A: Although we do find good companies operating in difficult macro conditions, favorable macro-economic indicators do matter in most cases. For instance, we could find a company, having a great strategy in an emerging market but if that market is located in a very politically unstable country with a bad fiscal monetary policy and the stabilization of the company is at risk, then, obviously, those countries won’t fit into the Fund.

We have an international economist in our team who analyzes fiscal and monetary policies. His input helps us check out and know the macro conditions of the countries and markets we are interested in. Another important layer is finding the right sectors and also understanding the dynamics of those sectors.

But most importantly is for us to find great companies. We identify companies on a bottom-up basis. We spend a lot of time on fundamental analysis, which is a three-layer bottom-up process. Being an international fund, our universe comprises thousands of companies, but we mainly focus on large cap companies with market capitalization of $10 billion.

We start with a quantitative screening of companies. That process is based on historic data and on future estimates. This quantitative analysis is, however, only a tool to give us a rough idea whether the company fulfills our growth requirements. The second part is the fundamental analysis which includes analyzing the balance sheet, cash-flow, earnings power, competitiveness of products just to name a few.

Last but not least we dialogue with management to check strategies, willingness to deliver shareholder value and the strength of management. We believe that the constant dialogue with managements is essential for a successful Fund Manager.

Q:  How do you construct your portfolio?

A: At any given time we try to stay between 70 and 90 stocks in the portfolio. We are currently invested in about 20 countries and 11 industry sectors. Our portfolio diversification strategy dictates that no stock will have more than a 5% position.

We also usually take only a 2% initial investment in the stock, and let it grow over time. On average, we have 10% or less exposure to emerging markets at the time we’re buying the stocks. Our benchmark is emerging market free and centers around Europe, Japan and the rest in developed Asia and Australia. Finally we limit our exposure to one single sector to 25%.

Q:  What is your buy and sell discipline?

A: We buy a company because it meets growth and valuation criteria. We sell a stock when a company misses earnings and our belief is that it due to deteriorating fundamentals.

Another reason to sell a stock is when a company suddenly changes its strategy in a way we feel not comfortable with.

The third reason to sell would be if the company reaches our price target, which is usually set when we buy the stock. However before selling we check the stock again to see if new developments justify a higher price.

Q:  What is your view on risk and how do you measure it?

A: There is already some risk control embedded in our portfolio diversification but we also look at market and fund volatility. If we believe that the world is heading into a recession, we will maybe construct a more defensive portfolio and invest in companies that are less economically sensitive.

For instance, we were heavily invested in banks until the spring of this year. However, in the beginning of the summer when we saw that the sub-prime issue was going to affect the markets, we felt that this was a major event which was affecting the portfolio, and hence decided to sell the banks.

Consequently, risk control is partly quantitative, partly qualitative and I admit a little bit subjective, too.