Bestinvest says
Fund manager Aled Smith now has a long term track record of success on this and other funds he runs or oversees as co-head of M&G's global equity desk. He uses a variety of ways of finding "alpha" and has shown willingness to evolve his investment process and to learn from his mistakes, in particular the underperformance during the banking crisis. Investors should note that the portfolio can display momentum characteristics which can mean periods of weaker returns versus the index.
This fund targets companies undergoing internal change e.g. selling poorly performing businesses or appointing new CEOs, as manager Aled Smith believes owning these can generate substantial outperformance. Typically these will be recovery situations, but the portfolio also includes “quality” companies generating positive returns where internal change could make the business even better. Investments are principally identified by using cashflow based valuation tool Holt to find companies with an improving rate of return that are currently undervalued. Portfolio companies may also be sourced through a regular report on companies that are changing their management teams, from elsewhere in M&G and from broker contacts. Companies identified are then researched in depth - this includes meeting company management and an independent audit of company accounts. Research is almost entirely internal as Smith believes external research is primarily short term - stocks are selected with a 3 to 5 year time horizon in mind. The manager is supported by dedicated global analysts as well as utilising M&G’s pan European research team. The process is almost entirely bottom up, but the portfolio is typically diversified by sector and country with stock selection expected to be the main driver of returns.