Active, unconstrained management
The equities team at M&G is driven by a fundamental belief that we can generate outstanding performance through active, unconstrained management. The index is not our primary concern. We believe the stockmarket is often wrong and that its tendency to be swayed by short-term noise creates opportunities for long-term investors. Consequently we are focused on what really matters for equities: the understanding of companies and their valuation in the stockmarket. This is our area of expertise.
A long-term view
Experience tells us that company fundamentals drive share prices over the long run, not the vagaries of economic cycles or the fickleness of market sentiment. As a result, we believe it is essential that equity investors take a long-term view (typically at least three to five years). This is the timeframe that companies use to manage their businesses and it is important, in our view, that the time horizons of investors are aligned with those of companies. We are long-term investors in companies, not short-term speculators.
Constructive dialogue with company management
To gain a thorough understanding of a potential investment, we seek to develop a constructive dialogue with company management. This is a key element of our investment approach. By engaging companies in open discussions, we aim to have a better appreciation of the opportunities, the challenges and the potential value of a business. We do not make any claim on superior knowledge and we do not profess any skill in forecasting (we believe forecasting is a futile exercise), but we aim to know enough about what is important to be able to make an informed decision. This is the purpose of our independent research.
Identifying good companies is not the same as identifying good investments, We only want to invest in companies where the prospects are mispriced by the market, and in this respect, valuation is crucial. This part of the investment process focuses on analysing market expectations and assessing whether those expectations are realistic. If we are confident that an anomaly exists, we will back the company and the management team.
The value of investments will fluctuate, which will cause prices to fall as well as rise and investors may not get back the original amount they invested.