From here, Mr Nemmoe will cut the universe further by assessing the quality of a firm’s franchise, management team and culture before conducting a deep dive into the firm’s financials.
The best ideas are placed on the watchlist. From this, a portfolio of 40-45 names is chosen based on the quality of the company, how much visibility there is in the earnings and the potential for long-term growth over five to 10 years.
Mr Nemmoe wants the portfolio to remain well-diversified and not exposed to one particular risk. No single country weighting can be more than 30 per cent, and frontier country weights are limited to up to 10 per cent. No sector can be more than 40 per cent of the portfolio, with the exception of consumer products and financials, which can be up to 50 per cent. The fund has a 1.1 per cent ongoing charge.
Mr Nemmoe's absolute mindset and valuation-sensitive approach means this fund should outperform more in falling markets. However, this may come at the expense of underperformance towards the end of a cycle, as Mr Nemmoe will not chase momentum-driven stock markets.
While it is still early days for this fund, we feel the focus on quality companies, supported by the extensive research team at FSSA, gives this offering plenty of scope to succeed over the longer-term.
Darius McDermott is managing director at FundCalibre