Fund Guide
Global Equity
Unconstrained Fund
December 2015
This document is for Investment Professionals only and
should not be distributed to or relied upon by retail clients.
It is only intended for use in jurisdictions where the relevant
funds are authorised for distribution or where no such
authorisation is required.
About Standard Life Investments
Standard Life Investments is a leading asset manager with an expanding
global reach. Our wide range of investment solutions is backed by our
distinctive Focus on Change investment philosophy, disciplined risk
management and shared commitment to a culture of investment excellence.
As active managers, we place significant
emphasis on rigorous research and a strong
collaborative ethos. We constantly think
ahead and strive to anticipate change before it
happens, ensuring that our clients can look to
the future with confidence.
domestic players in Asia, including HDFC Asset
Management in India and Sumitomo Mitsui Trust
Bank in Japan.
As of 30 June 2015, Standard Life Investments
managed £250.0 billion on behalf of clients
worldwide. Our investment capabilities span
equities, fixed income, real estate, private
equity, multi-asset solutions, fund-of-funds and
absolute return strategies.
Our parent, Standard Life plc, was established
in 1825. A leading provider of long-term savings
and investments, Standard Life went public
on the London Stock Exchange in 2006 and is
now a FTSE 100-listed company. Standard Life
Investments launched as a separate company in
1998 and has quickly established a reputation
for innovation in pursuit of our clients’
investment objectives.
Headquartered in Edinburgh, Standard Life
Investments employs more than 1,100 talented
professionals. We maintain offices in a number
of locations around the world including
Boston, Hong Kong, London, Beijing, Montreal,
Sydney, Dublin, Paris and Seoul. In addition,
we have close relationships with leading
Our investors rank among some of the world’s
most sophisticated and high-profile institutions.
They include pension plans, banks, mutual
funds, insurance companies, fund-of-fund
managers, endowments, foundations, charities,
official institutions, sovereign wealth funds and
government authorities.
Contents
2 Introducing the Global Equity
Unconstrained Fund
3 What is unconstrained investing?
4 What is our investment approach?
6 Fund information
7 Summary of benefits
8 Contact details
5 What is our investment expertise?
Global Equity Unconstrained Fund
1
Introducing the Global Equity
Unconstrained Fund
Global equities provide a compelling solution for investors looking for a wide
and diverse opportunity set. With the Global Equity Unconstrained Fund,
available as an OEIC and a SICAV, we have the maximum flexibility to invest
across all geographies and sectors, while still adhering to strict risk controls.
This approach means we can search the entire global stock market and
construct a portfolio based on companies in which we only have the highest
conviction. The aim of this strategy is to deliver excellent risk-adjusted
returns by giving our clients access to our best stock ideas.
We only invest in our best ideas
Extensive resources
Many funds reference a benchmark for portfolio
construction. This means the manager is heavily
influenced if that index is concentrated in a
small number of companies or sectors. For
example, over 30% of the MSCI AC World Index
is in the IT and financial sectors. By contrast,
we are able to invest right across the large and
diverse global equity set (we look at a universe
of around 5000 companies – two times more
than comprise the MSCI AC World Index).
This flexibility means we can access a greater
number of companies that can potentially
outperform at different stages of the economic
and investment cycle.
Mikhail Zverev manages the Global Equity
Unconstrained Fund and leads our six-strong
global equities team. The team draws from the
investment insight of over 60 managers/analysts
across Standard Life Investments. Together, the
team conducts over 3,000 company meetings a
year across the world.
Truly active investing
Our unconstrained approach gives us the
freedom to express deep, stock-level insights to
the fullest possible extent without consideration
for potentially inhibiting benchmark constraints.
This ability to invest in only our highest
conviction ideas means that our Global Equity
Unconstrained Fund is the purest expression
of stock picking, reflecting our best investment
ideas and representing truly active investing.
Five reasons to invest
Putting our process to work
¬ Superior resources accessing the
multitude of opportunities available
in the entire equity universe
Given the size of the global investment set,
many companies are often under-researched
and therefore their scope for improvement
is underappreciated. This means many firms
are mispriced relative to their underlying
fundamentals, resulting in inefficient markets
Our Focus on Change investment philosophy
and process, which is based on identifying
unrecognised change, is especially suited to
unearthing these companies.
