Frequently asked questions

What is your policy on environmental, social and governance (ESG) issues?
We are not a specialist socially responsible investment manager. However, our equity managers engage continually with companies in which we invest and regard any issue which might affect the stock price (and hence client portfolios) as appropriate for discussion with a company’s management. In assessing corporate quality, we have a strong preference for management which employs capital efficiently and has demonstrated a strong focus on shareholder interests. Corporate governance issues provide an important test of a management’s objectives and of its attitude toward shareholders. Significant concerns on corporate governance will tend to deter us from investing in a company.

What is your experience in managing global equity mandates?
We began managing client mandates in March 2005 focusing solely on global equities. However the majority of our equity managers have applied an unconstrained approach to managing global equities continuously throughout their careers. Five of our investment team worked together until September 2004 as key portfolio managers at a successful global equity firm, which managed £25bn for major pension funds worldwide, including US and UK clients. Initially, four of the team left that firm to establish the PI Investment Management business and have now worked together for 15 years. This level of team continuity is rare and promotes robust internal debate on individual stock opportunities. It also provides the resolve required to stick to investment principles during any short-term periods of underperformance.

Describe the management and organisational structures?
PI Investment Management is a wholly owned subsidiary of major Australian wealth manager, Perpetual Limited (Perpeutal). PI Investment Management is governed by a board of four directors, comprising two senior executives of the parent company, one local director and an independent non-executive director. PI Investment Management utilises various support services and infrastructure provided by Perpetual.

We have deliberately kept our investment managers free of board responsibility, enabling them to concentrate on research and investment decision making. We have also separated the functions of client servicing and operational support from the investment team so the team can focus solely on investing.

What type of investment vehicles do you offer investors?
We offer investors a segregated mandate encompassing our Global Equity Portfolio (typically comprising 60-90 stocks). This has an outperformance target of +3% per annum against the MSCI World Index. We also offer a Concentrated Equity Portfolio (typically comprising 25 stocks), which is derived from the same process and is drawn from the same pool of stocks. It has an outperformance target of +5% per annum measured against the MSCI World Index.

What are the distinguishing features of our approach?
There are three distinguishing features of our process:

1. We are benchmark-independent. Most managers seek to minimise variation from the benchmark index to reduce their business risk. We do not do this. Instead, we believe that the main portfolio risk a manager should attend to is absolute downside risk. So no matter how large a component of the index a country, sector or stock represents, if we cannot find value within it, we will not invest our clients’ money in it. Nor will we consciously adopt an underweight position in a stock. Our portfolio holds stocks which we believe will perform well in their own right and therefore outperform the market.

2. We take a team-based approach to investment decision making. This creates a high barrier to entry for stocks proposed for the portfolio by individual equity managers. To work effectively, this approach means that we keep our team compact and reward every manager on the same basis. Team-based decision-making ensures that there is a genuine sense of co-operation and collective responsibility. It also means that the team is resilient and stands by its investment philosophy.

3. We invest for the long-term. This means that, having spent considerable time analysing a company and choosing the point of entry to a stock, we expect to maintain the investment for several years, unless a change in valuation, the company’s operations or the macro-environment induces us to sell it. Our turnover of roughly 25% per annum reflects the three to five year investment horizon. To be successful, this approach requires us to remain independent of short-term market momentum trends.