Our philosophy and process

Our distinct investment philosophy and process for our UK, global and European equity strategies places sustainability at its heart

Potential, Valuation and Timing

Our PVT investment philosophy recognises the three key criteria that we believe enable us to discover the most promising investment opportunities regardless of market conditions.

We evaluate all stocks according to a combination of these clearly defined and continuously monitored investment factors. This enables our team to maximise returns and minimise risk.

Categories of potential

Over the years we have found that companies that can deliver above average potential divide into four categories; these relate to where a company is in its ‘life cycle’:

Growth – the delivery of strong revenue and profits growth

Quality – a business franchise that delivers a superior return on investment

Recovery – the process whereby a company produces a recovery in profits to ‘normal’ levels following decline

Asset-backed – the delivery of asset backed growth to a long-term investor.

Tandem bicycle selective focus

Sustainability

Our investment philosophy is further enhanced by a fully integrated analysis of every company's sustainability credentials.

image showing the three pillars of river and mercantile's sustainable philosophy and process

We evaluate sustainability through the pillars of People, Innovation, and the Environment, looking beyond those companies typically rated leaders by third party ratings and thereby including improvers (companies undergoing change leading to positive long-term outcomes) and enablers (whose products contribute to driving sustainability improvements).

Not only is backing transitioning companies an important driver for a more sustainable future, we believe this is a significant source of alpha.

Our analysis determines a sustainability 'score' for each company we look at. These are broadly categorised as follows:

Sustainability investment in action

A selection of investment case studies demonstrating our sustainability analysis

"We are, first and foremost, bottom up stock pickers, but the PVT philosophy provides an unemotional analysis of an investment, detached from swings in markets and investor sentiment that can come from macroeconomic events and the news"

Hugh Sergeant, Head of Value and Recovery strategies

Investment process

We are practical investors who live and breathe the evaluation of company prospects. We also believe there are repeatable investment cycles that can be systematically exploited, so we combine quantitative research with fundamental stock-specific analysis.

Our proprietary quantitative analysis tool allows us to quickly and systematically review vast amounts of complex data efficiently, scrutinising a universe of UK and global equities in order that we can track down and target the best opportunities to investigate further.

We then use the knowledge, expertise and, importantly, experience of our team to carry out fundamental research to validate every PVT idea to find those that will work best in our portfolios.

Verification process

There are four stages to PVT idea verification:

Screening

Our quant tool's findings are discussed at our weekly team meetings. We’re looking for high scoring stocks. Once identified, one of the team is nominated to manage the verification process for that stock.

Validation

We test the PVT score and investment thesis through analysing the key drivers of PVT relevant to the type of company we’re looking at.

Company meetings

Company meetings are an integral part of our process but we don’t believe in having meetings simply because we can or to screen the market. Instead, we meet with companies when we need answers to specific questions such as the key drivers of return on capital and growth.

Debate

We believe that team debate is an important process in ensuring effective testing of the validity of a stock’s PVT investment case, its strengths and weaknesses.

In the weekly verification meetings, all new ideas are presented, debated and questioned before any investment is accepted into the portfolios.

The importance of an effective sell discipline

As well as identifying exciting opportunities that we want to buy, we also monitor every company already in our portfolios to know when the time is right to exit or sell a position.

We systematically monitor the PVT scores of all portfolio holdings in our quantitative analysis tool. When scores fall significantly, we re-verify the investment case and debate the investment’s position at the weekly meeting. A systematic sell discipline is critical. Our selling process is driven by the same PVT philosophy. Shares where potential is deteriorating, where valuations are less attractive following a period of outperformance, or where timing is no longer optimal will all be examined.

"The longevity and consistency of a stable investment process continues to reap benefits for us and our clients. It allows us to remain true to our investment beliefs and insulated from the distraction of day to day market movements. By combining quantitative analysis with the knowledge and experience of our fund management team we ensure that our focus is always exactly where it needs to be – on finding great investment opportunities."

