Value Driven.
Fundamentals.
The Polaris Global Value UCITS Fund (“the Fund”) seeks to provide above average return by investing in companies with potentially strong sustainable free cash flow or undervalued assets.
We conduct rigorous fundamental research on the companies identified in the screening process, selecting myriad companies (across country, industry and market cap) in which the Polaris Global Value UCITS Fund invests.
The Fund is managed according to the model portfolios constructed by Polaris Capital Management, LLC (the “Adviser”). Shareholders may benefit from the experience and expertise of the Adviser’s senior investment team, investing in a convenient vehicle that has a lower minimum investment threshold than a separate account.
Pillars of The Polaris Global Value UCITS Fund
Value What Matters Most
How do we find value opportunities? We believe that worldwide markets are generally efficient over time, but investor behaviour creates volatility that leads to inefficiency somewhere in the world. At Polaris, we believe that investing in the most undervalued companies worldwide likely limits risk and has the potential to outperform the benchmark.
Cash (Flow) Is King
Committed to our value investing mandate, the companies that enter the Fund portfolio come from both developed and emerging markets, with two common elements: the companies have the potential to generate strong sustainable free cash flow and keep conservative balance sheets. These companies may be capable of growing stronger in difficult economic times, while performing admirably in growth cycles too. We like the growth potential, but don’t want to pay for it. We perform screens of databases that primarily focus on a company’s sustainable maintenance cash flow (“MCF”) relative to its market value where MCF is a proprietary measure of operating cash flow less maintenance capital expenditures. Seeking companies with the greatest potential for sustainable MCF is part and parcel of our research process (see below).
Fundamental Perspectives
Using a series of valuation criteria, our investment team regularly screens a database of more than 40,000+ companies to produce a list of approximately 500 to 2,000 companies worldwide that we view to be the most undervalued.
As a cross check to the database screen, we uses a global equity valuation model to identify the most undervalued companies based on corporate earnings, yield, inflation, real interest rates, and other variables.
However, bottom-up fundamental research comprises the vast majority of time we spend in the global investment process. Fundamental research covers financial analyses of companies including: in-depth review of financial statements, research on suppliers, customers and competitors and meetings with company management. We believe bottom-up fundamental global equity research provides the greatest perspective.
Diversification = A World of Opportunity
The Fund is invested in 65 to 100 companies out of the approximately 500 identified in the initial screening criteria. Allocations among global companies are primarily determined by this bottom-up analysis.
However, a well-diversified portfolio is a construction mandate for any good global mutual fund; we have the benefit and flexibility to invest in any country (developed, emerging and frontier), any industry and any market cap.
Today, the Polaris Global Value UCITS Fund typically has investments spanning more than 15 different industries and many countries, with a market cap that tilts slightly toward mid- and small-cap opportunities. The Fund will generally seek to hold investments for three to five years.
The Wisdom of Teams
Our portfolio managers are responsible for the day-to-day management of the Polaris Global Value UCITS Fund with assistance from a team of tenured investment analysts. Our research team travels the globe in search of discounted, but high-quality stocks in both emerging and developed markets to add to our global equity fund.
Analysts and portfolio managers spend their time “kicking the tires”, assessing industry conditions, competitive advantages, profitability, operating and financial leverage and the quality of management — in an effort to identify new companies that may enhance the Polaris Global Value UCITS Fund’s performance.