Philosophy & Process
ESG Approach
Risk Management
“We have great faith in our ability to continue to deliver superior outcomes for our clients over the long-term, provided we invest with conviction, creativity and humility”
Rob Marshall-Lee, CIO  


Many of the world’s most exciting capital growth opportunities are found outside of the developed markets. In the emerging markets, industries are often driven by multi-decade structural tailwinds, such as demographic shifts or technological revolutions. Cusana’s emerging market universe centres on industry leading companies, often underpinned by leading-edge innovation. By contrast, the emerging market indices contain a number of weak or even corrupt businesses. The emerging markets are therefore a fertile environment for a truly active manager to add exceptional value to client portfolios. 


In virtually all global stock markets over the long term, investment returns have been driven by a small cohort of stocks. From 2011 to 2021, ten stocks contributed 38% of total shareholder value in the emerging markets whilst the top 50 stocks contributed 51%. Cusana believes that active managers must endeavour to allocate capital to these exceptional, value-generative businesses with a view to owning them over the long term. We therefore spend our time researching such businesses; we hunt for companies that are able to compound per-share economic returns at sustained high rates over extended multi-year periods. In purchasing shares in these businesses at a material discount to their intrinsic value, we believe that we will continue to deliver sustained outperformance for our clients. 


The emerging market indices list thousands of equities. At Cusana, we consider only a small fraction of these businesses to be investable. To distil this vast universe down, our principle input is our thematic outlook: Cusana views the world not through sector classifications or geographic boundaries but instead through global themes. Where we observe industries supported by long-term thematic tailwinds, we conduct deep, bottom-up fundamental research. This research identifies businesses that consistently generate economic value, allocate capital shrewdly and treat minority shareholders equally. This informs our investable universe. We buy shares in companies within this investable universe only when we perceive there to be a material decoupling between a company’s share price and its intrinsic value. This presents us with highly asymmetric prospective returns. When evaluating intrinsic value, we consider a five-year horizon and employ rigorous scenario analysis as well as balance sheet stress testing. 


Benchmark-hugging in the emerging markets does not reduce risk. From our decades of experience in these markets, benchmark hugging inherently involves a greater concentration of weak or even corrupt businesses. In contrast, we believe that the best way to reduce risk in the emerging markets is to judiciously construct concentrated portfolios of high-quality businesses. In investing in high-quality businesses with strong cash flows, robust balance sheets and superior corporate governance, the Cusana portfolio exhibits lower absolute risk when compared to the benchmark indices. As a result, our portfolios are highly differentiated - not just from the benchmark, but also from our peers.


As long-term investors, the sustainability of each company is integral to our assessment of its intrinsic value. We therefore place great emphasis on ESG considerations as part of a holistic analysis in combination with financial metrics. Indeed, a thorough analysis of one cannot exist without a solid understanding of the other. Cusana exercises judgment and experience to ensure that the portfolio’s investee companies are managed responsibly and in the interests of all shareholders. We seek to invest in businesses that will be good stewards of our clients' capital and will positively contribute to the societies in which they exist.


We believe that a principles-based approach enables Cusana to better assess highly complex issues for which available data may be inadequate or even misleading. Principles aid our judgment, so that we do not become lost in well-meaning but misguided quantification. Our principles guide us to invest in a manner that prioritises ESG in substance, rather than being lost in a process of metric computation, false precision and box-ticking.


Whilst implicitly at the heart of most of what we do at Cusana, ESG is also explicitly integrated into the Cusana investment process. First, Cusana excludes businesses with revenue from the following activities: adult entertainment; armaments; gambling; tobacco; thermal coal. More significantly, all existing and prospective holdings in the Cusana portfolio are assessed against a detailed investment checklist, many sections of which relate to ESG factors. From this checklist, the investment team highlight the most material considerations. Corporate governance is always of great importance to the investment thesis.


The investment industry is key to driving behavioural change, as it can direct the flow of capital to good actors and conversely divert it away from the bad actors. We will therefore actively engage with our investee companies where we perceive their activities fail to consider fully the impact of sustainability as it is a risk to shareholder value. We often invest in small and mid-cap companies which are not yet best-in-class, but which we can help to guide on that journey. Engagement is therefore a fundamental part of the Cusana process.


Our ESG Policy is available upon request.


Risk management starts with Cusana’s fundamental equity analysis.

  • Risk is assessed on a company-by-company basis. Stock specific risk is primarily identified through an appraisal of a company’s profitability, cash conversion, reinvestment requirements, liquidity position and leverage. The treatment of minority shareholders is also assessed throughout our stock-specific due diligence.
  • At a portfolio level, we carefully review 'factor risks' in the portfolio so that we understand the component parts of our risk. Whilst we are comfortable taking factor risks, we must be confident that we are sufficiently compensated for taking that risk. 
  • The Risk Committee is responsible for firm-level risk. 


We strongly believe in swift action when necessary. In recent years, there have been two examples of the merit of this approach: first, once the seriousness of COVID became apparent to us in February 2020, and following a comprehensive portfolio review, two positions were quickly exited due to cash flow and balance sheet concerns; second, the strategy sold its residual holdings in Russia in advance of the invasion of Ukraine as the probability of the event materially impacted the risk-reward balance in each stock. Both decisions have been vindicated in the months and years since. Cusana will act with similar decisiveness should events necessitate it.


The CIO reports to the Risk Committee. The Risk Committee is comprised of the Chairman and the CEO. The Risk Committee meets monthly and is responsible for monitoring portfolio and firm-level risk statistics. 

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