Solaris Asset Management

Can you tell me in detail about the investment process and investment principles of Solaris Investment Management Limited?

[Shaleen]

The vision of Solaris Investment Management Limited is to generate out performance now and in the future and to create wealth for clients.

Investment Principles

• It picks stocks using fundamental analysis to exploit market inefficiencies in forecasts and valuations.

• Analyst management of the portfolio is the best way to capture market inefficiencies.

• Active Management can provide enhanced investment returns than passive investment.

• To achieve superior returns, positions are taken which move away from the benchmark portfolio, through skilful stock selection.

• All investment decisions are supported by detailed study of the securities and key financial markets, with an eye on the global perception.

• Firm risk controls are applied to reduce the exposure to downside risk.

• Stock selection is main area of expertise. The research aims to identify the "true" value of each stock, based on qualitative and quantitative company fundamentals.

• It is not bias towards value or growth stocks ("style-neutral"). The process identifies the stocks with the best expected return, regardless of perceived style.

Investment Process

It is an active, style-neutral equities manager using fundamental analysis to select stocks. Industry positions are a function of stock selection.

The Expected Return of a stock is compared against the expected return for the Universe, to arrive at an "Excess Return".

1. Solaris conducts risk screening to arrive at an 'Investable Universe' of 200-250 companies.

2. Investable Universe Analysis:

The team conducts industry analysis, company meetings and does modelling and valuations of all companies in the Investable Universe, using both qualitative and quantitative techniques to arrive at an expected return of the stock.

3. Expected Returns Platform:
The Expected Return of a stock is compared against the expected return for the Universe, to arrive at an "Excess Return".
The size of Excess Returns is used to generate portfolios.
The typical portfolio size is 40 to 70 stocks (20-40 for Solaris High Alpha Australian Equity Fund).

Another critical factor in the Solaris investment process is the analysts are also the portfolio managers.