Partner Insight: How can global equity investing benefit from the Corporate Life Cycle Concept?

clock • 4 min read
Partner Insight: How can global equity investing benefit from the Corporate Life Cycle Concept?

Peter Rutter, Royal London Asset Management’s Head of Equities, tells us about the Global Equity Select Fund

What is the key goal of the Royal London Global Equity Select Fund?

The key goal is to outperform across multiple market environments with the performance driven by differentiated and genuine stock selection, rather than by investing style. We're relatively style neutral from a traditional style sense - some slight tilts occur around our valuation discipline and the form of quality that we look for in stocks.

How do you attempt to gain outperformance across multiple environments?

We call it triple diversification: sector, region, and notably also company Life Cycle. Triple diversification and the unique tools we've built around it allows us to build portfolios where the dominant risk exposure is the stock selection itself, not the sector, region or Life Cycle waves.

Our Life Cycle framework maps every single company in the investment universe into one of five categories, depending on where the company is in the Corporate Life Cycle - from an early accelerator phase through potentially to a Turnaround phase after a period of distress - and it helps us both in portfolio diversification and when we are stock picking.

How does it help your stock picking?

The fundamental factors that determine if companies make money all vary by Life Cycle stage. With early phase Accelerator companies, you may need to examine the disruptive nature of the Accelerator business, the incremental cash burn, the size of the addressable market it's expanding into, and so on.

By contrast, in the most mature or Turnaround phase of the Life Cycle, we might be focusing on how much a company could sell its assets for; how big is the cost-cutting programme; how can they repair the balance sheet? As a team, we've built up 20 years of experience in what it takes to deliver in each Life Cycle category.

How do you apply Life Cycle insights through your investment process?

You can think of it first as fairly automated data management using Life Cycle insights, then a phase of deeper qualitative analysis that's again Life Cycle specific, and then proprietary portfolio construction and risk management toolsets, also using the Life Cycle. But really these all work together in a continuous flow for the investment team.

 

Click here to learn more about the Global Equities team's outlook and how the various possible scenarios might affect investment strategies and styles

 

This article was funded by Royal London Asset Management.

For Professional Clients only, not suitable for Retail Clients. The views expressed are the contributor's own at the date of publication unless otherwise indicated, which are subject to change and are not investment advice.

INVESTMENT RISKS

Past performance is not a guide to future performance. The value of investments and the income from them may go down as well as up and is not guaranteed. Investors may not get back the amount invested.

Concentration Risk: The price of funds that invest in a reduced number of holdings, sectors, or geographical areas may be more heavily affected by events that influence the stockmarket and therefore more volatile.

Counterparty Risk: The insolvency of any institutions providing services such as safekeeping of assets or acting as counterparty to derivatives or other instruments, may expose the Fund to financial loss.

Efficient Portfolio Management (EPM) Techniques: The Fund may engage in EPM techniques including holdings of derivative instruments. Whilst intended to reduce risk, the use of these instruments may expose the Fund to increased price volatility.

Emerging Markets Risk: Investing in Emerging Markets may provide the potential for greater rewards but carries greater risk due to the possibility of high volatility, low liquidity, currency fluctuations, the adverse effect of social, political and economic instability, weak supervisory structures and accounting standards.

Exchange Rate Risk: Changes in currency exchange rates may affect the value of this investment.

Liquidity Risk: In difficult market conditions the value of certain fund investments may be difficult to value and harder to sell, or sell at a fair price, resulting in unpredictable falls in the value of your holding.

IMPORTANT INFORMATION

For Professional Clients only, not suitable for Retail Clients.

This is a financial promotion and is not investment advice. The views expressed are those of the author at the date of publication unless otherwise indicated, which are subject to change, and are not investment advice.

The Royal London Global Equity Select Fund is a sub-fund of Royal London Equity Funds ICVC, an open-ended investment company with variable capital with segregated liability between sub-funds, incorporated in England and Wales under registered number IC000807. The Authorised Corporate Director (ACD) is Royal London Unit Trust Managers Limited, authorised and regulated by the Financial Conduct Authority, with firm reference number 144037. For more information on the fund or the risks of investing, please refer to the Prospectus or Key Investor Information Document (KIID), available via the relevant Fund Information page on www.rlam.co.uk.

Issued in October 2021 by Royal London Asset Management Limited, 55 Gracechurch Street, London, EC3V 0RL. Authorised and regulated by the Financial Conduct Authority, firm reference number 141665. A subsidiary of The Royal London Mutual Insurance Society Limited.

More on Equities

Richard Knight and Simon Gergel

What's in your stock-ings this year?

May be an ideal time for UK stocks

Simon Gergel and Richard Knight
clock 29 November 2021 • 4 min read
US policy decisions could impact global markets
US

How US policy could impact global markets

Global economy likely to suffer growth slowdown as stimulus policy reversed

clock 29 November 2021 • 2 min read
UCITS and AIF assets grow in Q3

Retail investors show 'confidence' in long-term UCITS funds in Q3

H1 marked by “significant” reallocation, says EFAMA

clock 29 November 2021 • 1 min read
Trustpilot