The portfolio will be made up from between 25 and 40 of the companies on our universe list of c.200 companies. At entry all investments made will be expected to generate a 15% p.a. total return hurdles. Thereafter the balance of the portfolio is determined by the fund manager from the opportunities available taking into account not only the expected return but also the company specific and geographic risk as well as the degree to which the investment diversifies the portfolio.
The cash position of the fund can vary between 0% and 25%. The level of cash within the fund is solely a function of the opportunities available to the portfolio manager. If, as a result of high valuations in equity markets, there are no suitable investments available which are expected to generate a 15% annual total return, then the manager will allow cash to rise as the fund makes sales or experiences in-flows. Cash is usually held in the base currency of the fund (USD) unless the managers have a strong medium-term view that another currency offers substantial appreciation potential in which case, a proportion of the cash will be invested in that currency.
With regards to the currency exposure, as a result of holding equities outside the base currency (GBP) the fund will accept the inherent currency exposure unless the managers have a strong medium-term view that the currency in which the investment is held will depreciate against the base currency. In such circumstances, the position will be hedged back into the base currency.
With regards to the currency exposure, as a result of holding equities outside the base currency (GBP) the fund will accept the inherent currency exposure unless the managers have a strong medium-term view that the currency in which the investment is held will depreciate against the base currency. In such circumstances, the position will be hedged back into the base currency.
The fund will invest both long and short, as allowable under UCITS III, to achieve long term capital growth. By investing long and short, the fund will employ leverage, principally through the use of derivative positions. Long positions will be held through a combination of direct investment and/or derivative instruments. Short positions will be held through derivative positions, primarily options, equity swaps, credit default swaps, CFDs and futures.
The purchase or sale of futures will be for hedging and investment purposes and the fund may use futures to achieve both long and short exposure. In addition, the purchase or sale of futures for long or short exposure may result in the fund being leveraged. Such leverage will be limited to a maximum gross exposure of 200% as per UCITS III rules.
Sell disciplines
Holdings within a portfolio are constantly monitored to assess whether our original investment thesis holds. If there has been a change to the underlying economics or competitive advantages of an industry or company we will assess the impact and act accordingly. Equally, if a holding within a portfolio becomes priced above our estimate of intrinsic value we will sell our stake.