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Sanlam FOUR Stable Global Equity

Elite Rated by FundCalibre

This fund’s primary objective is a return of cash plus 6%. The managers have complete flexibility to invest in any company they choose, which means the fund looks very different to the benchmark. They like to have high conviction ideas, so the portfolio usually comprises just 25 or so stocks. The team like out-of-favour companies with low sensitivity to movements in the global economy, and they don’t change investments very often.

Company Description

In 2014, FOUR Capital Partners was acquired by Sanlam Group to create Sanlam FOUR. The investment boutique manages UK, European, US and global equities, as well as multi-strategies. Fund managers have, on average, 17 years of experience and are allowed to autonomously implement investment processes and philosophy.

Factsheet_sanlam_four_logo

Fund Manager

Colin McQueen, Gregg Bridger and Stephen Walker have been senior managers of this fund since September 2012, while Lorenzo Dicorrado has managed the fund alongside them since December 2015. They have a tight-knit, small team, believing that large teams tend to lose a lot of information in communication.

Colin and Stephen joined the company in October 2010, both previously having managed assets within global equities at Morgan Stanley. Gregg previously worked within equities at both Goldman Sachs and Credit Suisse, and Lorenzo formerly worked as an equity analyst at SEI Investments.

Factsheet_colin_mcqueen_sanlam_four

By concentrating on the least volatile business models, our portfolio displays greater resilience during turbulent market conditions. My parents and children have savings invested in this fund. We take the responsibility of protecting and growing their assets very seriously.

Colin McQueen - Fund Manager

The Investment Process

The managers like companies with limited economic sensitivity. They typically look for a minimum of 10 years of high returns on equity (how much profit a company generates with the money shareholders have invested). Banks, energy and mining stocks are avoided, primarily due to high capital requirements and their cyclical nature.

Buying great quality businesses is only half the story. Valuation is also key. One of the most important metrics is free cash flow yield (the income generated by an investment). Different scenarios are stress tested when making investment decisions and stocks are sold if their price reaches intrinsic value.

Risk

This fund seeks to limit risk through a focus on high quality companies combined with a strict valuation criteria, ensuring the managers don’t pay above the odds regardless of how good they perceive a company to be. The valuation discipline also ensures that losses are minimised if a holding performs adversely. The portfolio is extremely concentrated, holding only around 25 stocks. This increases the potential impact of a bad investment, emphasising the utmost importance of manager skill in stock selection. Investors should also be aware of the currency risk.

Our Opinion

We particularly like this fund’s stringent quality requirements combined with its strict valuation discipline. The fund is very high conviction, offering the potential for higher returns than the benchmark. The tight-knit but heavily experienced team members all bring a unique perspective to the table. The fund size being very small, we believe this is a great hidden gem.

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©2014 FundCalibre Limited. All Rights Reserved. The information, data, analyses, and opinions contained herein (1) include the proprietary information of FundCalibre, (2) may not be copied or redistributed without prior permission, (3) do not constitute investment advice offered by FundCalibre, (4) are provided solely for informational purposes and therefore are not an offer to buy or sell a fund, and (5) are not warranted to be correct, complete, or accurate. FundCalibre shall not be responsible for any trading decisions, damages, or other losses resulting from, or related to, this information, data, analyses, or opinions or their use. The Elite Fund rating is subjective in nature and reflects FundCalibre’s current expectations of future events/behaviour as they relate to a particular fund. Because such events/behaviour may turn out to be different than expected, FundCalibre does not ,guarantee that a fund will perform in line with its FundCalibre benchmark. Likewise, the Elite Fund rating should not be seen as any sort of guarantee or assessment of the creditworthiness of a fund or of its underlying securities and should not be used as the sole basis for making any investment decision. FundCalibre disclaims any responsibility for trading decisions, damages or other losses resulting from any use of the Elite Fund rating.