The Investment Process
At EFG Hermes Asset Management, our goal is to create and maintain diversified portfolios with a regional product suite. We strive for low volatility and high risk-adjusted returns when compared to other regional investments. The key is to capture growth in the regional markets, yet minimize risk.
Our investment objective is long-term capital appreciation through investments in Middle Eastern & North African equity, equity related and debt related securities.
We believe that long term outperformance is achieved by investing in companies which offer the following:
- Strong management
- High and/or improving quality of earnings
- Attractive valuations
- Operate in countries with sound macroeconomic fundamentals
Our Investment Process
Our long-standing experience and that of our affiliates in the MENA region, our broad coverage of MENA markets and companies, and the breadth of our investment team, all endow our products with competitive advantages when we invest in securities of Middle Eastern and North African issuers. The bottom-up approach and stock selection based on fundamental analysis is complemented by a top-down overlay to determine country and sector allocation in order to maintain a diversified portfolio.
Our investment process can be summarised as follows:
Bottom-Up Approach: Our investment managers utilise a bottom-up investment approach to identify and screen value-driven opportunities across multiple countries and industries in the MENA region. We believe that long-term outperformance can be achieved by investing in companies which, among other things:
- Have strong management and market position
- Have high and/or improving quality of earnings
- Demonstrate that their interests are aligned with their shareholders
- Trade at attractive valuations.
Our bottom-up approach typically includes periodic meetings between our investment managers and senior management of a company, weekly calls with credible brokerage firms that cover the issuers in the portfolio, in-house financial analysis by buy-side analysts, and multiple valuation techniques including absolute and relative valuation.
Top-Down Overlay: Our investment managers complement our bottom-up approach with top-down considerations, including macro analysis of the MENA region as a whole and analysis of the economic, market and political factors in each country in the region. Our investment managers generally make investments in countries that show stable or improving fundamentals, accelerated economic growth, and more sophisticated regulations, as well as in countries where structural changes have led to macro stability. We seek returns on a total return dollar basis and of necessity make frequent assessments of country and exchange risk.
Due Diligence/Valuation Analysis: Our investment managers and their teams maintain a database that encompasses historical and projected financial information on most listed companies in the MENA region. Through this database, which is updated on a quarterly basis, we seek to identify and screen attractively valued companies relative to their peers in each sector, both on a regional and global basis. After considering the qualitative and fundamental characteristics of each company as part of the bottom-up process, which usually includes an on site visit and meetings with senior management, a detailed valuation model is developed and a report is prepared on each company that is proposed for inclusion in the portfolio.