Our high-conviction stock selection exploits the power of change over the long term
Our high-conviction approach results in a portfolio with very different stock weightings to those of the benchmark, generating a consistently high active share.
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.
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.
Portfolio manager James Rutherford has been managing European equity portfolios for more than 20 years. This experience has helped underpin the strategy's outperformance since inception1.
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.
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.
Past performance is not a reliable indicator of future results and targets are not guaranteed.
James Rutherford
Head of European Equities and Lead Manager - European Alpha
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James Rutherford is Head of European Equities and lead portfolio manager of the Hermes European Alpha strategy. He joined Hermes in 2009 as Co-Head of Investment for Hermes Sourcecap, now Hermes European Equities.
James began his career at Fidelity as a pan-European research analyst, initially specialising in areas such as property, transportation, autos and media. In 1995 he became a pan-European portfolio manager and co-managed the UK Recovery Trust, which was ranked first in its peer group during that period. James was ultimately responsible for a $19bn portfolio of pan-European institutional funds, and he remained at Fidelity until 2006, when he co-founded Sourcecap with the aim of building a best-in-class investment boutique focused on excellence in European equity management. James graduated from the London School of Economics with a BSc in Theoretical Economics.
Martin Todd
co-portfolio manager - European Alpha Fund
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Martin Todd joined Hermes as a senior analyst on the European Equities team in March 2013 and is co-portfolio manager of the Hermes European Alpha Fund. Prior to this he was an investment director at Scottish Widows Investment Partnership. Martin joined SWIP as a graduate covering US equities before spending two years covering the Japanese equity market. In 2007 he joined the UK equity team, where he was a portfolio manager and analyst within a 10-person team managing more than £20bn in AUM. Martin graduated from the University of St Andrews with an MA in Economics & Modern History and is a CFA charterholder. In 2015, Martin featured in Financial News’s ‘40 Under 40 Rising Stars of Asset Management’, an editorial selection of the brightest up-and-coming men and women in the industry.
