Investment Philosophy

We invest in best-of-breed businesses for their quality, strategic competitive edge and value. We believe that a portfolio of businesses each containing these elements will provide us with a favourable return over time.

  • BOTTOM-UP INVESTOR
  • THINK LIKE A BUSINESSMAN BUYING ANOTHER BUSINESS
  • CONSIDER RISK AS MUCH AS RETURN
  • INVEST FOR SUSTAINABLE ORGANIC GROWTH IN QUALITY BUSINESSES
  • BUY GLOBAL BUSINESSES, EXPOSED TO EMERGING MARKETS
  • OPERATE WITH HIGH CONVICTION
  • NO BENCHMARK ORIENTATION
  • OVERVALUED BUSINESS REPLACED WITH A MORE ATTRACTIVE OVERALL PROPOSITION
FUNDAMENTAL PILLARS OF QUALITY: IDENTIFYING GLOBAL BEST-OF-BREED BUSINESSES

Sustainable organic
growth

  • Invest for organic growth
  • Frequent use of products
  • Resilience through recessions
  • Market share growth
  • Infinite potential

Quality management
 

  • Standing of CEO Chairman, CFO and Board
  • Record of consistent success
  • Business strategy
  • Business culture (energy, innovation, openness, honesty & integrity, social responsibility, ESG focus, etc.)
  • Success with execution
  • Shareholder orientation
  • Clear communication

Efficiency
 

  • Operating margin development
  • Working capital management
  • Return on invested capital
  • Success of historic reinvestments

Free cash
flow generation

  • Sustainable free cashflow generation (not cash-hungry business)
  • Trend in cash conversion ratio
  • Success of free cashflow allocation
  • Success of buy-backs
  • Sustainable dividend growth

Investment Process: Identifying businesses which meet our quality criteria

"We are what we repeatedly do. Excellence then, is not an act, but a habit."
Aristotle

Filtering

  • Quantitative fundamental quality metrics
  • Qualitative analyst research
  • Portfolio manager research
  • Third party research

Portfolio Manager

  • Research co-ordination
  • Macro and market research
  • Technical analysis for tactical cash allocation
  • Implementation

PORTFOLIO CONSTRUCTION

  • Best ideas
  • Attractive valuation
  • Sensible diversification

ANALYST COVERAGE & RECOMMENDATION

  • Ongoing analysis
  • Valuation
  • Performance
  • News Flow
  • Results
  • Corporate events

SELL DISCIPLINE

  • Long term intention
  • Better overall alternatives
  • Market or business overvalued
  • Strategic case changes

OUR STONEHAGE FLEMING EQUITY MANAGEMENT TEAM

The specialist equity management division was established in 2009, and the team has over 100 years of combined experience.

The team only invests in best-of-breed companies that can clearly demonstrate quality, strategic competitive edge and value.

The team looks for companies with the following characteristics:

  • Good growth potential and the ability to deliver sustainable top-line growth
  • Management of the highest quality
  • Leaders in their field
  • Strong balance sheets
  • High returns on capital employed
  • Strong internal cash flow
  • Ability to grow dividends annually under all economic circumstances
  • An impressive performance record
  • Shareholder friendly
  • A sustainable compounder

To identify businesses that meet the quality threshold, the team use the above criteria to narrow down the broad investment universe of over 2000 candidates to a core universe of 125 candidates, which are then monitored closely.

In addition to the above criteria, there are a series of key characteristics a company should possess in order to be considered for investment. Characteristics such as an positive margin trend, levels of debt and dividend cover are also central to the team’s analysis.

*All sources as at 30 June 2018

Our Equity Management Team

"We believe that - if we have identified a quality business, and we do not pay more than a fair value, then these businesses should provide favourable returns over time. Central to this philosophy is a ‘buy-to-hold and compounding’ mind-set, to be invested in those businesses for the longer term.”
Gerrit Smit, Fund Manager

Gerrit Smit

Gerrit is Head of the Equity Management team, he has overall responsibility for the business unit, along with its Portfolio Management and Equity Research functions.

Gerrit joined the Group in 2008 following over 25 years’ investment experience as Equity Analyst, Chief Investment Strategist and Chief Investment Officer for Sanlam’s International portfolios in London, and heading a boutique fund manager’s investment research. He holds a Hons B.Com from the University of Stellenbosch and the University of South Africa and a PSM qualification from the Business School of the University of Stellenbosch.

