Investment approach

Growth investors

We are growth investors. Of the 20,000 listed corporations in the world, many profess to be growing, but only a small portion actually grow independently of the broader economic cycle. This is where the Munro investment process focuses. Our research process has been designed and honed over 14 years to successfully sift through the world’s listed corporations to find sustainable growth trends that are underappreciated and mispriced by the market, and the resulting winning and losing stocks.

Absolute returns

Munro runs the long/short absolute return mandate with the liquid alternative, CI Munro Alternative Global Growth Fund.

Index-unaware, aiming for meaningful absolute returns through the investment cycle, while maintaining a capital preservation mindset. Munro’s flexible investment mandate allows it to dynamically manage its market exposure and its currency exposure to protect clients capital and to enhance the long term returns of our investments.

Relative returns

Munro runs the long-only relative return mandate with CI Munro Global Growth Equity Fund.

It focuses on building a long-only portfolio of 20 to 40 growth equities that will benefit from structural changes through a disciplined investment process that provides access to a fully invested portfolio. The objective of the fund is to maximize long-term capital appreciation, primarily through a concentrated portfolio of growth-oriented equities issues anywhere in the world.

Stock picker

The investment process generates a high-hit rate of performing ideas and allows them to be appropriately sized and monetized over long periods. Concentration on stock and sector is important, while risk management and rigorously eliminating underperforming positions is crucial in generating strong absolute returns and outperformance over multiple market cycles.

Active research

At Munro, investing is a process of covering the globe and continuously meeting with management teams. With an “on the ground presence,” Munro’s founding partners built a strong 14-year performance track record by averaging 500 company meetings a year, assembling a focused 1,000-stock universe, and owning a network of over 3,000 key contacts.

Disciplined process

Munro runs a comprehensive and disciplined investment process that seeks earnings upside/downside visibility, valuation multiple upside/downside and catalyst visibility. In addition, the portfolios are managed within clear risk parameters and a disciplined drawdown management framework.

Investment process

Idea generation

Munro identifies sustainable growth trends that are underappreciated, misunderstood and mispriced by the market. With in-depth industry expertise, Munro leverages its global access and prides itself in recognizing key “areas of interest” (AoIs), as well as second and third derivative trends often overlooked by the markets. Its proprietary research process quickly identifies key winners and losers, and quantifies upside and downside, while giving time to price target.

The philosophy is based on three overriding principals:

1. Earnings growth drives stock prices
Companies that consistently earn more than the year before are generally rewarded with higher stock prices over time.

2. Sustained earnings growth is worth more than cyclical earnings growth
Consistent growth, independent of cyclical factors and above the peer group, is generally valued at higher multiples than otherwise.

3. The market will often misprice growth and its sustainability
Consensus earnings estimates often underestimate growth, and pegging to market multiples will often underestimate the sustainability and cash generation capacity of that growth. This allows for opportunities to invest in stocks well below their intrinsic value.

Idea generation process

Ideas are generated from a combination of top-down thematic and bottom-up views. The team identifies medium to long-term structural themes and the resulting investment trends, and distinguishes between trends that are well understood and priced in by the market, as well as those that are underappreciated and overlooked (AoIs).

The research process is a vital ingredient. Constant interaction with corporate management, independent consultants, industry networks, sell-side research and the private equity community all contribute to identifying new AoIs and new investment opportunities.

Munro maintains a generalist research approach across all sectors and markets, with the flexibility to focus resources on areas of greatest opportunity. Analysts act as stock and AoI “champions” when contributing to portfolio construction.

The team has amassed a deep internal stock knowledge database of over 800 stocks, and actively mines this universe for fundamentally driven investment opportunities.

Idea evaluation

Qualitative factors

Qualitative tests: Munro looks for five key company characteristics to gauge whether a listed company is likely to benefit or lose from a particular growth trend and whether that will be sustained over an extended period of time.

Quantitative factors

Quantitative tests: Munro uses three valuation-based tests to quantify earnings upside/downside, multiple upside/downside and time-based catalysts. Ideas graduate from the universe to the portfolio based on the relative upside generated from these tests.

Portfolio construction

Qualitative and quantitative tests combine to build a high-conviction, index, region and sector-agnostic portfolio where capital preservation is driven by a top-down view of market risks and hedging possibilities.

Risk management

Risk management and capital preservation are integral parts of Munro’s investment philosophy and portfolio management.