Comgest Growth Europe ex UK is a high conviction fund investing in high-quality, long-term growth European companies head-quartered - or carrying out their predominant activities - in any European country excluding the United Kingdom. Comgest has a strong track record investing in European equities going back to 1989.
This fund has a very well defined process that has been used company-wide for more than three decades. We really like Comgest's structure and culture. It has a singular focus, an emphasis on the long term, and a flat hierarchy. Portfolio managers all work as analysts and the majority of the staff - including those not in the investment teams - have a stake in the business. We think this has helped foster a healthy collegiate environment and that is born out in the funds' performance and the success of the business. Although Comgest Growth Europe ex UK is very stylistic and will likely struggle at times when the quality growth style is out of favour, we believe it can continue to deliver into the future.
Comgest was founded in 1985 and is entirely owned by its employees through a partnership structure. Equity is not restricted to senior managers and the company is proud that approximately 75% of Comgest employees are shareholders. Comgest is set up to do one thing – manage quality growth equity portfolios for the long-term. In this, it has been extremely successful and it now runs around $30 billion of assets. All Comgest funds have the same philosophy and process, which is applied to different parts of the world and each one is high conviction and concentrated, unconstrained by any benchmark. Comgest believes continuity - of their team, style and approach - is its greatest asset. Comgest was awarded the Elite Provider for Equities rating in 2019, 2020 and 2021.
The fund is co-managed by Arnaud Cosserat, Alistair Wittet and Franz Weis. Arnaud joined Comgest in 1996 and is the Chief Executive Officer of the Comgest Group. He is a long-standing portfolio manager within the European equity team. Alistair started his career as an analyst at Standard Life Investments in 2006. He joined Comgest in 2012 and is now the co-lead manager on the Pan Europe, Europe ex UK and European smaller companies strategies. He is also a CFA charterholder. Franz started his career in 1990 at Baillie Gifford & Co. He joined Comgest as a portfolio manager and analyst in 2005 and is now both a managing director and the Chief Investment Officer of the Comgest Group. He is co-lead manager on the majority of Comgest's European funds.
Arnaud Cosserat, Alistair Wittet, Franz WeisFund manager
Comgest has a clear, team-based investment philosophy which is used across all its funds. The team looks for quality companies that can sustainably grow their earnings over time. It invests for the long term, ignoring short-term market noise. All portfolio managers also work as analysts and they are free to look at companies in any country or sector.
The philosophy is embedded in an initial screen where six different areas are analysed: the business model; financial criteria, organic growth, barriers to entry, sustainability and quality of company management.
This screen reduces the initial universe down from 1,400 to 170 companies and detailed analysis is then conducted on the remaining firms. It is often a lengthy process.
Stocks which pass this second stage (usually around 70) will enter the investment universe, before valuations are considered. A unanimous team decision is required for a stock to be accepted in the portfolio.
Environmental, Social and Governance factors are also an important consideration, with controversial weapons and tobacco companies excluded entirely. Comgest Growth Europe ex UK's quality growth bias also means that is naturally very underweight oil & gas and mining companies, which tend to be quite cyclical.
ESG - Integrated
Comgest considers ESG issues as integral to the investment process, with each of the Environment, Social and Governance elements all given equal importance when performing stock analysis - from discovery to decision making. The managers look for companies exhibiting sustainable growth characteristics, which leads them to assess many non-financial criteria as part of their research process, such as corporate culture, governance structure, innovation, stakeholder relationships, environmental impact and policies. They then assess each company using their in-house ESG assessment tool, resulting in a rating from 1-4 (1 being an ESG leader, 4 being a laggard where they have identified need for improvement). This rating then impacts the discount rate they use in their proprietary valuation models. As impacting the discount rate leads to greater or lesser upside for the stock, ESG is hardwired into portfolio construction and the decision-making process.
The fund is very high conviction and concentrated with around 30 holdings, so there is stock-specific risk and investors are reliant on the team getting their investment choices right. New stocks usually start as a 1% position and will be added to over time. There are no hard sector or country limits, but the portfolio is carefully managed to ensure it is well diversified.
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