The bedrock of our philosophy is the belief that the best predictors of long-term shareholder return are growth in free cash flow and management's skill in allocating that cash.

We prefer cash flow to earnings for three reasons. First, cash flows are more reliable than reported earnings because they are harder to manipulate under accounting rules. Second, for innovative businesses which derive much of their economic value from intangible assets, reported earnings have become increasingly less relevant as a measure of value generation compared to cash flows. Third, businesses which appear to generate reported earnings but not cash flows are more likely to run into financial distress.

Capital allocation matters because decisions on how to allocate cash flows—whether to reinvest in order to grow a company, or to return capital to shareholders—can create or destroy long-term shareholder value.

The portfolio combines both the investment themes developed by our Investment Policy Group with high-conviction stock ideas selected by our research team that are typically present in our other strategies. The portfolio management team has latitude to invest across geographies and market capitalizations regardless of the composition of its benchmark, the MSCI World Index. 

The Global Choice strategy leverages the fundamental research carried out across all strategies managed by TD Epoch as the primary source for investment ideas. TD Epoch's broader underlying U.S., non-U.S., and global strategies incorporate qualitative and quantitative analysis to identify potential investments, taking into consideration factors that can lead to growing cash flow. Stocks are then subject to rigorous fundamental research. We develop an investment thesis as we assess the sources of the company’s long-term value creation as well as management’s ability to nurture it. We scrutinize management’s track record of allocating capital, looking for those with the discipline to use free cash flow to maximize return on investment, thereby creating shareholder value. 

While the portfolio is constructed from the bottom up, we also consider the macro context when making decisions. TD Epoch’s Investment Policy Group, which is composed of senior members of our various strategy groups, provides insight and guidance on the global market environment as well as macroeconomic and industry trends.

Our veteran team of research analysts and portfolio managers carry out the bottom-up fundamental research. This group averages over 20 years of investment experience. All of our investment professionals are based in our New York office, which fosters a close working environment and a high level of communication. Analysts work within a team structure and are involved throughout the decision-making process. Investments and ideas are discussed frequently in real time. Our investment team meets formally on a regular basis to review market news, new research, investment ideas and current portfolio holdings. The global team also works closely with our U.S. analysts to share ideas and information. A subset of our global team is focused specifically on the Global Choice strategy.

The Global Choice strategy leverages the fundamental research efforts of the entire firm, along with the work of our Quantitative Research and Risk Management team and our Investment Policy Group to create a concentrated, high-conviction portfolio. Our goal is to produce an efficient portfolio on a risk-return basis. Its composition reflects three elements: 

-              TD Epoch’s highest-conviction stock ideas without reference to any particular benchmark

-               Thematic and sector views generated by our Investment Policy Group           

-               Inverse risk weighting to control portfolio volatility

Once a stock has been purchased, we regularly revisit our thesis and will typically sell the stock if our price target is reached, our thesis changes or we see another investment with a better risk-reward profile.

We analyze risk as part of the portfolio construction process to monitor portfolio volatility and better ensure the delivery of the strategy’s goals. TD Epoch's Chief Risk Officer serves as a co-portfolio manager to ensure the investment team is aware of unintended biases and of the effect individual securities may have on the portfolio

The portfolio is unconstrained with the exception of limiting individual position sizes to 10% at the time of purchase. Geographic and sector weights are largely a by-product of stock selection. Large divergences from the benchmark occur and their potential to influence the portfolio are monitored.