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Tom Jeffcoate

Tom is a Director of Stonehage Fleming Investment Management and responsible for company research within the Equity Management team. Specialising in in-depth, bottom up research, he covers multiple companies across all sectors under the single global quality equity mandate.

Tom joined the Group in 2009 from ZAN Partners where he was a multi-asset Analyst and Trader. Prior to that he worked as an Equity Analyst at Sigma Capital having started his career with PricewaterhouseCoopers’ Performance Improvement Consulting business. Tom is a CFA charterholder and an associate of the Chartered Institute for Securities and Investment.

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Mark Sloan

Mark is a Director within the Stonehage Fleming Group specialising in in-depth, bottom up company research within the Direct Equity Management team.

Prior to joining Stonehage Fleming, Mark spent over 9 years at Investec Asset Management where he was a Global Equity Analyst and Sector Portfolio Manager. Previously, he worked at M&G Investments in both Pan-European and global equity analyst roles. Mark is a CFA Charterholder and graduated from Warwick University with a first class honours degree in economics.

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Thomas Withington

Thomas is a Senior Associate within the Equity Management team, providing client-servicing support to Gerrit Smit, Head of the Equity Management team.

Thomas joined the Group in 2011, having previously worked as a Project Manager at Jabulani Rural Health Foundation. Prior to this, he worked as a Consultant at IQuad Group Limited in Cape Town, consulting on various government-initiated investment incentive programmes. Thomas holds a Bachelor of Business Science (Honours) degree from the University of Cape Town and is a CFA Charterholder.

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Sean Harper

Sean is responsible for company research, supporting the Equity Management team.

Sean joined the group in 2018, having previously worked at Quilter Cheviot and Old Mutual Global Investors. Sean has passed Level III of the CFA program, he holds the Investment Management Certificate (IMC), and he is an affiliate member of the Chartered Institute for Securities and Investment. He graduated with a first-class degree in BSc (Honours) Finance and Investment Banking.

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Stonehage Fleming At A Glance

With a history dating from 1873

The largest international Family Office in the EMEA region

Independently owned

80% of the business is employee owned

An investment business

with nearly GBP9.2bn under management for individuals, families, charities and institutional-calibre clients

Investment centre

located in London employing over 85 people

Employing over 500 people

in 11 offices across 8 geographies

Proprietary expertise

in Global Equity, Multi-Asset, Fixed Income and Private Equity

 

Our flagship investment capability is the Stonehage Fleming Global Best Ideas Equity strategy, which was launched in July 2009. The strategy has in excess of GBP1.5bn in assets under management. It is offered through a Dublin based UCITS fund (the Stonehage Fleming Global Best Ideas Equity Fund, launched in August 2013) or on a segregated basis for portfolios of GBP10m and over.

 

Fund Name NAV Price NAV Price
(prev)
Valuation Date
Stonehage Fleming Global Best Ideas Equity Fund 152.929 153.9507 06 Dec 18
Stonehage Fleming Global Best Ideas Equity Fund 156.9368 157.9831 06 Dec 18
Stonehage Fleming Global Best Ideas Equity Fund 186.1407 188.0538 06 Dec 18
Stonehage Fleming Global Best Ideas Equity Fund 187.0668 188.9869 06 Dec 18
Stonehage Fleming Global Best Ideas Equity Fund 132.172 133.0523 06 Dec 18
Stonehage Fleming Global Best Ideas Equity Fund 144.0924 145.5704 06 Dec 18
Stonehage Fleming Global Best Ideas Equity Fund 124.4911 125.3185 06 Dec 18
Stonehage Fleming Global Best Ideas Equity Fund 142.4644 143.9237 06 Dec 18
Stonehage Fleming Global Best Ideas Equity Fund 112.6509 113.817 06 Dec 18

News

 

Global Equities Update - Q2 2018

Gerrit Smit, Head of Equity Management reviews the last quarter, sharing his insight on the global equities market.

19 November 2018

“It’s not that I am so smart, I just stay with problems longer.” Albert Einstein

It is our impression that we would need a relatively high probability of an imminent US recession to fear the formation of a bear market in equities and therefore a structural peak in share prices.

