The Barrow Hanley Global Value Equity strategy (ASX: GLOB) continues to earn our strongest convictions in both its tenured high-caliber team and its consistent approach to pragmatic value investing. The underlying share classes are available as AUD-hedged or unhedged vehicles.

Strategy lead Brad Kinkelaar, along with comanagers David Ganucheau and Cory Martin, leverage over 30 years’ industry experience on average in demonstrating their skills and insights. They are well-supported by the stability, depth, and experience of the 27-member investment team, which is organized by geography and sectors. All members of the investment team have equity in the business, fostering investor alignment on top of their competitive remuneration structures. There has been some elevation in turnover over the past two years, with a retirement and the departures of two analysts and a portfolio manager, TJ Carter. The latter was a rarity, considering it was the only voluntary departure of a portfolio manager in decades, highlighting the firm’s strong culture.

Robust bottom-up fundamental analysis underpins this strategy, as the team seeks to identify solid businesses that are mispriced by the market. Downside scenarios are clearly a consideration when evaluating the investment theses and avoiding value traps, supporting strong risk management. A distinguishing feature of the strategy is its ability to tilt between defensive and cyclical value positions as market conditions evolve—an outcome of bottom-up stock selection rather than top-down macro calls.

As a result, the portfolio may lag during sharp, deep-value rallies because of its balanced exposure across value substyles. This process results in a diversified 50- to 70-stock portfolio with a true investor mindset; commensurately, active share is high, and turnover is low. The underlying strategy has been running since 2010 and has performed well ahead of the MSCI World Value Index and well ahead of most of its value peers, given its ability to avoid the risks in deep-value stocks. This is a commendable long-term performance profile, though it is noted that the value style can deviate from the Morningstar Category Index benchmark for prolonged periods of time. The Barrow Hanley Global Value Equity has a strong investment team and a differentiated value process that makes it an ideal candidate for investors seeking a value-oriented exposure in their portfolios.

Disciplined value approach and detailed fundamental analysis

The depth of fundamental research, strong risk management, and dynamic value tilts warrant a Process Pillar rating of High. The Barrow Hanley Global Value Equity strategy employs a traditional value approach to global mid- to large-cap equities. The process starts with idea generation, which sees the team filtering the MSCI World Index to exclude stocks less than USD 1 billion using fundamental value metrics such as price/earnings, price/book, enterprise value/free cash flow ratios, and dividend yield. The resulting investable universe of approximately 600 stocks is then divided across the analyst pool by sector for further detailed bottom-up analysis, with the universe being reviewed weekly for idea generation. The focus for the analysts is identifying underappreciated companies that offer returns through depressed valuations, strong balance sheets, and those that are likely to experience positive changes in key operating fundamentals. Each stock then has an intrinsic valuation defined with its best- and worst-case scenarios.

The stringent process for a stock to qualify for a buy recommendation then faces a team-driven approval at the global value equity committee for inclusion in the 50-70 stock portfolio. Individual positions are then conviction-weighted based on the risk/reward opportunity, with the portfolio ultimately having a tilt toward defensive value or traditional value, depending on the stock selection in the relevant market environment.

Given this strategy’s value approach, the portfolio will generally have lower price/earnings and price/book than the MSCI World Index and a higher dividend yield. The strategy imposes guardrails against unintended sector/country bets by limiting sector and country exposures to 40% and 25% (ex US), respectively. Single-stock positions are capped at 5%, emerging-market exposure is capped at 20%, and cash typically is less than 5%. This does not preclude the team from taking sizable bets away from the benchmark. The team builds exposures where it can find the best companies with depressed valuations and strong balance sheets, while an eye on industry and market risk can see periodic sector rotations. The portfolio has typically underweighted technology, given the team’s views of lofty valuations. The portfolio typically has between 50 and 70 names.