Objective: Seeking to identify companies undergoing change that is unrecognised or has been underestimated by the market, which will transform these businesses over the long-term.
"Our high-conviction stock selection exploits the power of change over the long term."
Why Hermes Europe Ex-UK?
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 enduring market inefficiencies.
Forward looking: we look for companies that are repositioning themselves to be exposed to a structural growth theme or undergoing transformational change that will lead to higher future returns, which is not yet correctly reflected in analyst forecasts.
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.
Style agnostic: Understanding how unrecognised or underestimated change is reflected in a company valuation leads to stock selection that is not driven by the traditional labels of “growth” and “value”, and this is reflected in how the fund has performed.
Proven record: the European investment team has been managing European equity portfolios for over 10 years, and this experience has helped underpin the Fund’s outperformance since inception.
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.
1. Since inception on 8 August 2008 the Hermes Europe Ex-UK Strategy has outperformed the FTSE World Europe Ex UK Index by 3.48% on an annualised basis as at 31 December 2017. 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.