29 October 2018

“If you can’t explain it simply, you don’t understand it well enough.” Albert Einstein

The weak stock market performance over the past few weeks has brought it close to an official correction level of -10%.

1 October 2018

“What can be added to the happiness of a man who is in health, out of debt, and has a clear conscience.” Adam Smith

We continue to believe that the most important fundamental issue for the health of global financial markets is the outlook for the US economy.

10 September

GLOBAL MARKETS: The most important issue for the global capital markets remains the health of the US economy.

27 August 2018

“Tomorrow belongs to those who can hear it coming.” David Bowie

Somewhat surprisingly the end of July reading for the leading economic indicator ticked up again. Whilst the PMI index dropped a notch, it is still at elevated levels. The combination of these two readings provides continued confidence in the US economy.

13 August 2018

“Difficulties strengthen the mind, as labour does the body.” Seneca

US ECONOMY: We keep monitoring US economic indicators to form an opinion of the level of risk for an upcoming recession, and therefore for a potential peak in share prices: US – Conference Board Leading Economic Index & Goldman Sachs Current Economic Activity Indictor vs S&P 500

23 July 2018

“He who is brave is free.” Seneca

Most leading US economic indicators are currently at historically elevated levels, with some seemingly in a process of peaking and rolling over. Headlines of ‘this is as good as it gets’ may well be expected.

18 JUNE 2018

Investors are reflecting on a combination of potent recent geopolitical events. The G7 summit ended in acrimony, the Singapore summit seems to hold promise of more peace in Asia and immediately afterwards more threats of a trade war between the US and China materialised.

These are confusing circumstances for decision making, but fortunately investors are better guided by economic fundamental indicators. To read more please click to download

Investment Management

GBI 5th Anniversary

The Stonehage Fleming Global Best Ideas Equity Fund passed the five year anniversary of its launch in August 2018. We conducted interviews with colleagues from around the business to provide an overview of the fund, the investment strategy which underpins it, and its success to date. Please note that this video is for informational and educational purposes only and is not intended to be a financial promotion or investment advice.

FT Wealth

US-China trade feud is a test for your investment portfolio

Pensions and Investments

Italy perceived as trouble — but not by all

Money managers are carefully watching the political situation in Italy unfold, deeming the country “too big to fail.”

But sources said they’re not just watching for negative investment effects from the country’s political and fiscal problems: They’re also looking for opportunities to add to positions. “Political risk is back with a vengeance in Italy,” said Emiel van den Heiligenberg, head of asset allocation at Legal & General Investment Management in London.

“As the third-largest global issuer of government bonds after the USA and Japan, Italy is too big to be allowed to fail without severe contagion to the global financial system. However, it is also too big to comfortably bail out using tried and tested mechanisms.” Recent weeks have seen Italy’s population and investors forced to reckon with a populist government coalition and a potential snap election.

Read full article >>

FT Adviser

‘Where assets appear cheap there is a good reason for it’

ne of the driving philosophies behind Gerrit Smit’s investment approach is that it is better to pick a strong business at a fair valuation than to look for something that is cheap and hope it will recover. Patience is the name of the game.

Mr Smit, who is head of equity management at Stonehage Fleming, said: “Where assets appear to be cheap, there is a good reason for it. Very often the hope or the expectation of being able to turn it around are too optimistic. The task to turn a proverbial ship is usually larger than people perceive it to be.

“[Our] philosophy is to buy to hold outstanding quality businesses with a particular competitive edge at the maximum of a fair valuation.” Thus, an outstanding quality business does not mean that more value cannot be derived from it.

He added: “Quality businesses very often seem to be fully valued and may appear to be expensive, but in the end the better the business can continue to deliver, the more people are willing to pay for it.

Read full article >>

Moneyweb

Pets: An investment case

While Smit is a bottom-up investor, which means he doesn’t invest based on macro trends, but picks companies based on fundamentals, he says healthcare is a solid industry from a sustainable organic growth perspective – one of the four pillars of his investment strategy.

Yet, he is fairly sceptical about the prospects for traditional human medicine as an investment for three reasons. The first is patent issues – as global patents expire, generic drugs come to market, competition intensifies and margins drop. Moreover, governments tend to be the largest clients worldwide and their concentrated buying power puts even more pressure on prices.

