Bestinvest says
Whilst this fund has its origins in companies that are expected to benefit from privatisation, deregulation or otherwise (the fund was originally named Investec Global Privatisation), in reality its investment remit is reasonably wide and for example the fund also invests in companies which are enhancing profitability through operational or structural improvements to their business. However, the most important factor influencing returns is the stock screen that utilises the in house 4Factor system. Therefore, in common with other quant-based funds, the fund performs best in directional markets and tends to underperform at market turning points.
The managers believe that stock prices are affected by behavioural biases, and have identified key drivers that they believe lead investors to mis-price stocks – these include deregulation, restructuring, new technologies and privatisation. From a 4,500 stock universe the managers select the 500 stocks they believe are most impacted by these factors, then rank them using the proprietary “4Factor” quantitative process. This is based on the factors they have identified as most strongly affecting share prices: Strategy (companies that understand how to create shareholder value); Valuation (companies trading at a discount to their prospects based on cashflow); Dynamics (positive newsflow); Technicals (share price trends). Investec’s sector analysts then subject the best ideas identified to qualitative analysis to ensure the quantitative data is accurate. Finally, the fund manager constructs the portfolio – this is on a bottom up basis, i.e. with no sector or country allocations.