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Investment Clarity in a Clamorous World


INVESTMENT CLARITY IN A CLAMOROUS WORLD

kristian-heugh

Kristian Heugh
Head of the Global
Opportunity Team
Morgan Stanley
Investment Management

In a rapidly evolving global market, well-established procedures and the determination to follow it through are the beacons that guide investment decisions. So we learned from Kristian Heugh, Head of Global Opportunity Team, and manager of a highly concentrated portfolio. Having won two coveted titles – House Award and Manager of the Year – in this year’s Global Equity category, the asset manager evidenced the ability to see clarity, through stringent processes, in a noisy investment world.

BENCHMARK (BM): Congratulations on sweeping this year’s Global Equity category, Kristian! We are deeply impressed with your concentrated investment approach. Can you tell us how high-conviction ideas are derived?
Kristian Heugh (KH): With pleasure. We adopt a multi-pronged approach to generate new ideas worthy of further due diligence. That includes applying screens, networking, mining for patterns, and identifying disruptive changes. We then comprehensively assess the quality of our best new ideas to thoroughly understand the companies’ business models, investment theses, and anti-theses. We value each company using a customized, discounted cash-flow model and seek to pay a price much lower than the intrinsic value of the company.
We care much more about avoiding a permanent loss of capital than minimizing volatility. Our risk management ensures that our exposure is deliberate, diversified, and scaled appropriately. To do this, we scale our ideas according to their risks to reward characteristics; and impose limits based on position size, geography, and industry, while implementing our strict selling discipline. We make sure that selling actions are executed immediately when a thesis is no longer valid, or when the valuation is no longer attractive.
BM: Your investment horizon on a single security typically spans three to five years. How do you gauge if an investment idea has run its course? Your core positions are concentrated in a few stocks. Do you allow room for tactical allocations?
KH: As long-term investors, we are able to concentrate capital in our highest conviction ideas for a typical holding period of three to five years. We believe that by applying price disciplines to high-quality companies – strictly defined as those with sustainable competitive advantages, long-term growth, and the potential for value creation – we can best capture opportunities and manage risk for our clients. We view our conviction based concentrated portfolio as a source of long-term outperformance.
We generally sell positions for two reasons – deterioration in quality or unattractive ratio of price-to-value. First, the quality of a business may experience a decline in sustainability with respect to disruptive change, financial strength, and ESG, or fundamentals, as competitive advantage deteriorates, or high-return growth prospects diminish. Second, we sell when the price-to-value ratio approaches or exceeds 1.00, or when we have identified more attractive alternatives to allocate capital.
BM: Geography-wise, you have been overweighting Asia against the benchmark index. Is this a top-down decision, or a by-product of your bottom-up stock selection?
KH: I’d say the latter. We have been overweight Asia relative to the benchmark since the inception of the portfolio. While country allocations are the residuals of our bottom-up stock selection, we do believe that Asia has more high-quality companies than the US and Europe do, as shown by our screening work. That said, though, we also consider diversification at the company level and strive to have a portfolio that is diversified by the uniqueness of the underlying business drivers and customer segments.

Again, we believe that owning high-quality companies with sustainable competitive advantages, and purchased at a deep discount to intrinsic value, will deliver outperformance over a three- to five-year investment horizon.
BM: And finally, how do you define risk? And how does your team mitigate risk?
KH: We define risk as “losing money”. We believe that risk is not driven by fluctuations in tracking error or the performance of a portfolio but stems from profit and loss over a period of time. To mitigate risk, we strive to reduce the probability of having a permanent loss of capital on each investment by buying companies at a discount to their intrinsic value. That, to us, is the best risk-control fundamental investors can employ in client portfolios. BM

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喧鬧的投資世界裏保持清晰

kristian-heugh

摩根士丹利環球機會
團隊負責人Kristian Heugh
摩根士丹利投資管理

球市場正快速發展, 完善的程序以及貫徹執行的決心是指導投資決策的航標。這是我們從管理高度集中投資組合的摩根士丹利環球機會團隊負責人Kristian Heugh身上學到的投資要訣。在今年頒獎禮上,Kristian Heugh和團隊贏得了兩項令人覬覦的獎項——「基金公司大 — 股票(環球股票)—同級最佳」和「年度基金經理大獎」——這位資產管理者證明了在喧鬧的投資世界中,仍能憑藉其清晰的眼光,通過嚴謹的選股流程取得佳績。

《指標》:Kristian,恭喜你橫掃了今年「全球股票類別」兩大獎項!我們對你集中持股的投資方法印象非常深刻,你能告訴我們這投資信念的由來嗎?
Kristian Heugh (KH):非常榮幸。我們採取了多管齊下的方式來找出值得進一步盡職調查的投資新主題。當中包括從公司篩查、結交人脈、模式挖掘以及識別破壞性變化等辨識出投資範圍。然後,我們作出全面評估,深入了解公司的商業模式、投資正論和反論。我們使用定制的貼現現金流模型來評估每家公司,並力求付出遠低於公司內在價值的價格買入股票。
相比起降低組合波動性,我們更關心的是避免資金永久虧損。我們的風險管理確保我們慎重評估組合所曝露的潛在風險,致力維持多樣化並適時調整。要做到這一點,我們根據所制定的風險回報率來定立投資主題,並根據企業定位、地理位置和行業領域,同時實施嚴格的買賣紀律;確保在理論不再有效或估值不再吸引時,立即執行賣出。
《指標》:你對單一股票的投資期限通常為三到五年,你是如何評估一個投資理念已過時了?你的核心持股集中在少數股票,有預留空間進行戰術分配嗎?
KH:作為長期投資者,我們能夠將資本集中在我們最有信心的股票上,並通常持有三至五年。我們相信,通過將價格規範應用於高質量的公司——嚴格定義為具有持續競爭優勢、持續增長和具創造價值潛力的公司——我們可以更好地抓住機遇並為客戶管理風險。我們認為我們集中持股的投資組合是長期表現優異的源泉。
我們賣出股票的原因通常有兩個:股票質量下降,或價格與價值之間再沒有吸引力。首先,由於競爭環 惡化或高回報增長前景遭看淡,可能會為企業帶來破壞性的變化,例如財務實力和ESG(環境、社會及管治)或基本面下降。其次,當市帳率接近或超過1.00 時,又或者當已確定有更吸引的投資替代方案時,我們便會出售股票。
《指標》:從地理角度看,你們打破了基準指數而持重亞洲股票。這是由上而下的選股策略,還是由下而上選股策略出來的效果?
KH:我會說是後者。自投資組合成立以來,我們一直持重亞洲股票。根據我們由下而上的選股策略,持股國家分配是其中一個結果,但我們在篩選的過程中,確實找出亞洲擁有比美國和歐洲更多優秀公司。儘管如此,我們也考慮透過潛在業務驅動因素和客戶群體的獨特性找出不同值得投資的公司,使投資組合更多元化。

我想強調,我們認為以低於內在價值的價錢,買入擁有具有持續競爭優勢的優秀公司,在三至五年的投資期內能夠帶來豐厚回報。
《指標》:最後想請教的是,你如何定義風險?你的團隊又如何降低風險?
KH:我們將風險定義為「虧損」。我們認為風險並非由跟踪誤差或投資組合表現波動性所驅動的,而是源於長時間的盈利和虧損而來。故此我們努力以低於內在價值的價格購買股票,以減少每筆投資永久虧損的風險。對我們而言,這是基金經理為客戶投資組合控制風險的最佳策略。BM

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