Threadneedle Asset Management

We take a long-term, quality-growth approach when investing, targeting companies with durable or improving competitive advantages, high or rising returns on invested capital and sustainable growth potential. By assessing the durability of the competitive advantage, rather than simply looking at the return or growth profile, we open up a broader opportunity set and find investment opportunities other quality managers may not consider. By leveraging on our deep research resource, we are able to find the best opportunities around the world and build a well-diversified, high conviction portfolio that can deliver strong risk adjusted returns, in both up and down markets.

The ability of quality companies to sustain high returns on capital and above-average growth is often underestimated, meaning that potential long-term winners trade at a discount to their intrinsic value. We search for these quality stocks that have durable competitive advantages, alongside robust business models, and therefore strong and sustainable long-term growth potential, as we believe that these businesses are well positioned to generate returns for the long term. 

Compared to the US, the international market is not dominated by a handful of large tech or tech-adjacent companies. Instead, the biggest companies in the index are split across a range of industries; correlation across these companies tends be lower; and they tend to have more idiosyncratic drivers of growth.  Therefore, not owning a company or a sub-set of highly correlated companies is less likely to have an impact on a fund’s return relative to the index. For an active manager, this diversified opportunity set provides a great opportunity to deliver additional value over benchmark indexes.

We’re currently excited about Japan. It is a large part of our universe and has long proved a fertile ground for innovative, forward-looking businesses, but it’s the country’s ongoing corporate reform that gives us further confidence. Companies are focusing on more efficient capital allocation, which should mean increasing growth and returns. While we don’t target income, the increasingly shareholder friendly nature of Japanese companies should also be supportive of returns. We also find plenty of other interesting opportunities across different sectors, from health care and industrials companies in Europe to differentiated financials in Asia.

We’re bottom-up investors, so the sector and country positioning will always reflect where we’re finding the most compelling long-term opportunities. While we’re not thematic investors, we do companies across different geographies markets that expose the portfolio to structural themes. These include electrification, digital transformation of products & services, structural capex in manufacturing, and growing data- and semiconductor intensity. The companies that we own tend to be the leaders in their fields, with dominant market shares and offering a product or a service that is difficult to replicate. This should lead to solid fundamentals - sound financial and operational foundations, such as high profitability, stable growth and low dependence on debt -, stronger share prices and better outcomes for our investors.