Alex here!

A few weeks back I had the opportunity to visit the Edinburgh home office of Walter Scott & Partners which is our International Equity Manager in many of our portfolios.

I had the chance to get a tour of their Charlotte Square offices and hear more about their investment philosophy. I was graciously hosted by Tim Wilcox, the President of BNY Mellon, which owns Walter Scott, and Murdo McLean, Client Investment Manager.

 

Walter’s investment philosophy and approach is three-pronged – proprietary process, team approach, and long-term investment horizon:

1. Proprietary process. Like every firm, Walter has their own set of standards and processes that guide their investment decisions. They have stringent investment criteria and only select companies that meet their quantitative and qualitative markers. What we like about them, is their focus on value. Like us Winnipeggers, Walter also wants to be able buy at a discount. They are looking for companies with reasonable valuations that have robust cash flows to internally finance investments and drive long-term growth.
2. Team approach. Many investment management firms, have analysts that are specialized in certain areas such as health care, real estate, energy etc. What makes Walter unique is that they don’t follow this model. Every analyst must in be unanimous agreement when adding a position into their fund – essentially, they all must be experts. They found that when they would have an expert in a field that was presenting the stock, the rest of the team would be inclined to agree because they didn’t have the knowledge to counter the position. This has removed a lot of the bias in their holdings and allows their tenured team to challenge and debate all proposals.
3. Investing for the long-term. As of December 31st, 2023, Walter had 47 holdings in their global mandate and 21 of them have been held for greater than 10 years. This is a testament to their decision making process, and the ability of their holdings to sustain themselves in volatile markets. One aspect of longevity for Walter, is paying attention to the environmental, social, and governance (ESG) practices of companies. They would hesitate in investing in a company that does not have well-thought out ESG integration within their business. In their experience, this is an important factor in a company’s long-term success.

When we look at the diversified components of our client’s overall portfolios, we always want to compare each manger to their own benchmark depending on the segment of the market – Canada, US or international. The benchmark that Walter compares itself to, is the MCSI EAFE international index. As you can see below, they’ve been able to out-perform over the last 20 years. Please note that past returns are not necessarily indicative of future returns.

Source: Walter Scott (International Equity Factsheet (CAD), MSCI (Index). https://www.walterscott.com/strategies/

It’s always nice to meet our managers at their office and see first-hand how our managers operate. We feel that Walter’s approach and focus on value aligns with both our team’s investment process and our client’s needs. We carefully select the managers that we work with, constantly reevaluate them, and don’t hesitate to change our managers when we identify a reason to do.

If you have any questions, don’t hesitate to let us know. Tim, Murdo, and the rest of the team at Walter are always accessible to us. If you are interested in reading further, Walter also has a fantastic website with a lot of materials that they put out.