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Managed Portfolios

When selecting companies and building portfolios, we believe that sustainable equity returns are ultimately derived from a company’s ability to allocate its capital for the benefit of equity owners. For some, this discipline is reflected in the capacity to reinvest free cash flow back into the business, or into acquisitions that then bolster future shareholder returns. For others, the optimal capital allocation strategy is to return free cash flow back to the owners via capital management initiatives.

Our portfolios are constructed with a view to optimising the ‘bottom-line’. That is, we want the portfolio to consistently offer a superior outlook to the market with respect to earnings/dividend-per-share growth and quality. Quality is defined in terms of efficient utilisation of free cash flow, which should be reflected in balance sheet health and a return on funds employed that exceeds the cost of capital.

Ideally, these goals are pursued without compromising (i.e. inflating) the portfolio’s valuation metrics. As such, any proposed changes to the portfolios are first assessed on the basis of their impact on the ‘bottom-line’.