Barings Europe Select I GBP

Investment Process

The managers believe that coverage of small and mid-cap stocks has deteriorated in recent years, meaning there are greater opportunities to find attractive investments in this area. They look for growth stocks but at a reasonable price (GARP). The bottom-up process begins with a chunky investment universe of around 4,000 companies with a market value of less than €5billion. They look for companies with quality/GARP characteristics, a stable balance sheet and track record, high growth and return of equity with the potential to improve their numbers. The managers also seek companies with a credible strategy and a demonstrable track record of success. The team find suitable portfolio candidates using quantitative screening to assess liquidity, financial viability and GARP characteristics including accounting practices and ESG factors. In depth company research is also carried out with potential candidates presented to and debated by the investment team at regular meetings. They focus on those companies with a catalyst for outperformance over the next 9-12 months, with a 40% target upside. The portfolio typically holds around 100 names to maintain liquidity. Holdings may be jettisoned if the investment case changes or if a 40% rise triggers profit taking. Conversely a 10% fall could lead to a review of the company’s position in the fund.