Finally, legal risks are significant – ultimately human life is involved. With animal drugs, most of these arguments disappear, Smit says.

Read full article >>

Morningstar

Top Fund Managers’ 5 Global Stock Picks

It’s rather unorthodox thinking, but Smit explains that the company owns all the properties, around the world, that their restaurants are run from. They then franchise the day-to-day running of them to individuals.The first point Smit makes is that no other landlord-tenant relationship can be as good as this one because one is totally dependent on the other. “The success of that restaurant is critical for everybody.”

Read full article>>

This is Money

Fund focuses on the world’s strongest brands - and it’s paying off

No one can accuse Gerrit Smit of having doubts as a fund manager. He is someone who believes passionately in how he goes about generating profits for his investors. He is not an individual for turning.

‘I have total conviction in what I am doing.’ he says. ‘I am investing of sustainable growth and everything in the fund’s portfolio is held on that basis. It lies at the core of what I and my team do as investment managers.’

Read full article via This is Money >>

Financial Mail

Analyse This: Stonehage Fleming’s Gerrit Smit

Financial Mail analyse Gerrit Smit, fund manager, Stonehage Fleming.

If someone came to you tomorrow with R100m to invest in just one company, which would it be?

Accenture. The single most important issue to invest for in a business is the one of sustainable organic growth. While evolving technology will always create new opportunities for growth, Accenture is one of the few examples where their particular services in technology will always be needed to assist clients into new technological developments. While all technology may not be sustainable, Accenture’s services in technology should be. They have an outstanding record in this context thus far.

Read full article via Financial Mail>>

Daily Telegraph

Top wealth manager returns 70pc in three years

The best performing manager in the “aggressive” category, Stonehage Fleming, returned 70pc to investors in three years. It managed this through its £500m Global Best Ideas fund.

You don’t need to be a client to invest as the fund is available via some investment shops at a charge of 1pc a year. Gerrit Smit of Stonehage Fleming said the portfolio contained only 25 stocks, with top performers including Visa, Accenture, the consultancy, and McDonald’s . “McDonald’s is a fantastic property business,” he said. “The chain receives a franchising fee and also owns the physical properties, so gets rental income too. It has been able to increase its dividend every year for 20 years.”

See more: telegraph.co.uk

FA News

Stonehage Fleming’s flagship fund produces outstanding returns

“Despite some nervousness, equities remain the asset class of choice” Gerrit Smit, Head of Equity Management, Stonehage Fleming.

Since launching in August 2013, the Stonehage Fleming Global Best Ideas Equity Fund has returned 47.2%*, compared to MSCI World All Countries Index of 39.0%*. The fund has attracted assets from private, professional and institutional investors and now has assets under management of over US$650 million.

Read full article via FA News

Tech Central

Interview: Gerrit Smit on why the global tech rally is far from over

Listen here to the podcast to hear Smit’s views on tech giants such as Tencent, Naspers, Microsoft, Apple, Amazon and Tesla and why he believes the tech rally of recent years still has plenty of legs. Listen here>>

In this episode of TechCentral, Duncan McLeod chats via Skype to Gerrit Smit, fund manager at London-based wealth management company Stonehage Fleming, which invests billions of dollars on behalf of ultra-high-net-worth individuals.

Thirty percent of Stonehage Fleming’s Global Best Ideas (GBI) Fund is made up of investments in the technology space, including in companies such as Visa, PayPal, Tencent and Accenture.

Smit, who is head of the equities management team, has overall responsibility for the business unit, along with its portfolio management and equity research functions.

He joined Stonehage Fleming in 2008 after 25 years of investment experience as equities analyst, chief investment strategist and chief investment officer for Sanlam’s international portfolios in London, and heading a boutique fund manager’s investment research.

In the podcast, Smit explains why he believes there’s still plenty of upside for some of the world’s biggest tech stocks, despite the strong rally they’ve enjoyed in recent years.

But what are the best metrics for determining whether these shares still make good investments or not? Smit explains why he focuses on top-line growth and on free cash flow, in particular.

The WealthNet

Stonehage Fleming’s flagship fund tops £500m

Assets under management (AUM) for the Stonehage Fleming Global Best Ideas Equity Fund have passed the £500 million mark.

