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European Equities

Home / Capabilities / European Equities

Hermes offers three European equity strategies:

Hermes Sourcecap European Alpharutherford-quote

Objective: aiming to achieve long-term capital appreciation by investing primarily in a diversified portfolio of equity and equity-related securities with a European bias (including Russia and Turkey) quoted or traded on Regulated Markets.

Why Hermes Sourcecap?

  • Truly active: our high-conviction approach results in a portfolio with very different stock weightings to those of the benchmark, generating a consistently high active share.
  • Power of change: markets behave as if change has a short-term and linear effect on a business. However, companies can see long-term, exponential outcomes. This mismatch creates an enduring market inefficiency.
  • Enduring quality growth: we look for companies with a persistent competitive advantage underpinned by franchise value, balance sheet strength and revenue generation, putting them in control of their own destiny.
  • Long term: time is the last true arbiter of change and our strong convictions in companies enable us to invest for the long term with a low rate of turnover.
  • Proven record: portfolio manager James Rutherford has been managing European equity portfolios for more than 20 years. This experience has helped underpin Sourcecap’s outperformance since inception1.

Investment approach
Change is systematically under-appreciated by investors. Most stock analysis is linear, but in reality we live in a non-linear world. As a consequence, change can lead to dramatic geometric expansions in stock valuations, as changes persist for longer than most investors expect.

We take a bottom-up approach to investing, with stock selection the key driver to returns and the dominant source of relative portfolio risk. Our emphasis is on identifying companies or industries undergoing longer-term structural change. Even when a stock decision has a strong thematic element, the fundamental qualities of the company take precedence, and stocks only enter the portfolio on their own merit.

Focus on long-term growth
Our high-conviction approach ensures that stocks are only bought when there are clear insights into factors that will generate positive change in the business and that will persist over time. Markets generally value companies in a short-term and linear fashion. We look for companies that can deliver long-term compounding growth to their shareholders.

Hermes Sourcecap Europe ex UK

Objective: aiming to achieve long-term capital appreciation by investing primarily in a diversified portfolio of equity and equity-related securities with a European bias (including Russia and Turkey) quoted or traded on Regulated Markets.

Why Hermes Sourcecap?

  • Truly active: our high-conviction approach results in a portfolio with very different stock weightings to those of the benchmark, generating a consistently high active share.
  • Power of change: markets behave as if change has a short-term and linear effect on a business. However, companies can see long-term, exponential outcomes. This mismatch creates an enduring market inefficiency.
  • Enduring quality growth: we look for companies with a persistent competitive advantage underpinned by franchise value, balance sheet strength and revenue generation, putting them in control of their own destiny.
  • Long term: time is the last true arbiter of change and our strong convictions in companies enables us to invest for the long term with a low rate of turnover.
  • Proven record: portfolio manager James Rutherford has been managing European equity portfolios for more than 20 years. This experience has helped underpin Sourcecap’s outperformance since inception.

Investment approach
Change is systematically under-appreciated by investors. Most stock analysis is linear, but in reality we live in a non-linear world. As a consequence, change can lead to dramatic geometric expansions in stock valuations as changes persist for longer than most investors expect.

We take a bottom-up approach to investing, with stock selection the key driver to returns and the dominant source of relative portfolio risk. Our emphasis is on identifying companies or industries undergoing longer-term structural change. Even when a stock decision has a strong thematic element, the fundamental qualities of the company take precedence, and stocks only enter the portfolio on their own merit.

Focus on long-term growth
Our high-conviction approach ensures that stocks are only bought when there are clear insights into factors that will generate positive change in the business and which will persist over time. Markets generally value companies in a short-term and linear fashion. We look for companies that can deliver long-term compounding growth to their shareholders.

Hermes Sourcecap Eurozone

Objective: aiming to achieve long-term capital appreciation by investing in a diversified portfolio of European equity securities primarily listed in the MSCI EMU Index or in a constituent country.

Investment approach
Eurozone is a mid-to large-capitalisation eurozone equity strategy with strong emphasis on alpha generation over the long-term. A typical portfolio would usually consist of 30 to 60 high-conviction bottom-up ideas that are generated within a clear thematic framework. Technical and macro overlays are deployed which are complementary to our fundamental bottom-up approach to stock selection as companies operate in the real world and not a vacuum.

We analyse and value stocks in an absolute sense based on their own merits, as we feel that the benchmark is there to be beaten rather than clung to. This approach leads to a strategy with very high levels of conviction, with all stocks held for a clear and positive reason. The structure of the strategy in terms of stocks held, sector positioning and residual country exposure, therefore reflects the availability of good ideas and hence the number of names held will vary to reflect the prevailing economic and market conditions.

1. Since inception on 18 June 2007 the Hermes Sourcecap European Alpha Strategy has outperformed the FTSE All World Europe Index by 3.39% on an annualised basis as at 31 December 2015. Performance shown is in EUR and is gross of fees. A full GIPS disclosure report is available on the latest strategy factsheet.

Past performance is not a reliable indicator of future results and targets are not guaranteed.

European Alpha Newsletter