AMX CCF – Metropolis – Valuefund
SFDR II Web Disclosures
Summary
AMX CCF – Metropolis – Value fund “(the Sub-Fund”) has been categorised as meeting the provisions set out in Article 8 of SFDR for products which promote environmental and social characteristics, as further described below. The investment objective of the Sub-Fund is to seek an attractive risk-adjusted total return on a medium to long term basis through primarily investing in concentrated portfolio of global equities.
Metropolis Capital is the delegated portfolio manager (The Portfolio Manager) for the Sub-Fund and manages a concentrated portfolio of global equities on behalf of the Sub-Fund.
The Sub-Fund promotes E/S characteristics, but will not make any sustainable investments. The Portfolio Manager seeks to invest in companies with sustainable business models and earnings, including analysis of companies with respect to E/S characteristics such as Greenhouse gas emissions (scope 1&2), and controversial weapons. The Sub-Fund also excludes certain industries on E/S grounds. The Portfolio Manager incorporates an E/S assessment as an input to its assessment of disruption risk and applies this analysis in the process of determining whether potential investee companies meet a sufficient level of quality to be included in its concentrated portfolio of global equities.
To support this, the Portfolio Manager uses a combination of third-party data and data sourced directly from the target investee companies to build its own assessment of disruption risk from E/S factors.
The Portfolio Manager also leverages the assessment of E/S risks to assist its ongoing engagements with portfolio companies.
The minimum percentage of investments that are aligned with the EU Taxonomy is 0%.
The portfolio manager will periodically monitor exposure to Greenhouse gas emissions and controversial weapons utilising a four-stage methodology as detailed below. The Portfolio Manager uses third-party data from companies like S&P Global Trucost, Bloomberg and MSCI. While there are limitations to these methodologies and data sources such as inaccuracies in third party data, or an over reliance by third-party data providers on industry-based estimates, the portfolio manager has explicitly cited these limitations and does not believe these impact the ability of the sub-fund to achieve its investment objective.
The portfolio manager conducts periodic due diligence on portfolio holdings, including regular engagement, to ensure the sustainability of the business model and alignment to the E/S characteristics promoted by the sub-fund.
The Portfolio Manager has published its Responsible Investment & Engagement Policy on its website: https://metropoliscapital.co.uk/responsible-investing.
The sub-fund does not have a reference benchmark.
No sustainable investment objective
This financial product promotes E/S characteristics, but will not make any sustainable investments
Environmental or social characteristics of the financial product
The valuation of each investee company for the portfolio is fundamentally grounded in an assessment of the long-term sustainability and predictability of the relevant company’s earnings. It is generally the policy of the Portfolio Manager to consider the possible impact of potentially disruptive forces in the markets of the respective companies. There are a number of industries which are unlikely to pass the Portfolio Manager’s tests for long-term sustainability of revenues and margins. In particular, it will not be the policy of the Sub-Fund to have direct exposure to the following types of companies:
• Tobacco manufacturers
• Manufacturers of controversial weapons
• Tar sand oil extraction companies
• Thermal coal mining companies.
The Sub-Fund may, from time to time, invest in high-quality conglomerates that may have exposure to some of the above areas, directly or indirectly. These areas will represent no more than 10% of the Portfolio Manager’s assessment of a conglomerate’s intrinsic value.
Investment strategy
In order to achieve the Sub-Fund’s investment objective, the Sub-Fund will primarily invest in a global equity portfolio comprised of securities of listed companies with a focus on developed markets but which is unconstrained by geography or market capitalisation parameters. The Sub-Fund may also invest in money market instruments, UK or US government and public securities, deposits, cash and near cash, and money market funds (as a proxy cash management tool).
The Portfolio Manager will seek to identify companies that have some or all of the following characteristics: a history of strong cashflow generation, a strong balance sheet, a strong competitive position in a market with high barriers to entry and security of future revenue streams. The Sub-Fund expects to invest in those companies that the Portfolio Manager considers to be undervalued by the market. In determining the intrinsic value of a company, the Portfolio Manager focuses on the long-term viability of a company and ignores the common practice of determining valuation by comparing value on a relative basis to a basket of “similar” businesses. The approach to valuation looks for a material value gap between the market enterprise value and the intrinsic enterprise value of a business.
