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Accounting
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Merrill Lynch Investment Manager has several core approaches to their 30-year investment philosophy. Rigorous fundamental analysis of investment, the pursuit of quality investment and the construction of concentrated portfolios are the approaches that are responsible for the success of Merrill Lynch. Merrill Lynch Mercury’s1 investment philosophies are as follows: A belief in active management Merrill Lynch Investment Managers believes in actively managing portfolio where there is an active approach to all levels of the investment process: stock selection, sectors weightings and asset and geographical allocation. Commitment to primary research The investment process is driven by research where investment managers undertake double responsibilities of fund management and extensive individual research covering markets open to international investment. Managers are also benefiting from a vast range of analysis from brokers where the management has a privileged relationship. Experience and extensive research has provided confidence to commitments to investment decision. Style flexibility In contrast with a restrictive style that might lead to under performance in times of economical change, a flexible approach is practice to accommodate economic circumstances. Thus in the long run, this flexibility allows consistency in performance over the economic cycle. Flexibility also allows investment in a wide range of stocks which are described as “growth”, ‘value” or “contra-cyclical” A strong team approach There is a strong emphasis on collective consensus where individual skills are factored into house views and ideas are discussed within teams. An emphasis on risk management A dedicated Performance and Risk management Team monitors all investment performance within the group. To ensure consistency and discipline, a risk control model is implemented where the level of risk in a portfolio is analysed quantitatively 2.Investment Style/Process Merrill Lynch Investment Managers’ Australian Equity investment style can be characterised as a bottom-up stock picker. MLIM approach on stock picking depends on 3 factors that drive share prices: Management Quality, Business Strength and Valuation (MBV). Research. The research process is the first part of MLIM investment process in the Australian Equity. MLIM undertakes team-based research to identify and further evaluate stocks that comply with the MBV criteria. 1) Team Based Research Each of Australian Equity team’s eight Portfolio Managers has individual stock research responsibilities that covers up to 150 top companies in the Australian equity market. These stocks are rated strictly to the MBV criteria and MLIM has an expert in each stock sector that monitors the key development and trend that drives future earnings and growth in that particular sector. Furthermore, the use Lotus Notes research will enable the team to communicate research information efficiently amongst the team. MLIM’s team based research efforts allow diverse input on an individual stock, which they call it ‘360 Degree Stakeholder analysis’. MLIM also research for good value investment based on the multi level analysis of the Discounted Cash Flow model that is also known as a ‘waterfall analysis’. This analysis method is more likely to determine the upside or downside of stock as opposed to just using a simple DCF model.
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