Charles Benett, Head of PVT Equities

Our fund management team

Hugh Sergeant

Head of Value & Recovery Strategies, PVT Equities

Hugh Sergeant

Head of Value & Recovery Strategies, PVT Equities

Hugh graduated from the London School of Economics with a degree in Economics. He joined Gartmore in 1987 as a UK equities graduate trainee and moved to Phillips & Drew in 1990, managing UK equities throughout his twelve years there. In March 2000 Hugh was promoted to Head of UK Equities at UBS Global Asset Management and Chairman of the UK Equities Committee.  He joined Société Générale Asset Management in 2002 as Head of UK Equities. Hugh was one of the founding members of R&M Asset Management in 2006. Hugh is Head of Value and Recovery strategies within the PVT Equities team and manages the UK Equity High Alpha, UK Recovery, Global Recovery and Global High Alpha strategies.

William Lough

Portfolio Manager, PVT Equities

photo of R&M's William Lough

William Lough

Portfolio Manager, PVT Equities

Will graduated from the University of Oxford with a First-Class Honours Degree in Modern History, before joining R&M as an equity analyst in 2009. In 2013 he was promoted to Director of Research and in 2014 became alternate Portfolio Manager on Hugh Sergeant’s Recovery and High Alpha strategies.   Will is currently the lead Portfolio Manager on the UK Dynamic Equity and International High Alpha Strategies and co-manager on the Global High Alpha Strategy. Will is also the alternate on the UK Recovery Strategy.

George Ensor

Portfolio Manager, PVT Equities

photo of George Ensor

George Ensor

Portfolio Manager, PVT Equities

George graduated from Bristol University with an Upper Second Class degree in Chemistry in 2008 before joining Smith & Williamson Investment Management as a graduate trainee where he worked for five years as an analyst and Private Client Investment Manager. George joined R&M in March 2014 and is Portfolio Manager of the ES R&M UK Equity Smaller Companies Fund and the R&M UK Micro Cap Investment Company. George is a CFA charter holder.

James Sym

Portfolio Manager, PVT Equities

photo of James Sym

James Sym

Portfolio Manager, PVT Equities

James graduated from the University of Cambridge with a degree in Natural Sciences. James joined Cazenove Capital in 2007 as a graduate trainee in Wealth Management before moving to work on the Pan European desk in 2008, initially on the UK desk. In 2012 he launched the Cazenove European Income fund as co-manager and, following  the Schroders acquisition of Cazenove in 2013, was appointed manager of a number of continental and pan European equity products ultimately managing over £2bn of client assets as well as forming the specialist European equity team at Schroders. He joined River and Mercantile in June 2020 and is a member of the PVT equity team with responsibility for the European franchise.

Matt Hudson

Portfolio Manager, PVT Equities

photo of Matt Hudson

Matt Hudson

Portfolio Manager, PVT Equities

Matt has over 20 years' experience of managing UK equities, with a deep specialist knowledge of equity income strategies. After qualifying as a chartered accountant with Coopers and Lybrand, Matt started his investment career in 2001 as an assistant fund manager at AIB Govett Fund Management. In 2001, he joined Cazenove Fund Management to launch a new fund, the Equity Income Trust for Charities and to develop his investment approach for equity income. In 2005 he launched the Cazenove UK Equity Income Fund which became one of the best performing funds in the income sector, eventually growing to c.£1bn in assets under management and which was twice shortlisted for the IA best UK equity income fund of the year.  For over a decade Matt was a key member of the highly successful and award winning Pan European Equities team at Cazenove Capital, combining his portfolio management responsibilities with his analytical work on a range of UK sectors including Banking, Utilities, Chemicals, Mining and the Building & Construction sectors. In 2013, Matt moved, along with the rest of the business cycle team, to Schroders following their take-over of Cazenove. He continued to focus on his key income fund responsibilities and was later appointed as the Head of the Schroders Pan European Business Cycle Team, managing a team of senior Portfolio Managers responsible for client assets of over £5bn in long and long/short strategies. Matt joined R&M in 2022 and is lead portfolio manager of the ES River and Mercantile UK Equity Income Fund.

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