Since launching in August 2013, the £514 million fund has attracted assets from both private, professional and institutional investors and has returned 78.7 percent over the last four years, compared to the Global Equity peer group average of 52.8 percent.

Fund manager Gerrit Smit runs a concentrated, high conviction portfolio of 24 stocks that are chosen for their sustainable growth potential, strong management team, strategic competitive edge and value according to the firm. The portfolio has very low turnover, over the past 12 months Mr Smit has only sold two positions and initiated one.

Current investments include companies such as Visa, Alphabet, Nestle, Estée Lauder, PepsiCo and Accenture with technology stocks now making up 28.8 percent of the fund.

Mr Smit said: “There has been some general nervousness of equities which are now in the eighth year of a bull market, but this needs to be weighed against global economic fundamentals, which in our view continue to favour investment in quality companies.

“The US consumer and manufacturing sector show strong confidence and economic performance has improved in Europe too. Most importantly, we continue to stick to our philosophy that a good business remains a good business irrespective of potential short-term tactical setbacks in its share price, and it will continue to reward investors over time.”

The fund had previously been available exclusively to clients of Stonehage Fleming, but has been open to outside investors since 2016. It is now available on seven platforms and across three jurisdictions, with more under consideration.

Stonehage Fleming provides a range of services to over 250 wealthy families. The group advises on over £35 billion of assets and employs over 540 people in 11 offices in eight jurisdictions around the world.

Investment Europe

Stonehage Fleming fund passes £0.5bn

Stonehage Fleming, the independently owned family office, says its Global Best Ideas Equity fund has seen assets under management pass the £0.5bn mark, as the number of external client investors continues to grow.

Only available since 2016 to investors who are not clients of Stonehage Fleming, the fund is run as a concentrated portfolio of some 24 stocks, and aims for exposure to businesses with sustainable growth potential. Turnover is low, with just two positions sold in the past 12 months and one initiated. Current holdings include Visa, Alphabet, Nestle, Estee Lauder, PepsiCo and Accenture. The investor base includes both private, professional and institutional investors, but more distribution is being considered beyond the current availability via seven platforms in three jurisdictions.

Portfolio manager Gerrit Smit said: “There has been some general nervousness of equities which are now in the eighth year of a bull market, but this needs to be weighed against global economic fundamentals, which in our view continue to favour investment in quality companies. The US consumer and manufacturing sector show strong confidence and economic performance has improved in Europe too. Most importantly, we continue to stick to our philosophy that a good business remains a good business irrespective of potential short-term tactical setbacks in its share price, and it will continue to reward investors over time.”

Citywire Wealth Manager

Stonehage Fleming hires former Investec man as equity research boss

Stonehage Fleming has appointed Investec analyst Mark Sloan as its director for equity research in its equity management division.

His appointment comes as Stonehage Fleming opens its flagship £500 million Global Best Ideas Equity fund to institutional investors. Sloan joins the firm after almost a year out of the industry. He was most recently at Investec Asset Management, where he spent 10 years before leaving in July 2016.

Read more via Wealth Manager

Investment Europe

Stonehage Fleming adds one to equity management team

London-headquartered family-office Stonehage Fleming has named Mark Sloan (pictured) as director, equity research in the group’s equity management team.

He will be responsible for analysing a group of businesses that are either in Stonehage Fleming’s investment portfolio already, or those that should be considered for inclusion without restrictions in terms of sectors. Based in London, Sloan reports to Gerrit Smit.

Most recently, Sloan worked within the 4Factor team at Investec Asset Management as the global industrials analyst and sector portfolio manager during seven years. He also spent two years on analysing global consumer businesses.

Formerly, he was a global equity analyst with M&G Investment Management. Gerrit Smit, partner and head of Equity Management at Stonehage Fleming, said: “We are pleased to have attracted someone with Mark’s depth of research experience to join our Equity Management team. Mark arrives at Stonehage Fleming at a particularly exciting time following our decision to open our Global Best Ideas Equity Fund to institutional investors for the first time.

“As well as valuable training and experience at two excellent asset managers, Mark has an investment philosophy that is totally aligned with ours, which will add value as we continue to build our research and equity investment team.”

Stonehage Fleming advises on more than £35bn (€39.9bn) of assets and manages over £9.5bn (€10.8bn).

 

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