A financial incumbent reborn
In this exclusive video, Eileen Riley, Co-Portfolio Manager at US-based Loomis Sayles articulates the opportunity available for investors when “the pace of change globally is faster than it has been in any point in recent history.”
As well as bringing significant risk, the accelerating changes are bringing significant opportunities, which are presenting across multiple sectors as well as multiples geographies. From their investment philosophy of ‘disciplined process with an unconstrained universe’, she shares one multinational financial incumbent that has used tech to completely redefine itself. The resulting changes have allowed it to rationalise its cost structure, deliver a ROE above 20% and allow it to leverage a major demographic trend. Watch the short video to hear Eileen’s thesis.
How do you screen for opportunities?
We talk about being a disciplined process with an unconstrained universe, and that's a powerful combination because it allows us to have a wide universe for our selection set, but we're very disciplined in what we're looking for. We're consistently looking for quality businesses that can grow their intrinsic value at the right price. What that allows us to do is, those first two, we call those our alpha drivers, those first two allow us to take advantage of what we call the duration effect of a business, but the ability of a business to add value over time, and that last alpha driver valuation allows us to take advantage of mispricings. Those are the two inefficiencies we're looking to take advantage of in the market.
How do you think about disruption?
We're looking for businesses that we can own for long periods of time. The ability to do that has to do with how sustainable is that business model in the future? We happen to think we're in a period of time right now where the pace of change globally is faster than it has been in any point in recent history. That's not just a technology comment. Technology is the enabler, but we're seeing that across healthcare, we're seeing it across consumer staples, we're seeing it across consumer discretionary. And we're seeing it across broad geographies, we think that's a very important trend that's happening in the market. With that disruption comes significant risk, and that's what you're getting at in part of your question, but it also brings significant opportunity.
Can you share an example?
One business that we find particularly attractive right now is Legal & General, the UK insurer. They have a very strong pension risk transfer business, as well as a very strong investment management business. This is a business with an ROE just over 20%, and a business that is positioning itself well for some of the key demographics or key trends in the market, more specifically, ageing population, as well as taking advantage of significant technology opportunity to enhance and run their business more efficiently with a better cost structure.
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Loomis Sayles’ value driven global equity offering is being distributed by IML here in Australia. If you would like to learn more about their capabilities hit the 'contact' button to get in touch or visit their website for more information.
This information is provided for general information purposes only and does not take into account the investment objectives, financial situation or needs of any person. Investors Mutual Limited (AFSL 229988) is the issuer and responsible entity of the Loomis Sayles Global Equity Fund (‘Fund’). Loomis, Sayles & Company L.P. is the investment manager.
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