Research process and coverage
Our research spans macroeconomics and asset allocation, Australian and global equities, managed funds and ETFs. We narrow a broad field before deeper analysis, and revisit a view when the evidence changes.
We start broad, then decide where to go deeper
A macroeconomic question, a company and a managed fund require different analysis. The process changes with the question. The basic discipline is consistent: narrow the field, test the evidence, form a view and revisit it as the evidence changes.
Start with the broader universe
We begin with more markets, companies, funds and ETFs than we can research in depth. Screening and ongoing monitoring help us decide where further work is warranted.
Narrow the field
For equities, an internally developed 20-indicator framework helps us narrow the broader universe before deeper fundamental research. Managed funds and ETFs have their own screening and due-diligence process.
Do the deeper work
The deeper work depends on what we are researching. We use the relevant mix of financial analysis, modelling, valuation, due diligence, meetings and first-hand research to answer the investment question.
Form the view
We try to make the reasoning inspectable. Where appropriate, the research should make clear what we think, why we think it, which assumptions matter, what evidence supports the view, what could prove it wrong and what we are watching next.
Keep testing it
Research does not stop when we publish a note. Company results, announcements, economic data, valuations, manager changes and market developments can all affect the assumptions behind a view, and when something material changes we go back to the work.
The questions depend on what we are researching
There is no single research template for every investment. The work has to answer the questions that matter to the decision. The different parts of the research also inform one another. Macro conditions can change how we assess a company or fund, while bottom-up research can challenge the broader view.
Macroeconomics and asset allocation
We monitor economic and market conditions across major regions and maintain proprietary models covering growth, inflation, liquidity, financial conditions and other variables relevant to asset allocation and portfolio risk. The models help us organise and test the information. The investment team still has to decide what it means.
Australian and global equities
For a company under coverage, we want to understand the business, what drives its financial performance, what we think it is worth and what has to happen for the investment case to work.
A company note may include:
Investment thesis
Why we believe the investment is or is not attractive.
Valuation
The framework, assumptions and range we use to assess value.
Financial analysis
The operating and financial drivers that matter to the investment case.
Risks
What could undermine the thesis rather than a generic list of things that could go wrong.
Signposts
The evidence we are watching to judge whether the thesis is progressing as expected.
Changes to our view
Where our assessment has changed, what changed in the evidence and why the investment implication changed with it.
For companies under coverage, we produce a research note at least twice a year, with additional work where developments warrant it.
Managed funds and ETFs
The questions are different. We examine the exposure being offered, the underlying portfolio, the manager or index methodology, the investment process, risk characteristics, liquidity and the role the investment could reasonably play within a broader portfolio.
For managed funds, that includes meeting with managers and testing how the stated investment process is reflected in the portfolio and its risks. For ETFs, we look through the product to understand what exposure it actually delivers and how that exposure is constructed.
We care more about the portfolio problem an investment solves than how well the product itself is presented.
What we screen and what we cover
Screening gives us a broad field to work from. Once a company or fund moves into coverage, it becomes part of the ongoing research and review.
Macroeconomic research
We monitor more than 80 macroeconomic and market indicators across major economies.
The work covers variables relevant to growth, inflation, liquidity, financial conditions, asset allocation and portfolio risk.
Australian and global equities
Our broader equity screen covers approximately 2,700 companies across 23 developed and 24 emerging markets.
At any one time, around 120 to 150 Australian companies and 30 to 50 global companies are under research coverage. The 20-indicator framework helps us narrow the broader universe before we commit to the deeper company work.
Managed funds
We screen more than 200 managed funds across asset classes.
Around 60 to 90 are under coverage at any one time, supported by ongoing manager meetings and due diligence.
ETFs
We screen more than 200 ETFs across asset classes each month.
The work looks at the exposure, structure, underlying holdings or index methodology, liquidity, risks and the role the ETF could play within a portfolio.
External information is an input. The judgement is ours.
We use financial-market and economic data, company disclosures, company and manager meetings, industry participants, specialist research and third-party research systems. The distinction is what we do with them. We do our own analysis and reach our own investment conclusions.
Company and manager meetings
We meet directly with companies and investment managers as part of the research programme. A meeting can help us test an assumption, understand how a company or investment manager is thinking about an issue, or examine something that is difficult to see from published information alone.
It is another source of evidence. We still have to decide what we think of it.
Site visits, conferences and international research
We conduct site visits, attend investment conferences and undertake international research where seeing a business, asset, industry or market first-hand adds to the work.
We also speak with industry participants and specialists where their experience can help us understand the question we are examining.
Data, models and research systems
We use professional market-data and research systems alongside our own models and internal research.
Across the broader programme, our systems track more than one million data points. That breadth gives us more ways to form our own views, test them from different directions and recognise when the evidence no longer supports an existing view.
Independence and disclosure
We are management-owned, and our investment research is produced by our own investment team. No manager pays us for research coverage, and we are not a paid ratings agency. We and members of our team may from time to time have interests or relationships relevant to securities or organisations discussed in our research. Where a relevant interest or relationship requires disclosure, we disclose it. The research conclusion remains ours.
When the evidence changes, we go back to the view
An investment thesis records what we believe at a point in time. New evidence may strengthen it, weaken it or make an assumption no longer reasonable. When that happens, we go back to the investment case rather than treating the original conclusion as something that has to be defended.
What changed?
We start with the new information. That might be earnings, valuation, the balance sheet, management, economic conditions, portfolio exposures or another development relevant to the original case.
Which assumption does it affect?
Not every new fact changes the investment view. We go back to the assumptions behind the conclusion and ask whether the new evidence changes one of the things the investment case depends on.
Does the conclusion still follow?
If a material assumption changes, we reconsider the investment implication. The view may remain unchanged. We may change our valuation or assessment of risk. Or the original investment case may no longer hold.
Where a view changes, we want the record to show more than the new conclusion. We want it to show what changed in the evidence and why it mattered.
See the research for yourself
If you want to judge whether the research is useful to the way you invest, start with the work itself. We can send you a sample, or you can try the live service for 30 days.
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- Level 2, 44 Bridge Street
Sydney NSW 2000