The valuation of each investee company for the portfolio is fundamentally grounded in an assessment of the long-term sustainability and predictability of the relevant company’s earnings. It is generally the policy of the Portfolio Manager to consider the possible impact of potentially disruptive forces in the markets of the respective companies. There are a number of industries which are unlikely to pass the Portfolio Manager’s tests for long-term sustainability of revenues and margins. In particular, it will not be the policy of the Sub-Fund to have direct exposure to the following types of companies:
• Tobacco manufacturers
• Manufactures of controversial weapons
• Tar sand oil extraction companies
• Thermal coal mining companies.
The Sub-Fund may, from time to time, invest in high-quality conglomerates that may have exposure to some of the above areas, directly or indirectly. These areas will represent no more than 10% of the Portfolio Manager’s assessment of a conglomerate’s intrinsic value.
The Portfolio Manager will seek to maintain a concentrated portfolio, typically consisting of up to twenty-five companies at one time, but reserves the right to construct a less concentrated portfolio where it believes this would be in the best interest of the Unitholders. The Sub-Fund may invest in new issues, but is unlikely to invest in new issues to any significant extent.
It is the Portfolio Manager’s policy to invest the majority of the portfolio in securities (including shares and debt securities) of companies, which are admitted to or dealt in on Eligible Markets established in the EEA, the United States or Canada. At its discretion, the Sub-Fund may invest in securities (including shares and debt securities) of companies whose securities are admitted to or dealt in on other Eligible Markets. The Portfolio Manager will not actively invest in unlisted securities or in any collective investment undertakings or pooled investment vehicles. Derivative instruments may be used for foreign currency hedging only and may be exchange-traded or over-the-counter.
The Sub-Fund may also maintain a cash balance and invest in money market funds, money market instruments and other fixed rate securities, whether issued by corporate or sovereign entities (including, but not limited to, deposits or United States treasury bills).
The Portfolio Manager may not use leverage in pursuing the Sub-Fund’s investment objective. By way of example, the Portfolio Manager shall not use borrowed funds for investment purposes or use derivatives to leverage or gear the portfolio.
Proportion of investments
The minimum percentage of investments that are aligned with the EU Taxonomy is 0%.
Monitoring of environmental or social characteristics
It will not be the policy of the Sub-Fund to have direct exposure to the following types of companies:
• Tobacco manufacturers
• Manufacturers of controversial weapons
• Tar sand oil extraction companies
• Thermal coal mining companies.
The Portfolio Manager conducts periodic monitoring of the underlying assets, to check that positions remain within the permitted thresholds detailed below and takes corrective action if those thresholds are breached.
Sustainability Indicator: 1. Greenhouse gas emissions (scope 1 & 2) and 2. Carbon footprint
Metric
Companies in the following industries are excluded1:
· thermal coal mining
· tar sand oil extraction
1The Sub-Fund may invest in conglomerates that may have exposure to some of the areas above either directly or indirectly which represent up to 10% of the Intrinsic Value of the company as determined by the Portfolio Manager.
Threshold
0% of the portfolio invested in companies for whom the assessed Intrinsic Value of the future profit streams of these industries (in total) is greater than 10% of the Intrinsic Value of the company as determined by the Portfolio Manager.
Sustainability Indicator: Exposure to controversial weapons
Metric
Companies in the following industries are excluded1:
• Manufacture of controversial weapons (anti-personnel mines, cluster munitions, chemical weapons and biological weapons)
1The Sub-Fund may invest in conglomerates that may have exposure to some of the areas above either directly or indirectly which represent up to 10% of the Intrinsic Value of the company as determined by the Portfolio Manager.
Threshold
0% of the portfolio invested in companies for whom the assessed intrinsic value of the future profit streams of these industries (in total) is greater than 10% of the Intrinsic Value of the company as determined by the Portfolio Manager.