2
The team also shares insights with our other
investment teams, including the equity, credit,
currency and strategy teams. In addition, our
strategic alliance with Sumitomo Mitsui Trust
Bank (a leading active Japanese equity manager)
and joint venture with HDFC in India affords us
additional investment insights.
Global Equity Unconstrained Fund
¬Potential to deliver outperformance over
time and in all market conditions
¬Truly active investing based on deep,
stock-level insight
¬A high-conviction proposition, free
from benchmark-led bias
¬ A highly concentrated, yet strongly
risk-aware portfolio
What is unconstrained investing?
Despite the title, unconstrained investing is not completely unfettered
and without rules – restrictions still apply. For example, our Global Equity
Unconstrained Fund has to adhere to maximum stock or sector size limits.
In addition, the portfolio is subject to a high degree of control, and we apply
rigorous risk management at every step of the investment process.
High conviction, not high risk
When constructing the Fund, we base risk
tolerance on more relevant characteristics than
the benchmark weightings of the underlying
stocks. Instead, we use a host of advanced
tools to model and characterise risk, including
factor analysis and risk diversification models.
We also rigorously assess particular stocks for
fundamental risks, such as thematic risk and
balance-sheet risk.
Position sizing
In addition, a focus on risk-weighted return
is central to position sizing. We conduct
appropriate due diligence on stock-level risk
characteristics and their impact on the overall
portfolio before we purchase shares in a
company. We then include stocks on the basis
of absolute positioning, rather than relative to a
weighting in a benchmark. If a particular stock
is considered more risky, absolute position size
is limited accordingly, even if it offers significant
upside potential. The reverse is also true: stocks
with perhaps less upside potential but offering
important diversification attributes may justify a
larger position size.
The role of ‘active share’
One of the key differences between
unconstrained investing and traditional
benchmark-related approaches is the higher
‘active share’ typically seen in an unconstrained
portfolio. Active share refers to the percentage of
a portfolio that differs from the benchmark index
and is deployed in taking an active view on the
stocks held. At end-October 2015, the Fund had
an active share of around 95% (by contrast, a
tracker fund aims to have an active share of 0%).
However, this is not a targeted number.
As we highlighted, our investment process
looks for companies that will experience the
most positive change. By their nature, these
companies tend not to be on the main indices
or well-covered elsewhere in the market.
Therefore, a fund carrying such companies will
have a high active share.
The bias of benchmark-aware portfolios towards
large index-weighted stocks will lead to low
active share, as a greater percentage of portfolio
capital is tied up in these holdings given
their size in the benchmark. This feature has
significant risk implications for investors, making
such portfolios potentially more risky, not less. It
also means investors may not be gaining access
to the portfolio manager’s best ideas.
Indeed, index-referenced strategies can
effectively end up mimicking the index they
follow and can therefore have higher exposure
to market risk than many investors expect.
Strict investment limits
An unconstrained equity portfolio will still have
to adhere to maximum stock or sector size
limits. The UCITS rules regarding mutual fund
position sizes equally apply to unconstrained
portfolios. For example, the 5/10/40 rule
stipulates that a maximum of 10% of a
portfolio’s net assets can be invested in the
securities of a single issuer, while investments
of more than 5% with a single issuer cannot
make up more than 40% of the entire portfolio.
This ensures a degree of diversification for
clients’ protection.
We take the right kinds of risk
Our goal is to maximise exposure to stock-specific
risk, the risk attributes particular to one company.
This is where bottom-up equity investment
managers can expect to have an information
advantage and non-consensus insight. After all,
investors pay us for these insights and our stockpicking expertise in order to maximise returns.
Global Equity Unconstrained Fund
3
What is our investment approach?
Across Standard Life Investments, our investment process is underpinned
by our Focus on Change philosophy. We believe assets are driven by
fundamentals and that, more importantly, most market participants are
inefficient at pricing changes in these fundamentals. As such, we seek to
identify and understand key market drivers and the dynamics behind them.
Clearly, the factors that drive markets will vary depending on where we
are in the economic cycle. Therefore, our investment approach is neither
inherently growth or value biased, nor is it momentum driven.
We use five key questions to frame our
investment ideas. This provides a common
investment language across the entire
company and ensures our portfolio managers
can quickly and easily access the diverse range
of opportunities available across the global
equity market.
