The Fund’s assets are invested in a diversified basket of local stocks positioned within key sectors and foreign funds invested in equity funds, bond funds, hedge funds, property funds and structured products. The Fund seeks to meet its objective by following a disciplined approach by investing in stocks with consistent earnings growth, attractive valuations and strong fundamentals.
Research and analysis lie at the core of framing our investment strategies. Our approach looks at both fundamental factors and market sentiment. This translates into a stepwise approach which is followed for each asset class:
Prevailing macro-economic outlook
We first have a look at the asset class’ macro-economic outlook, paying attention to major economic trends. The investment team will make a map of the investment landscape for the asset class followed by identification of different sub-sectors. Further macro-economic analysis will then be conducted to assess the attractiveness of each of the several sub-sectors in the asset class.
Formulating a preliminary sector allocation
With insight into which sectors to focus our strategies on, we formulate a first sector allocation. The allocation will take into consideration where we are in the economic cycle (emphasis is laid on the sectors that are expected to perform well during that particular phase of the cycle). It can be region-wise, sector-wise or based on investment style depending on the asset class. The aim of the allocation will be to, at least, provide superior performance than any diversified portfolio invested in the asset class. This would be achieved by overweighting the portfolio sectors/regions in which we have an optimistic view and underweighting it on those where we are not particularly optimistic.
All our strategies are monitored on a regular basis, some daily and others, at least, on a weekly basis. Assessment is done to monitor the performance of the strategies relative to current market trends and changing outlook. In cases where there are sudden changes in economic outlook or serious adverse performance of any strategies, special adhoc analysis and investment committees are organised.
Sector allocation and stock selection
The landscape of the asset class
The local stock market is composed of an official market (OM) and a development and enterprise market (DEM) with stocks sub-classified in no less than 8 industry categories. Over recent years, the OM has enjoyed improved liquidity and has attracted a significant amount of foreign investments.
Our strategy and its rationale
The IPRO Group manages local equities with the primary objective of out-performing the SEMTRI using a discretionary portfolio management approach and investing directly in the markets. We rely on a combination of expertise from our trader, financial analysts and fund managers, covering the macro and micro analysis spectrum. Our ability to deliver superior performance compared to the market lies in a more pragmatic sector allocation and better stock selection. We focus on growth sectors and select companies that have sound fundamentals.
Sector allocation: Macro-economic and econometrics forecasts
Our highly qualified and experienced team are constantly monitoring the macro-economic environment of the Mauritian economy. We believe successful investing results from a thorough understanding of these basics and its underlying relationship with the business cycles. A top down approach usually focuses on specific pillars/sectors of the economy, thrusting its way down to specific stocks within the specific industry.
Growth sectors with interesting prospects are preferred over less bright ones. Our portfolio sector allocation is based on these macro- economic researches while we use various econometrics based models for our forecasts. Increasing exposure to preferred sectors ultimately result in our local portfolios outperforming the major local indices.
Stock selection: Company financial analysis & stock valuation
Our stock selection procedure involves in-depth company analysis (be it on a top-down or bottom up based investment approach) backed by technical forecasting models. Throughout the years, we have been able to compile an impressive amount of information on these companies. Our financial analysis is based on detailed fundamentals, whereby the company is scanned through its ‘skeleton’ for its progression, health, etc. Market dynamics and the macro/micro economic environment evolve rapidly in this highly competitive world.
We, at IPRO, are fully aware of this and therefore we monitor and update our valuations based on these changes. Our long term investment approach also implies knowing the people behind these businesses. In consequence, we also assess the management of these companies as well as their corporate governance, especially during difficult times. Only those companies which fit our investment philosophy and which show interesting growth prospects are selected to fit in the local portfolio.
IPRO employs both traditional fundamental analysis and quantitative metrics to determine if a company with a sustainable strategy meets our rigorous investment criteria. We look for current or future market leaders, whose financial strength and strategic vision provide maximum potential for long-term growth. We evaluate a company’s prospects for earnings and revenue growth, cash flow generation and margin expansion, and its track record for meeting or beating expectations. We analyze management’s ability to adapt to shifting market conditions, in still tight internal controls and build shareholder value. Using quantitative metrics, we assess a company’s performance relative to others in its industry and to the market as a whole. Our objectives are to identify top quality companies, dominant market leaders, trading below projected value and hold them until their value is fully realized.
When equities on our watch list enter target trading ranges, we use technical analysis to help us determine the best times to buy them. As experienced market technicians, we analyze accumulation and distribution patterns, paying particular attention to crossovers of varying trailing moving averages. Our disciplined approach takes emotion out of investment and this belief is vital in investment management.