Liontrust Responsible Capitalism Report 2024 - Flipbook - Page 95
PORTFOLIO CONSTRUCTION AND CONVICTION
The team assigns each holding a proprietary conviction score which
reflects how much conviction the team has that the holding will be
a profitable investment in the fund(s). Similar to the resiliency score,
the team’s conviction score is 1 to 5 (5 is the highest). The conviction
score amalgamates all the analysis undertaken by the team and may
include, inter alia: macro and micro economic data; the valuation
of the company and its competitors; the resiliency score assigned
to the company by GFT; the prioritised exposures of a group; and
the degree to which the company is managing these. While the
team does not use a set equation for the conviction score, each
manager assigns their conviction score and is responsible for the
rationale for each. The conviction scores, together with other factors
such as liquidity and company size, may have an impact on the
weightings of each holding in the fund(s). The rise and fall of the
team’s conviction scores may also lead to an increase or decrease in
a stock’s weighting (see Figure 1 on the previous page).
RISK MONITORING
Risk monitoring of the team’s funds is undertaken by the team and
Liontrust’s Portfolio Risk Committee (PRC). The PRC meets regularly
and, for GFT, reviews the conviction and resiliency scores of the
holdings in the team’s funds.
Responsible Capitalism Report 2023 - 95