Salt Funds Management is an active manager.
We are a core investor with no intended style bias to either “growth” or “value”.
Our investment philosophy which underpins our investment process, is predicated on the belief that the value of any financial asset is the net present value (NPV) of some measure of future cash flow, discounted appropriately.
More specifically, the value of a listed company is the NPV of the operating free cash flows (FCF’s) that the equity market expects that company to generate over its economic life. Corporate FCF’s are uncertain, and thus a company’s value reflects the market’s implicit expectations as to the FCF’s that company will generate over time. It is changes in expectations that cause share prices to change.
Understanding what is implicitly priced in to a company’s value at a particular point in time through explicitly modelling likely future financial performance is thus critical to our investment process.
Our aim is to be overweight stocks where we think the market is being overly conservative in its implicit assessment as to the future FCF’s a company will generate, and underweight stocks where we think the market is being overly optimistic, provided we can identify credible reasons for those expectations to change in a reasonable time frame. It is not enough to simply identify “high quality” companies. You are unlikely to be the first ….
Salt’s investment process is thus fundamentally driven.
Proprietary research is at the heart of our firm. Salt employs a team of dedicated analysts who are tasked with producing bespoke research on companies within our coverage universe, aimed at providing the portfolio managers with well-reasoned views on the value of companies based on our own in-house, proprietary financial modelling. This allows us a robust quantitative framework to aid the qualitative interpretation of information flows. It is not about claiming an “information edge”. The true value of a research function lies in quickly and accurately interpreting information that is (quite rightly) available to all market participants.
Our research further incorporates the consideration of ESG factors, particularly in relation to how such issues may impact on the returns a company may generate over the long term. Salt is a signatory to the UN PRI.