The Five Questions - a common investment language
Analysis
¬ What are the drivers?
¬ What is changing?
¬ What is priced in?
Judgement
¬ Why will the market change its mind?
¬ What is the trigger?
In-depth peer review process
The role of our global equities portfolio
managers is to select the best investment ideas,
predominantly from the primary research of the
analysts across our regional teams. They work
together to access and leverage investment
insights from across the firm and are fully
integrated with the regional equity analysts’
stock process. Pooling the knowledge, skills
and resources of all of our people is critical to
generating the investment insights that make
the difference.
4
Global Equity Unconstrained Fund
Sector specialists add deep
stock-level insight
Our analysis is organised around sector lines
rather than by country. As bottom-up stock
pickers, we believe it is essential to be industry
experts in a position to understand material
changes specific to particular companies or
industries. This expertise also gives our analysts
the confidence to pick stocks at an early stage
in their evolution when they may not be well
covered by other industry analysts.
Getting to know the companies in
which we invest
It is critical to understand the companies in which
we invest and therefore company meetings are
a vital component of our research process and a
fundamental aspect in terms of gaining unique
investment insights.
Collectively, our investment professionals will hold
more than 3,000 company meetings each year.
These meetings allow us to cross-check the veracity
of our investment rationale and assess the strength
and repeatability of a company’s business model.
Supplementary analysis
The Matrix, our proprietary screening tool,
supplements the insights gained from these
company meetings. It assists our stock selection
process and helps us to identify companies with
improving or deteriorating characteristics. The
Matrix focuses on the 5,000 stocks we examine
and screens them for a host of factors, such as
growth or value characteristics. It is therefore
an invaluable tool for identifying instances of
change in the market.
What is our investment expertise?
Standard Life Investments’ reputation as a leading investment manager is
based on the exceptional quality of its people. We have never embraced
a ‘star fund manager’ mentality. Our global equities team is testament to
the benefits of this collegiate approach, actively sharing ideas across asset
classes, business areas and geographic regions.
This co-ordinated way of working strikes an
ideal balance between the team’s collective
effort and the talents of its individuals.
Pooling the knowledge, skills and resources
of all our people is critical to generating the
investment insights that can meaningfully
make a difference to the performance of our
clients’ investments.
The Fund is managed by Mikhail Zverev. He
is part of our high-calibre six-strong global
equities team, whose members have an average
of over 16 years’ industry experience.
At Standard life Investments, we combine the
role of portfolio manager and research analyst.
This fosters a culture of high-quality investment
debate, which we believe tangibly enhances the
stock selection process.
We also gather insights from over 45 credit
analysts in our corporate bond team, as well as
from our real estate team and strategy team. In
addition, our strategic alliance with Sumitomo
Mitsui Trust Bank (a leading Japanese equity
manager) and joint venture with HDFC in India
affords us additional investment insights.
Our people - scale and structure
UK
Global Equity Team
Mikhail Zverev
Stephen Weeple
Kevin Troup
Dominic Byrne
Donal Reynolds
Ross Mathison
Staff
ope
Eur
sia Small C
ap
M/A
E
s
G
US
6
Global equity team
16
10
54
Regional equity teams
15
9
45
Credit team
15
5
44
Strategic partners / JV**
16
-
12
Governance,
Stewardship &
Responsible Investing
19
8
¬ Well resourced regional equity teams enable
large unbiased stock coverage universe
¬ Dual role of analyst/PM attracts talent and
drives investment debate
Ja pan*
Source: Standard Life Investments, 30 September 2015
* Japan coverage by 31 equity investors at strategic partner
SuMi Trust; ** Strategic partnership in Japan with SuMi
Trust, Joint Venture in India with HDFC
Mikhail Zverev
Head of Global Equities
Area
Average
Average Years
Years of
of Industry
Standard Life
Experience
Investments
Experience
¬ Close collaboration with credit team enhances
stock analysis
¬ Global team integration into front-line research
enhances conviction and global insights
After graduating from St Petersburg State Technical University with a BSc in Physics, Mikhail started
his career in 1998 with Trigon Capital, an Eastern European investment banking firm, where his
focus was on technology investment banking. He gained his MSc in Accounting and Finance from
London School of Economics and joined the investment banking division of Schroder Salomon
Smith Barney in London in 2001, before moving to First State Investments as analyst, UK equities,
in 2002. He joined Standard Life Investments in January 2007.
