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US SMID EQUITY

Aiming to provide long-term capital appreciation by investing primarily in equity or equity-related securities of small and mid-capitalisation companies domiciled in the US or deriving a large proportion of their income from US activities.

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We are looking for companies underneath Wall Street's radar, not shooting stars. We firmly believe the tortoise beats the hare.

Mark Sherlock

Fund Manager

High quality

We define quality as durable competitive advantage. Companies that have this often exhibit high market share, industry-leading margins and good cash-flow generation.

Long-term investment

The average holding period is three to five years. This longer-term focus allows the team to take advantage of short-term swings in investor sentiment to identify attractive entry points for investment.

Lower risk

The focus on quality and cash-flow generation gives a degree of downside protection. We believe this provides a relatively low-risk way of accessing this asset class.

Stable returns

Investments in high-quality businesses tend to preserve capital in down markets, thereby lowering risk.

Investment approach

We invest in high-quality companies that we believe possess a durable competitive advantage. We value consistency and stable, growing revenues and cash flow. Over time, we believe that companies that exhibit these characteristics outperform with less risk. Our investment criteria are based on company fundamentals, not macro driven.

US Small and Mid-Cap

We have a watchlist of about 200 companies that meet our quality criteria, which has been built up over the past 10 years and supports timely investment when valuations are appropriate. A detailed company report and cash flow model is produced for each potential investment. We then perform a composition review, an optimisation tool which is run monthly, incorporating quantitative and qualitative data on each of our companies to effectively manage position sizes.

A track record of performance

Small and Mid-Cap stocks have historically provided better returns over time. The Hermes US SMID Strategy, upon which this product is based, has a long track record of outperformance.1

Risk management

The majority of risk in our portfolio comes from stock selection – the team’s core competency – and we regularly test for unintended factor risks. EOS provides us with proprietary data about environmental, social and governance risks that may influence the performance of companies.

  1. 1Since inception on 31 October 1987 the Hermes US Small & Mid Cap Companies Strategy has outperformed the Russell 2500 index by 1.09% on an annualised basis as at 30 September 2018. Performance shown is in USD 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.

Team

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Mark Sherlock

CFA, FCA, Head of US Equities, Lead Portfolio Manager

Mark Sherlock

CFA, FCA, Head of US Equities, Lead Portfolio Manager

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Mark joined the US Equities team in February 2009 as co-manager of the US SMID Cap strategy and became lead manager in October 2013. He was appointed as Head of US Equities in October 2017. Mark initially joined the international business of Federated Hermes in 2005 as an analyst and fund manager on the UK Focus Fund. Prior to this, he was an investment analyst at Rio Tinto Pension Fund, where he had responsibility for the small- and mid-cap portion of the portfolio. Mark qualified as a Chartered Accountant with PricewaterhouseCoopers in 2002. He has a degree in Politics from Durham University, is a CFA charterholder and a Fellow of ICAEW.

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Michael Russell

CFA, Director, Co-Portfolio Manager, US SMID

Michael Russell

CFA, Director, Co-Portfolio Manager, US SMID

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Michael joined the international business of Federated Hermes in March 2014 as the co-manager of the US SMID Cap strategy. Michael was most recently senior portfolio manager of the Global Developed Markets Equity funds at Nomura Asset Management, where he worked for eight years. During this time, he also acted as portfolio manager of the firm’s US equity funds for five years from 2005. Earlier in his career, Michael held senior roles managing US equity funds at Merrill Lynch Investment Managers and Mercury Asset Management. He is a CFA charterholder and has an MA in Economics from Cambridge University.

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Alex Knox

ACA, Portfolio Manager, US SMID

Alex Knox

ACA, Portfolio Manager, US SMID

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Alex joined the international business of Federated Hermes in August 2009 and is portfolio manager on the US SMID Cap strategy. Alex's investment experience has been focused on smaller companies, starting in 1995 at Morgan Grenfell Asset Management and subsequently at JPMorgan, but most recently as an analyst and portfolio manager for UK SMID at Aviva. She is a qualified Chartered Accountant and worked as a strategy consultant at Arthur Andersen. Alex has a Mathematics degree from Durham University.

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Henry Biddle

CFA, ACA, Portfolio Manager, US SMID

Henry Biddle

CFA, ACA, Portfolio Manager, US SMID

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Henry joined the international business of Federated Hermes in March 2012 and is portfolio manager on the US SMID Cap strategy. He joined from UK brokerage firm Peel Hunt, where he was a diversified financials analyst from December 2010 until February 2012. Prior to that, he worked at Deloitte in the banking and capital markets group and in corporate finance from October 2006 until November 2010. Henry has an MA in Classics from Trinity College, Oxford, is a qualified Chartered Accountant and a CFA charterholder.

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