[MUSIC PLAYING]
Hi, my name is Fiona Harris.
I'm a US equities specialist at JP Morgan
and I've been with the firm for over 25 years.
My role is a very important one.
Consider me the voice and face of the trust.
As investors, you really want to pay for your portfolio managers
to manage your money.
But we also recognize YOU also want
to be able to interact with the investment team.
you want to know about their process, how the team is built,
how they think about investing, but also have updates
on performance and portfolio positioning.
[MUSIC PLAYING]
The investment philosophy and process
we employ managing this trust is very much focused on stocks
as the building blocks.
It's a bottom-up process.
What does that mean for you?
It means we're not looking at macro.
We're not looking at economic data or interest rates
and then determining where we want to invest.
What we're doing is we're looking
for good companies, companies that we perceive
to have competitive advantages, irrespective of where
they exist within the market.
And then we're looking to own these companies
for the long term.
[MUSIC PLAYING]
For that strong competitive advantage,
you want to know why you go back to a company for their product
and service year in, year out.
So think about a truly innovative company, a company
that adapts their product time and again so it's useful,
that it's purposeful.
Or a company that has fantastic customer service so they're
a pleasure to deal with.
Our companies are often the market leaders in their space
because they have those attributes.
[MUSIC PLAYING]
Some words that many of you will have heard in the marketplace
is ESG, Environmental, Social and Governance issues.
They're at the forefront of a lot of newspaper articles.
When we think about ES &G, we really break them out
individually.
For G, good governance.
Because we invest in high quality companies,
we also want high quality management teams,
management teams that do the right thing, that
invest directly in the companies themselves,
that think about their employees, that
think about the products or services they're
bringing to marketplace.
They're not using aggressive accounting,
making acquisitions that make no sense.
For environmental, we want to know the impact a company can
have on its environment.
Is it subject to greenhouse gases?
Is it subject to resources that they're using?
And so that's really important, because environmental issues
can impact a company's long-term earnings and cash flow streams.
And the same with social issues.
We want to know if these companies are
good investors in terms of the people
that they have on their payroll, but also
in the communities where they're involved.
And being a good social company can reap benefits
over the long term.
[MUSIC PLAYING]
The US markets over the long term
have truly rewarded investors.
There's a lot of reasons for that.
Companies have generated great margins, great sales.
It's been a great growth story.
But also, the US compared to other markets
is actually the highest-quality market.
So even in times where there's fear about the US
and a recession, or fear and other markets
there's typically a flight to safety
and US equities tend to reward investors
over those time periods.
So it's a large market with very attractive long-term returns,
but also it's a high-quality market.
And that makes it, for our mind, a compelling long-term
investment.
[MUSIC PLAYING]
We are very disciplined in the execution of our investment
process.
We're always looking for those quality companies, quality
management teams, and when we find them,
we're looking to buy them when they're trading at a discount
to their intrinsic value, when they're cheaper than they
should be for whatever reason.
Now that discipline is really important.
Irrespective whether the market's
trading at a high valuation or a low valuation,
we're looking for those individual stocks
that can make compelling investments for inclusion.
When the market goes on sale, we usually
get excited because a lot of our favorite names
that we haven't been able to add to the portfolio
may be on sale as well.
If the fundamentals are still good,
compelling investment decisions can be made.
And you can buy those stocks at really attractive valuations.
[MUSIC PLAYING]
When we look to the US today, there's a lot of uncertainty.
There's a lot of issues we're all dealing with--
inflation, stronger dollar, higher interest rates.
And that, of course, resonates both in consumer sentiment
and business sentiment.
But at the end of the day, we're looking
for those companies that can navigate the cycle irrespective
of where we are.
[MUSIC PLAYING]
When we look at the outlook for US smaller companies,
you really have to think long term.
Long term means different things to different people.
So we have to think about over a full market cycle.
What we have to do is find those compelling ideas
that we can invest in for the long term.
So we think the outlook looks good,
irrespective of what happens with the economy
over that short term.
[MUSIC PLAYING]
When we're looking for a compelling investment
ideas for inclusion in the portfolio,
the attributes that we look for don't change.
It's always looking for quality companies, great management
teams, companies with consistency of earnings,
but also companies today that can push through higher
prices with higher inflation.
While we may not be able to find ideas
across all the sectors in the market,
with a great research team we can definitely
find individual gems for inclusion.
[MUSIC PLAYING]
When it comes to portfolio holdings,
we typically hold between 90 and 100 names.
May seem like a lot, but also we can manage risk that way
by having a number of names in the portfolio.
So no position size is above 3%.
That gives us enough active exposure but also to help
manage risk as well.
[MUSIC PLAYING]
As US small cap investors, of course we love our asset class
and we think it's the best out there.
But also, when you're looking at potential returns,
we do feel you should get good reward from investing
in your small caps.
What we're trying to do is find those truly innovative
companies, those high-quality companies
that we can own for the long term in the portfolio.
So it's not about a sector, it's not about economics,
it's not about inflation.
It's finding good businesses that we
can invest in for the long term that will hopefully reward us.
[MUSIC PLAYING]
When we're looking for Investment opportunities,
but also when we're reviewing our holdings in the portfolio,
we really don't think about the macro.
We're not macro strategists.
We're not going to be the best at determining interest
rates or inflation, but what we can be the best at
is finding those great ideas that we
can own for the long term in the portfolio.
So stocks are our building blocks to hopefully deliver
great long-term performance.
[MUSIC PLAYING]
When we think about us smaller companies, those great ideas
for inclusion in the portfolio, we're
thinking about investing in the long term.
Think about three, five, 10 years.
And in fact there's names that we've
held for even longer in the portfolio.
So for us, it's not about the opportunity set
because of market environments and investing
for the short term.
It's about the opportunity set for investing over
the long term in individual names.
[MUSIC PLAYING]