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 strategy primarily sources ideas from our suite of concentrated 'Choice' strategies (Global, Non-U.S. and U.S.) in assembling a highly concentrated portfolio. In turn, TD Epoch's Choice strategies source the majority of positions from the approximately 500-600 securities held across the firm, benefiting from proprietary research that drives our U.S. and global strategies. As such, Global Select represents the most concentrated form of TD Epoch's highest conviction ideas. Portfolio Management is led by the Co-CIOs, representing the full intellectual property of TD Epoch's global equity investment team, including risk management. 

The investment team looks for companies that generate free cash flow, have little debt relative to their competitors (or are deleveraging), and possess managements with a history of capital allocation decisions that have increased shareholder value. The Global Select strategy leverages the fundamental research efforts of the entire Firm, along with the work of its Quantitative Research and Risk Management team and themes developed by our Investment Policy Group.

The firm's broader underlying equity strategies incorporate qualitative and quantitative analysis to identify potential investments, taking into consideration factors that can lead to growing cash flow. Analysts identify potential research candidates through meetings with companies, suppliers, customers, their peers, conferences, and trade shows. In addition, the portfolio managers may assign research candidates to the analysts based on the macro context or portfolio positioning considerations. Fundamental insights are complemented with the Epoch Core Model, a proprietary quantitative tool that was developed in-house to systematically express TD Epoch's fundamental investment philosophy, increase the breadth of coverage by our fundamental analysts and help prioritize their research work.