LFAM's management philosophy is based on the integration of financial, ESG and strategic analysis, which supports stock picking at all levels by combining:
· ‘Traditional’ financial analysis criteria
· A non-traditional, more strategic and forward-looking company, sector and thematic research in order to find the best-managed companies
· An analysis of the companies' megatrends exposure
· An ESG analysis integrating ESG criteria together with a strategic analysis based on capacity of corporates to innovate and adapt (our 5 factors analytical model)
· The non-traditional research is founded on an analysis of the environmental, social and governance risks that specifically apply each sector and company. It is also grounded in compliance with standards that are widely recognized and internationally endorsed such as the UN Global Compact principles or the exclusion of companies linked to controversial weapons. Accordingly, any company that is found to be violating these principles will be excluded from the investment universe.
More precisely, these five factors analyse:
· The environment: dependence on commodities, management of carbon emissions, energy efficiency, pollution, management of waste and water, etc.
· Human capital: workers' rights, turnover, structures for training and acquiring knowledge, corporate governance, etc.
· Organisational capital: corporate governance, relations with regulators, suppliers and the supply chain, local communities, customers, etc.
· Innovation capacity: innovation culture, internal structures dedicated to innovation, R&D, new products brought to market, etc.
· Adaptability and responsiveness: management structures, ability to gather and organise information, strategic agility, public relations, etc.
In addition, we conduct an evaluation of the companies' exposure to global megatrends that will shape their economic and competitive landscape. The question is whether or not these companies will be able to put themselves in a position to benefit from these underlying trends. This analysis takes a sharp look at the nature of their businesses, products promoted, the strategies they have unveiled and the countries/regions in which they are present or will be in the future.
The ten megatrends include:
· Transportation - Mobility
· Healthcare burden
· Access to knowledge
· Energy demand growth
· Changing consumer demographics
· Urbanization and infrastructure needs
· Climate change
· Food, land resources and biodiversity
· Scarcity of raw materials
· Water availability and quality
The ESG assessment (scoring) is updated every month as part of the data based research conducted by Inflection Point. Depending on exogenous factors (publication of new elements, sudden controversies, etc.) or internal events (a manager's specific interest in a given company) some companies might be reviewed more often by the research analysts, who will make adjustments to the scores if required.
The 5-factor model set up by Inflection Point is stable (last major review in H2/2016). The underlying KPI's are being reviewed regularly and updated - especially if new data sources become available. The relative weightings of the model are reviewed at least annually.