Q:  What is your investment philosophy?

A: The Neptune investment philosophy is driven primarily by the belief that the world of global equities should be viewed by sector. This contrasts with the more traditional regional, benchmark-driven approach adopted by the majority of our competitors. It is this approach that offers the fundamental differentiator between Neptune and other providers.

Our disciplined investment process ensures all funds in the Neptune stable are actively managed. We run high conviction, concentrated portfolios. If we believe in a company then we take a meaningful position within the portfolio, reflecting our conviction. We don’t own anything where we do not find a compelling investment story with a relatively long-term view.

Q:  How do you generate new ideas?

A: Origination of ideas comes from a variety of sources: our own quantitative screening model, company news and results, company meetings and external research. All Neptune research is proprietary. Whilst we have access to the majority of major brokers’ research, it is used simply as a background view for our own analysis.

In emerging markets it is very important to be on top of the news at all times, and be on top of any kind of political, economic or regulatory changes. Conferences are also good places for finding ideas in addition to those generated by our global sector research.

Q:  How is your research process organized?

A: The Neptune Investment Process can be divided into five parts: Global Economic Overview, Global Sector Views, Asset Allocation & Stock Selection, In-House Research and Portfolio Construction.

Our process evaluates the key global sectors, with an emphasis on macroeconomics and growth prospects for different industries. This helps us identify the turning points which have an enormous impact on portfolios and performance.

Our investment process combines a rigorous global sector focus with superior stock picking. We analyse and forecast all major macroeconomic data, and co-ordinating this data allows us to form a sector overview and define sector weightings and asset allocations. This is an in-house process, driven by our sector specialising analysts.

The stock research process ensues with a company profile followed by an analysis of industry trends. We then analyse the competitive position of the company, the management and strategy incorporating track record and allocation of capital.

Q:  How does an idea turn into a holding?

A: The stock screening process begins with a focus on industry bell-weather stocks, using our proprietary in-house quantitative model. Our valuation focuses on profit outlook and a generic valuation model to calculate implied growth rates and target price. Once this analysis and information is drawn together, we form our investment rationale.

Typical holdings in the Fund have good fundamentals, good earnings growth, but also good earnings quality and visibility. We like strong balance sheets and experienced management. We don’t want to own a stock unless we feel that it’s been undervalued by the market and there’s some upside potential.

Q:  How do you go about portfolio construction?

A: The number of securities within the investment universe is reduced on a preliminary basis through our top-down, sector-led investment process. We believe that there will be only a small number of companies in any given sector worthy of consideration and this belief leads to a focused list of companies which qualify for our next stage of in-depth qualitative research process.

The size of the position will depend on our strength of view and the opportunities to invest within that sector or sub-sector. We may, for example, believe that a particular sector looks favourable but within a specific region not rate any of the companies that would gain us exposure, thus making a technical overweight into an underweight.

From a bottom-up stance, we believe that having identified the most promising sectors, it will be global companies that tend to dominate within the sector or sub-sector in which they operate. We believe there are rarely more than five genuinely credible companies in any given sector or sub-sector in which to invest. There is no obligation to be exposed to a sector only because that is what your benchmark index tells you.

It is at this stage that we look to add value through detailed research at stock level, allowing us to identify the most suitable candidate for investment.

Q:  What drives your buy and sell decisions?

A: The investment rationale for a researched stock is discussed in a group forum, after which the fund manager takes a decision on the stock’s inclusion/exclusion from the portfolio.