiment. Companies with an attractive valuation and a positive blend of these elements are what we look for when investing. A simple way of thinking about how a company’s characteristics interact with one another to create its ultimate value is to consider the relationship between a company’s Price-to-Book (P/B) ratio, a valuation metric, and its Return on Equity (ROE), a measure of profitability. Broadly speaking, similar companies tend to display a persistent relationship between profitability and valuation: the higher the excess returns the company is expected to generate, the higher the valuation. Looking at figure 1, the lines show how different levels of profitability are valued in each industry group, with companies below the line for a given sector looking cheap and those above the line expensive. From the slope of the lines we can estimate the market’s expectations of how long companies in each industry are expected to deliver excess returns. This is referred to as the market-implied competitiveadvantage period for the peer group.
  • July 3, 2017
    Equities
    ESG empowered: Hermes Global Equity ESG Fund posts three years of strong returns
    Geir Lode
    Our proprietary research has long demonstrated the performance benefits of integrating environmental, social and governance (ESG) factors into investment decisions. The strong returns of the Hermes Global Equity ESG Fund, launched three years ago, provides further evidence that ESG investing not only makes you feel good but can also make you money. The Hermes Global Equity ESG Fund aims to generate consistent, positive relative returns by investing in companies with strong fundamentals and ESG characteristics. So far, this objective has been achieved: since its 1 May 2014 inception, the Fund has gained a net cumulative 21.3% against the MSCI World AC Index return of 16.7% (see figure 1).
  • December 12, 2016
    Equities Stewardship
    Through boom and doom, consistency is at our core
    Geir Lode
    Launching our core global equity product in the depths of the financial crisis, and investing throughout subsequent market shocks and surges, tested our ability to meet the commitment we made to investors from the outset: to generate consistent, compounding outperformance for the long term. Since its December 2008 inception, a period beginning with the tumult of the financial crisis and ending with the bullish US ‘Trump trade’, the Hermes Global Equity Fund has achieved its objective: to generate 2%-3% net annualised outperformance of its benchmark, the MSCI World Index, over rolling three-year periods (see figure 1). This 2.4% net annualised outperformance is reinforced by other evidence that the Fund offers a robust proposition: strong risk-adjusted returns, skilful active management, prudent diversification and low turnover.
  • December 1, 2016
    Equities
    What the dawn of ‘Trumponomics’ means for investors
    Geir Lode
    President-elect Donald Trump broke all the rules on his way to winning the White House. As the world considers the implications of an unorthodox Trump-led administration, Geir Lode, Head of Global Equities at Hermes Investment Management, examines how ‘Trumponomics’ could shape the global economy and investment landscape.