Approach - Equities

Mawer Investment Management Ltd. systematically creates broadly diversified portfolios of wealth-creating companies bought at discounts to their intrinsic values.

There are four key ideas in this investment approach that should be highlighted.

Wealth-Creating Companies

We focus only on companies that create wealth, or those that deliver a return on capital greater than their cost of capital over time. We believe that this is the main reason to assume investment risk. It implies that we do not buy companies just because they are "cheap" and that we will ignore those companies which do not offer the prospect of earning a satisfactory return on invested capital.

Discount to Intrinsic Value

Once we have identified a wealth-creating company, we try to buy it at a discount to its intrinsic value, or the price an objective, well-informed businessperson would pay for the company. It is not enough to know that a company is wealth-creating. One must also know how much wealth it is expected to create in order to know how much to pay for a share of the enterprise. Our primary tool for estimating intrinsic value is a discounted cash flow model.

Broadly Diversified Portfolios

Given our concern with investment risk, and not just investment return, our portfolios are broadly diversified by industry and economic sensitivity. Please note, though, that we are not driven by our exposure relative to underlying index weights.

Systematic Process

Following this investment approach systematically is what should enable us to take advantage of the market opportunities identified in our investment philosophy. We believe that a systematic approach ensures discipline, enhances efficiency, minimizes errors and reduces risk.

Approach - Fixed Income

Mawer exploits inefficiently priced areas of the Canadian bond market in order to provide investors with better than market total rates of return together with lower than market levels of risk over economic cycles.

Our fixed income portfolios are comprised of core positions in Government of Canada bonds based on the shape of the yield curve and the level of interest rates. To add value, we rely on flexible application of yield curve strategies, yield spread strategies and security selection strategies.

There are three keys to our strategy that should be highlighted.

Yield Curve

We forecast the shape of the yield curve using fundamental analysis. We utilise internal resources, including our Canadian, U.S. and International Equity managers to complement other internal and external research and idea generation.

Yield Spread

We forecast changes in spreads between the broad market sectors and actively seek to exploit yield spread anomalies.

Security Selection

We actively seek mispriced securities using in-house credit analysis. Credit risk is also researched and monitored using dealer research and various bond rating agencies. Credit risk is integral to our style as we seek opportunities to pick-up yield through sector trading without sacrificing credit quality.