Mackenzie sticks to its tier-structured strategy
06 November 2013
News, Asia, Global, Emerging Markets
By Hui Ching-hoo
Toronto-based investment manager Mackenzie Investments is looking to capitalise on new opportunities linked to emerging markets (EMs) in Asia and the rest of the world in its range of global equity mandates.
According to Mark Grammer, senior vice president, investments at Mackenzie Investments, the investment strategy of the Mackenzie global all cap growth strategy blends bottom-up with top-down approaches: “Our strategy features thematic overlays. We try to find long-term secular growth themes that are sustainable for more than one business cycle. We don’t change the theme on a frequent basis. We normally adjust the themes once or twice a decade.”
He adds: “One of the predominant themes we focus on is EMs. The strategy is looking for companies with significant exposure to EMs – more than half of the names in our portfolio have material exposure to EMs.”
During the investment process, the team employs a thematic or a top-down approach to identify ideas for its investment strategies and then utilises bottom-up methods to pinpoint individual firms. Overall, its investment strategy is bottom-up oriented and stock selection has accounted for 70% of attributed returns for the strategy.
Mr. Grammer goes on to say that the strategy looks for companies with valuations that do not currently reflect their growth prospects. It prioritises firms with return on equity (ROE) of more than 10% and total debt to capital below 30%. “We are looking for the companies with strong balance sheets which can generate cash flow to support their growth. These are the prerequisites for the companies we invest in.”
After nailing down the target, the team develops an investment model to analyse the company’s discounted cash flow based on its five-year historical statistics and will construct a 10-year profile projection based on growth and margin expectations.
Mr. Grammer explains: “From a portfolio management perspective, we’ve set different tiers based on the companies’ business scales and riskiness in order to mitigate risk exposure and ensure our asset allocations are well diversified.”
Mackenzie managed US$215 million in the strategy at the end of June 2013. Despite returns being affected by rocky economic conditions earlier this year, it has consistently outperformed its benchmark, the MSCI All-Country World Total Return Index, since inception.
Established in 1967, Mackenzie Investments is mainly engaged in providing investment advisory and related services. With $63.4 billion in assets under management, the company distributes its services through a diversified network of third-party financial advisors in Canada and for institutions worldwide.
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