Our rigorous approach includes the team interrogating every potential stock utilising proprietary research to evaluate the case for investment.
A Conviction Score - quantitative outputs from our appraisal process - is awarded to each stock based on six key fundamental components and helps determine optimal weightings within the fund with the aim of delivering strong, risk-adjusted returns:
1. Management and shareholder structure
We focus on entrepreneurial, high-quality management teams as a key drive of business growth and shareholder value creation. We also analyse shareholder structure, management ownership and incentives, and alignment of interest with our objectives as investors.
We assess the company’s strategic positioning and how management are looking to enhance strategic value. We assess the clarity, simplicity and deliverability of the business strategy and how it links to long-term value creation.
3. Market opportunity
We seek to understand the size of the company’s realistic addressable market and the trends and sector dynamics likely to affect this over the life of our investment. We also look for a company’s management to be able to clearly define their opportunity, including ways to expand their addressable market through international expansion, new product development and/or acquisition.
4. Market position and business model
We seek to assess the market position of the company, its customer value proposition and its sustainable competitive advantages. We also evaluate the key levers of the business model and how the company generates its returns.
Our evaluation focuses on operational and financial performance, considering the profit and cash flow growth potential over the anticipated life of the investment. We also consider visibility of revenues and earnings, concentration risks, vulnerability to external shocks outside the control of management as well as the key value drivers of the business.
6. Valuation and liquidity
We use an earnings-based approach to valuation analysis with each investment assessed based on absolute and relative metrics applicable to the individual characteristics of the company. Valuations are benchmarked against selected listed peers, long-term average sector multiples, appropriate situational comparators, and public and private company M&A multiples.
We strive to get the best results for our clients by challenging accepted wisdom, sharing information and creating a naturally collaborative environment.
Our equity investment team incorporates the added expertise of over 50 investment and research professionals from the wider Livingbridge business into their investment analysis. This powerful platform of research includes a wide network of relationships built with entrepreneurs, business leaders and influential thinkers – providing insight beyond the traditional methods of company evaluation.
Please confirm, by ticking the box at the foot of this window, that you have read the following important information to access the website. LF Gresham House UK Micro Cap Fund and LF Gresham House UK Multi Cap Income Fund (the “Funds”) invest in companies both quoted on AIM and the main market of the London Stock Exchange. Prospective investors should refer to the detailed risk warnings in the relevant prospectus, but key risks are set out below.
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In addition to any other risk factors contained within Regulated Information available on this website, investors should note that investments referred to on this website place investors’ capital at risk and could result in a total loss of capital.
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PAST PERFORMANCE AND RISK OF LOSS OF CAPITAL
The past performance of the Funds is not a guide to their future performance. The value of the Funds depends on the performance of the underlying assets. The value of the investment and dividend stream from the Funds can rise and fall. Investors may get back less than originally invested. There can be no guarantee that investment objectives of any of the Funds will be achieved.
RISKS INHERENT IN INVESTING IN SMALL COMPANIES
Investment in smaller companies which are traded on AIM or PLUS Markets, by its nature, involves a higher degree of risk than investment in larger companies, including those traded on the main market. In particular, smaller companies often have limited product lines, markets or financial resources and may be dependent for their management on a smaller number of key individuals. In addition, the market for shares in smaller companies is often less liquid than that for shares in larger companies, bringing with it potential difficulties in acquiring, valuing and disposing of such shares. Investments held by the Funds may be difficult to realise. The fact that a share is traded on AIM or PLUS-Markets does not guarantee its liquidity. The spread between the buying and selling price of such shares may be wide and thus the price used for valuation may not be achievable.
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Gresham House Asset Management Limited (Gresham House) is registered in England and Wales under company number 09447087 and has its registered office at 5 New Street Square, London, United Kingdom, EC4A 3TW. Gresham House’s main trading address is at 5 Cheapside, London EC2V 6AA. Gresham House is authorised and regulated by the Financial Conduct Authority with financial services register reference number 682776.