Reaping Big by Going Small



Andrew Paisley
Fund Manager,
European Smaller Companies
Aberdeen Standard Investments

European small caps have provided rich pickings for investors in recent years. However, with political uncertainties and elevated valuations looming over the region, most conservative investors believe that European stocks in 2018 may not be as optimistic as they were in 2017. As the award winner of Best-in-Class in Europe Equity, Aberdeen Standard Investments is highly qualified to enlighten our readers. We talked to Andrew Paisley, Fund Manager – European Smaller Companies, to find out whether the tailwinds still exist and how they manage to uncover small caps with huge potential.

BENCHMARK (BM): Congratulations! Could you tell us about your investment approach and how it added value to your portfolio in 2017?
Andrew Paisley (AP): Sure. We generally look to invest in high-quality companies with sustainable business franchises that can deliver repeatable growth. Our bias is toward profitable and cash-generative companies. Over the years, this approach has allowed us to identify many world-beating European businesses, often market leaders in their niches, that were underappreciated by the market.
BM: As far as I know, small companies are generally more sensitive to the health of the economy than their larger counterparts. After the strong run in 2017, what do European small caps say about the European economy? Do you expect the rally to extend into 2018?
AP: Actually, we tend not to focus much of our time worrying about the macro outlook. Rather, we focus on the individual, bottom-up company fundamentals of our investments. From a portfolio perspective, we look to take as much of our risk as possible at a stock-specific level, rather than at a factor level. Currently, the level of stock-specific risk in the portfolio is over 80%, which is where we like it to be. In our opinion, we don’t have a particular edge when it comes to macro factor movements, but we believe we do have an edge and can add value at the individual-company level. So, as long as the macro scenario isn’t deteriorating sharply, we believe that the companies we invest in should be able to grow in line with their plans.
BM: On the flip side, what kinds of risks will European small caps be subject to in 2018? And how is your portfolio positioned to weather these volatilities?
AP: Smaller companies tend to be driven more by company-specific risks than macro factors, and we think our approach of focusing on high-quality smaller companies provides investors with a significant degree of downside protection during market downturns while still outperforming over the long term. As bottom-up fundamental stock pickers, we are not trying to time the market or predict macro events but rather focus our attention on finding the smaller companies that have resilient business models and are in control of their own destiny.
BM: With nearly one-third of your portfolio allocated to the UK, how will Brexit negotiations affect UK small caps, as well as your portfolio, in 2018?
AP: The ups and downs of the Brexit negotiations are likely to prompt some volatility from time to time. Of course, there is a range of potential Brexit scenarios, and any sense that the UK is facing a higher probability of leaving on unfavorable terms would be likely to have a large impact on more domestically-focused companies. However, the UK small cap universe also contains numerous companies that look overseas for the bulk of their earnings, and these companies should prove more resilient to such swings in sentiment.
Our process has uncovered a number of UK-quoted high-quality companies with excellent growth prospects and good momentum. Our in-house quantitative tool – the matrix – has highlighted a number of them as potentially interesting investments. Generally, they are UK-quoted companies with a high degree of international earnings rather than domestically focused companies. BM


小公司 大機遇


基金經理Andrew Paisley

年來,歐洲小型股為投資者提供了豐富的選股機會。鑑於政局不明朗,歐洲地區股票估值升高,保守投資者普遍認為2018 年的歐洲股市,可能並不如2017年般樂觀。作為歐洲股票「同級最佳」的獲獎者,安本標準投資管理定能為我們的讀者帶來啟發。 我們與負責歐洲小型公司投資的基金經理Andrew Paisley進行了訪問,以了解歐洲的增長趨勢是否仍存在,以及他們如何發掘潛質優厚的小型股。

《指標》:首先恭喜你報捷! 你能否向我們闡述一下你的投資方針以及如何在2017 年助你的投資組合增值?
Andrew Paisley(AP):當然可以。一般而言,我們希望投資於業務可持續發展而質素又高的公司,從而實現可重複增長。我們青睞於具備盈利能力和有現金創造力的公司。多年來,我們憑藉這種投資方針識別出了許多國際一流的歐洲企業,這些企業往往是其自身領域中的佼佼者,但之前在市場上一直未受重視。
《指標》:據我所知,小型企業通常比大企業更重視經濟健康。在2017 年的強勁運行之後,你認為歐洲小型股將對歐洲經濟發出什麼樣的信號?你預計漲勢會延續到2018 年嗎?
AP:我們的注意力通常不集中在宏觀前景上。相反,我們以「從下而上」的策略專注於所投資的各個企業的公司基本面。 從投資組合的角度來看,我們希望承擔的風險,是基於個別股票層面,而不是外在因素。目前,投資組合所承擔風險水平,80%以上是基於個別股票層面,這正是我們樂見的。我們認為,在預測宏觀因素變動方面我們並無優勢,但我們擅長分析各個企業,從而帶來投資價值。 所以,只要宏觀情況沒有急劇惡化,我們有信心這些公司能夠按他們的計劃發展業務,締造增長。
《指標》:另一方面,歐洲小型股在2018 年面臨哪些風險? 投資組合如何定位以抵禦這些波幅?
AP:與宏觀因素相比,小型企業更容易受到企業特有風險的驅動。我們認為,專注於高質素小型公司的做法,為投資者在市場低迷時提供了很大程度的下行保護,長遠而言望可超越大市 。作為注重「從下而上」策略、重視股票基本面的投資者,我們並不試圖以市場變化進行投機或預測宏觀事件,而是將注意力集中在尋找那些具有穩健商業模式,同時有能力掌控着自身命運的小型企業。
《指標》:鑑於貴公司的投資組合有近三分一投資於英國,你認為退歐談判於2018 年將會為英國小型股及你的投資組合帶來怎樣的影響?
AP:英國退歐談判的起伏,可能會不時引起市場波幅。 當然,英國脫歐存在一系列的潛在情況,假如英國於脫歐實落時較大可能要面臨對其不利的條件,可能對着重本土收益的公司產生更大的影響。 然而,英國小型股領域所包含的眾多公司中,不少的業務收益都來自海外。這類型公司在此波動環境下,應該更具支撐力。
我們在投資過程中發現了一些優質的英國上市公司,他們具有絕佳的發展前景和良好的增長勢頭。 我們亦透過公司內部的股票計量工具 Matrix,來篩選具投資潛力的一些小型公司。基本上,他們都是一些業務收益來源覆蓋世界各地的英國上市公司,並非單靠本土收益。BM