Investment Philosophy

We believe a bottom-up investment strategy can exploit inefficiencies in global equity markets. We utilize a broadly defined valuation methodology, a global sector approach to company research, a long investment time horizon and apply risk management at the security and portfolio levels.

Role and Objectives

Our investment process includes a financial and valuation assessment, global sector-based research based on primary company contact and team-based portfolio decisions. Risk is explicitly managed at the overall portfolio level through tracking error constraints, while at the stock-selection level there is a strong bias in favor of companies with proven financial strength. Stocks held in Invesco portfolios tend to provide above-average stability of growth, as measured by the variability of underlying profitability, as well as below-average balance sheet leverage. Risk management efforts also seek to ensure that the largest single component of active risk is security specific, which is consistent with stock selection being the sole targeted area of excess return. A model portfolio approach is utilized to avoid performance dispersion among client portfolios within the same mandate.

Product Profile

Stock selection focuses on high caliber, well-established companies. Predictable and consistent returns are sought by avoiding undue portfolio concentrations. We do not limit our portfolios to the country/sector allocations of the benchmark. These weightings can vary substantially from the index, but only within the constraints based upon our statistical risk monitoring and control process.

Investment Process

Overview

We employ a three-step investment process:

Financial and Valuation Criteria

We monitor about 3,000 companies worldwide, focusing on stocks with a minimum of five years of traded history and $1 billion in market capitalization. Three valuation factors are utilized: profitability-based implied return analysis, asset values and current earnings. Significant financial-statement analysis is employed, including systematic accounting related adjustments. We have a bias in favor of companies with proven financial strength.

Company Research

We take a global sector-based approach to research. Management interviews focus on peer group positioning, the sustainability of long-term profitability and the financial characteristics of the business. Our time horizon recognizes a five-year average holding period for investments.

Portfolio Design

We hold significant positions in companies meeting our financial, valuation and research criteria, while also ensuring an appropriate level of overall diversification. A model portfolio approach is employed, with a tracking-error constraint to control risk.