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RCM seek to identify companies with a high quality franchise, where earnings growth that is attractively priced or undervalued relative to their un-discounted growth potential is sought. The approach combines bottom up and top down factors in order to maximise risk adjusted returns.
The fund’s universe is about 2,000 stocks, covering the TSE1 and about 400 other stocks (including OTC). Screening is used first for market cap (>$0.7-$0.8bln) and then for liquidity and trading volume. Fundamental screening is then undertaken, reducing the universe to around 500 stocks. Further research is then undertaken by analysts and fund managers, including the analysis of the financials, company meetings, an analysis of competitors and the business environment and also the potential for a catalyst event.
Sector allocation quantitative trend analysis and a fundamental sector outlook. Stocks are bought on positive earnings revision, positive news flow, attractive valuation and the macro- environment. Barra is used to measure marginal contribution to risk and Willshire is also used to monitor risk. Stocks are sold on valuation grounds of because of a change in fundamentals.