Global Equity Unconstrained Fund
5
Fund information*
Investment objective
The Fund aims to provide long-term growth by investing in a diversified portfolio of global equity
assets. The investment team will maintain a diverse asset mix at country, sector and stock level,
with the regional, country and sector weightings within the portfolio being a by-product of the
underlying stock exposure. The team’s primary focus is on stock selection to try to take advantage
of opportunities it has identified. Due to the unconstrained nature of the Fund, investors must be
willing to accept a relatively high degree of stock-specific risk.
Global Equity Unconstrained OEIC Fund
Fund details
Fund manager
Mikhail Zverev (since Jul 2010)
Launch date
01 Jan 2007
IA sector
IA Global Sector
Benchmark
MSCI AC World Index
Base currency
GBP
Type of shares
Accumulation
XD dates
28 (29) February
Distribution dates
30 April
Retail
Acc
Platform
Acc
Institutional
Acc
Bloomberg
STIEQGR:LN
N/A
STIEQGI:LN
Lipper
60011521
N/A
60011520
GB0004483540
GB00B6915j97
GB0004482807
448354
B6915J9
448280
ISIN
SEDOL
Global Equity Unconstrained SICAV Fund
Fund details
Fund manager
Mikhail Zverev
Legal structure
SICAV - sub fund
Benchmark
MSCI AC World Index
Type of shares available
Accumulation
Launch date
9 December 2014
Base currency
USD
Shareclass currency
USD
*Source Standard Life Investments, as at 31 October 2015
For further information, including on different shareclasses and charges, please read the
Prospectus and Key Investor Information Document (KIID). You can find these in the literature
section of our website www.standardlifeinvestments.com
6
Global Equity Unconstrained Fund
Summary of benefits
Through the Global Equity Unconstrained Fund, we enjoy greater freedom to invest right across
the entire equity investment set, bringing a number of benefits for investors.
¬Access to our highest conviction bottom-up investment ideas
¬Repeatable investment process backed up by sizeable resource and superior
company access
¬Highly concentrated, yet strongly risk-aware portfolios
¬Robust controls that allow us to take the right kind of risk
¬The potential to deliver outperformance in all market cycles
We believe the Global Equity Unconstrained Fund is one of the purest expressions of our tried
and trusted investment process. This allows us to express deep stock-level insights to the
fullest extent in the pursuit of superior risk-adjusted returns for investors.
The Fund may be suitable for
investors who:
The Fund may not be suitable for
investors who:
¬want to achieve capital appreciation
over the long term
¬do not want to take any risk with their
capital – equity investments are not
risk-free
¬would like to invest in an actively managed
portfolio of mainly global equities
¬have an investment time horizon of at
least five years.
¬are not prepared to accept temporary
losses as a result of the volatile nature
of equities and currencies.
Global Equity Unconstrained Fund
7
Contact details
For further details on the Global Equity Unconstrained Fund, please visit www.
standardlifeinvestments.com where you will find contact detail for your location.
Visit us online
standardlifeinvestments.com
8
Global Equity Unconstrained Fund
This material is for informational purposes only. This should not be relied upon as a forecast,
research or investment advice. It does not constitute an offer, or solicitation of an offer, to sell or
buy any securities or an endorsement with respect to any investment vehicle.
The opinions expressed are those of Standard Life Investments and are subject to change at any
time due to changes in market or economic conditions.
standardlifeinvestments.com
Standard Life Investments Limited is registered in Scotland (SC123321) at 1 George Street, Edinburgh EH2 2LL. Standard Life Investments Limited is
authorised and regulated in UK by the Financial Conduct Authority.
Standard Life Investments Global SICAV is an umbrella type investment company with variable capital registered in Luxembourg (no. B78797) at 2-4, rue
Eugéne Ruppert, L-2453 Luxembourg, Grand Duchy of Luxembourg.
Calls may be monitored and/or recorded to protect both you and us and help with our training.
www.standardlifeinvestments.com © 2016 Standard Life, images reproduced under licence
INVBBRO_12_0677_Global_Equity_Unconstrained_Fund_Guide_TCM
x
Global Equity Unconstrained Fund
0716
Global Equity Unconstrained Fund
x