Our fund is centred on a portfolio of single stock equity investments, with cash and non-equity investments alongside which are intended to produce ample returns while reducing downside risks.
We embrace volatility at the individual investment level, while continuously endeavouring to reduce it at the portfolio level. This can be done without the need for short strategies or leverage by using the primary findings of diversification theory, behavioural finance, and by taking a genuinely long term approach to every investment we make.
At Latitude we only invest in very liquid instruments. Our stocks are generally larger than £10bn in market cap and our non-equities include government bonds, FX and gold.
The current daily liquidity of the Latitude Horizon Fund is at least 97%. The issue with illiquidity premiums rising will affect larger groups more starkly than boutiques, another reason in our opinion to invest in the latter!
At Latitude we firmly believe it is our duty to be responsible stewards of our clients’ capital. The increasing focus on stakeholder capitalism (as opposed to simply shareholder capitalism) is a welcome change, and one we embrace. Applied consistently and successfully we believe sustainable long term investing will continue to result in shareholders’ best interest being met through performance, while also being in the interest of employees, clients, society and the environment as a whole.
Latitude are signatories of UNPRI and the UK Stewardship Code; below is a brief overview of how we achieve the 6 principles of responsible investment.
We are long-term in our approach to managing client money; as active managers we look for businesses that will deliver absolute performance and create enduring value. We are patient investors, buying and holding good businesses over a five to ten-year investment period so, clearly, any business which we consider investing in has to be able to demonstrate commitment to long term sustainable value creation. Given this long-term approach we naturally seek out and support exceptional senior management teams, and favour businesses that articulate compelling long-term strategies, and take seriously their responsibilities to their customers, workforce, local communities, the environment and their shareholders.
As part of Latitude’s investment strategy, we seek to build effective relationships with the boards and management teams at the companies in which we invest.
Latitude will generally look to invest in companies that it believes to be well managed. As part of the research and monitoring process, Latitude may look to intervene by holding meetings with management and/or directors to express Latitude’s concerns or express its views through other channels. These concerns will generally be motivated by the failure of management to uphold shareholder value and the failure to deliver products and services for the benefit of society.
While obviously being conscious that, at this stage of our business growth, we are likely to be minority shareholders in the large cap businesses in which we invest, we believe the views of all shareholders are considered when presented carefully and intelligently.
We utilise various research and support tools to meet this principle. The monitoring process will include analysing annual reports and financial statements, using independent third party and broker research and attending company meetings. No fundamental analyst would ever surrogate their decision making on earnings or cash flow to an external provider or systematic model yet many approach ESG analysis in this manner. We genuinely integrate the risks and opportunities created from the changing investment landscape into all aspects of our fundamental research.
We are an active participant in a number of investor bodies such as the UK Investment Association, the Independent Investment Management Initiative (IIMI) (our CEO is a member of the board) and the United Nation’s Principles for Responsible Investment (UNPRI). Through these initiatives, we are willing to discuss and work with other investors on a range of collective engagement opportunities.
We would normally pursue engagements with invested companies on our own, however, as we are an emerging asset manager with a small but growing level of assets under management we believe a collaborative effort with other investors can be more effective. The extent to which we are listened to by a Board depends on a number of factors, including the power of our argument (i.e. how compelling it is); how deeply our points resonate with board directors; our size as a shareholder; and the level of shared concern of other shareholders.
We report regularly to clients on our stewardship activities in meetings and through our monthly and annual reports. Our reports are openly available on our website which includes details of selected company engagements and voting activity.