Investment focus

We believe that our proprietary research and portfolio construction process gives us a competitive edge both in South Africa and abroad. Our structured, in-house based research model enables us not only to run our own branded funds well, but to pass institutional levels of research to segregated fund mandates owned by our direct retail clients. This, together with our competitive fee structure makes Northstar unique in the retail market. In addition, being a specialist and relatively small player, enables us to make quick decisions and invest in high-value proposition smaller companies that larger players are unable to meaningfully invest in.

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CLOSER TO THE TRUTH

An overview of our business and investment focus

Northstar team discuss what 'closer to the truth' means to them in the context of Northstar and their role within the business.

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Our philosophy

Our mantra is: “Long-term exposure to quality assets where value exceeds price.” In short, we follow a QARP approach – Quality at a reasonable price. Our philosophy has remained unchanged in time and has been designed to work through market cycles. Its three pillars are:

  • Long-term

    Duration increases the probability of achieving real returns for equities.

  • Quality

    Back-testing demonstrates that owning quality assets at reasonable prices (value) leads to outperformance.

  • Focused universe

    This ensures deeper insights and reduces the margin for error.

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Equities

On Equities

Our equity research process is entirely focussed on understanding a company’s competitive position, with the objective of identifying a strategic competitive advantage and determining how long that advantage could reasonably be expected to last. We believe that the positive fundamentals we value in companies translate into superior and sustainable return on capital and free cash flow over time. In fact, we think our own advantage lies in taking a truly long-term view on these key drivers of intrinsic value, rather than attempting to forecast earnings over the short-term. As ‘bottom-up’ stock pickers, we manage the inevitable risk of being wrong by avoiding point estimates and by taking a probabilistic view of the path of all (or most) likely future outcomes. Simply put, we look to own well managed companies, with durable economic characteristics, at sensible prices.

An overview of Equities

Adrian Clayton gives an overview of Northstar’s equity investment process.

Equity investment process
  • Industry landscape

    In depth analysis and understanding of industry landscapes, barriers to entry and structural growth drivers.

  • Competitive advantage

    Determination of the source, trend and durability of a company's competitive advantage.

  • Management

    Understanding strategic direction and capital allocation decision making and ensuring that incentive structures are aligned with the interests of our clients.

  • Sustainability

    Assessing whether environmental and governance practices as well as the approach to social and human capital ensure a sustainable future.

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FIXED INCOME

On Fixed Income

Northstar applies a quantitative as well as a fundamental approach to analysing fixed income assets. Quants is used to screen for value opportunities across the various fixed income asset classes and fundamental inputs drive the valuation modeling which we apply. The outcome of our process is an actively managed and diversified fixed income portfolio of high quality holdings which provide inflation-beating returns and a stable income.

An overview of Fixed Income

Mark Seymour gives an overview of Northstar’s fixed income investment process.

fixed income investment process
  • Economic

    Focuses on the path of interest rates and inflation taking into account the potential economic and political risks.

  • Credit Risk

    High credit quality profile with predominant holdings in senior A rated bank paper.

  • Bonds

    Optimise the blend between floating rate notes, fixed coupon bonds and inflation linked bonds based on the phase of the interest rate cycle and expected returns.

  • Other assets

    High quality listed property stocks, global bonds and global currency holdings offset inflation and interest rate risk.

  • Portfolio

    Actively managed and diversified portfolio of high credit quality holdings to provide inflation beating returns and a stable income.