Methodologies
In general, the Portfolio Manager deploys a four staged process in the execution of its investment due diligence for any investee company. Stage 1 is a quantitative screening process from which candidates are generated for further research. Companies with exposure to the industries set out above are excluded at this stage.
In Stage 2, the Portfolio Manager deploys a semi-automated template for each investment candidate which includes externally sourced ESG data. There are also a number of questions for the analysts to answer from desktop research, which includes questions on the potential for disruption to the investment candidate’s business model from ESG risks. In the process, these risks are scored which highlight areas for greater scrutiny in stages 3 and 4 of the research process.
Further work on potential disruption risks, including ESG risks, are reviewed in stages 3 and 4. Sources of data will be third party (e.g. Bloomberg), the company itself (annual report, company website) and other third-party data sources specific to the industry being analysed. If following this research, the Portfolio Manager believes that the risk could undermine its ability to model a sufficiently narrow range of future scenarios for the purpose of valuation, then the Portfolio Manager will either reject the company for further research or engage with the company directly.
Any engagement seeks to understand the company’s perspective on the risks identified and whether any action is being taken to resolve the risk. Often, the issues are around disclosure, in which case the Portfolio Manager will actively encourage the company to improve this area of their activities. If following engagement, the Portfolio Manager’s assessment of disruption risks including those related to Governance, or the company’s impact on the environment or society, is too high, then the investment candidate will be ruled out for inclusion in the portfolio and moved to a list of companies which have failed its quality threshold.
Once in the portfolio, the Portfolio Manager has developed a portfolio monitoring framework for maintaining its assessment of ESG risk during the ownership of the position. This looks at objective measurable parameters. This data assists the Portfolio Manager’s ongoing engagements with its portfolio companies.
the Portfolio Manager engages with portfolio companies through active voting on shareholder resolutions and will make its viewpoints known to the company where there is a strong divergence between its views and the strategy being followed by the company. Ultimately, the Portfolio Manager will exit a position if it believes that it cannot influence change and without change, the investment thesis and long-term value of the company is materially impaired.
Data sources and processing
The Portfolio Manager uses third-party data from companies like S&P Global Trucost, Bloomberg and MSCI. the Portfolio Manager also sources data directly from many of its investee companies through access to published sustainability reports and direct engagement.
Limitations to methodologies and data
Third party data has been found to be sometimes inaccurate, out of date and based on estimation using broad industry definitions. For this reason, the Portfolio Manager also sources data directly from many of its investee companies as set our above.
Ultimately this data is used as an input into the research process, in particular to support the process of the Portfolio Manager developing its own proprietary disruption score for each investee company. While there are limitations to these methodologies and data sources, the portfolio manager has explicitly cited these limitations and does not believe these impact the ability of the sub-fund to achieve its investment objective.
Due diligence
As set out above in more detail, the Portfolio Managers deploy a four staged process to support the due diligence carried out on each investee company. Stage 1 is a screening process which aims to rule out industries which they have excluded from their universe. In Stage 2, the Portfolio Manager deploys a semi-automated template for each investment candidate which includes externally sourced ESG data. Risks are scored which highlight areas for greater scrutiny in stages 3 and 4 of the research process. Further work on potential disruption risks, including ESG risks, are reviewed in stages 3 and 4.
Once in the portfolio, the Portfolio Manager has developed a portfolio monitoring framework for maintaining its assessment of ESG risk during the ownership of the position.
The information gathered to support this process is documented internally by the relevant analyst working on the research. This documentation is reviewed by both Portfolio Managers.
Engagement policies
The Portfolio Manager has published its Responsible Investment & Engagement Policy on its website: https://metropoliscapital.co.uk/responsible-investing
The policy sets out a description of the firm’s investment philosophy and approach and how engagement with investee companies is fundamental to this and supports investment outcomes for its investors. The Policy sets out the firm’s approach to exercising its right to vote on shareholder resolutions. The policy also addresses sustainability risks which are considered as part of this engagement process.
Designated reference benchmark
The sub-fund does not have a reference benchmark.