Learn more about OUR STRATEGY
We believe in delivering idiosyncratic and uncorrelated returns and we think this is key
What is Principal’s approach to global equity investing?
Our investment process focuses on identifying companies where the market underestimates future free cash flow growth. This is a powerful, idiosyncratic determinant of future returns. This approach requires deep, fundamental research to identify the investment case drivers ahead of the market. To do this, we empower our analysts to be independent and true experts of the companies so that they can be anticipatory in identifying higher free cash flow growth in the future.
We do this because based on research dating back to the 1980s, companies with high free cash flow yield have consistently outperformed the market across both macro environments and factual environments.
You can
watch the interview here
or read his
views below
In this video, Martin Slipsager Frandsen, Portfolio Manager, shares his views on identifying companies with undervalued future free cash flow growth, constructing portfolios designed to weather any market environment and gives examples of how these principles come to life in practice, particularly within sustainable investing strategies.
Scroll down
Three
Minutes
With
Martin Slipsager Frandsen explores how to approach global equity investing where returns are driven primarily by company-specific factors
marketing communication
Why is this important for investors and can you give an example of a strategy where you put this to work?
Our investment approach with stock selection by identifying companies with underestimated future free cash flow growth and portfolio construction to allow for all-weather portfolios, is consistently applied across all our global equity strategies.
We believe in delivering idiosyncratic and uncorrelated returns and we think this is key, especially in turbulent and uncertain times where geopolitical and macro concerns persist.
One example of where we bring this to life is in our global sustainable equity strategy. Sustainable factor portfolios have historically often been biased towards sector risks such as growth and quality, leading to volatile and sometimes uninspiring returns.
In our view, sustainable investments would benefit from a recalibration. And that is what we've done in our global sustainable equity strategy. In our strategy, we put stock selection and portfolio construction as the foundation.
This allows us to deliver idiosyncratic and uncorrelated returns. While at the same time delivering a positive impact towards the UN SDGs.
Strategy examples
•
All-weather portfolio
•
Investing approach
•
Introduction
Three Minutes With
Creating all-weather portfolios is a cornerstone of our investment process. We do this by combining stocks with underappreciated free cash flow growth into efficient core portfolios, where the majority of the risk is idiosyncratic. A key component of doing this is using implied alpha analysis as the determinant in the position sizing. By using implied alpha, we get an unbiased lens that considers not only the risk of the stock, but also the impact on that stock relative to the total portfolio risk.
Through this approach, we get all-weather portfolios where the risk is driven by idiosyncratic components rather than systematic risk.
Your team aims to deliver “all- weather” portfolios, how do you enable this in your investment process?
1
2
