Investment Process

We believe that a transparent and intuitive portfolio construction framework makes for more focused team interactions, better decision making and better risk outcomes. All our portfolios can be considered as an interaction of three distinct components:

  • Fundamental research aimed at delivering standardised valuations and conviction scores. Unconstrained portfolio weights are generated purely on the basis of these fundamental research outputs;
  • Model portfolios based on fundamental research that differ only in their construction benchmarks, risk constraints and yield constraints; and,
  • Hedge overlays aimed at reducing market exposure and adding incremental alpha.

Importantly, all components are generic and scalable across the four individual strategies we manage on behalf of clients. Strategy specific parameters are incorporated in a systematic and transparent manner imposing little diversion from alpha generating activities.

 

ESG Integration

At Merlon we focus on assessing the sustainability of a company’s free cash flow because we believe that is the basis on which companies should be valued.

We believe that ESG factors play a key role in determining the sustainability of a company’s free cash flow and we assess every investment with ESG factors in mind.  We incorporate ESG considerations both in our fundamental analysis and our valuation assessment.

ESG integration in our investment process

For further detail on how we incorporate ESG in our investment process please refer to our ESG Policy