Eric Lynch, managing director of Scharf Investments, speaks to David Barfoot about Scharf’s approach to investing and, in particular, how they find sustainable value.
Scharf Investments is focused on a differentiated approach to quality value investing. We have a focus on companies with sustainable earnings and attractive favorability ratios, targeting those with 30% upside vs. 10% downside. We believe that by holding companies with less earnings per share variability, we can help minimize the downside for investors.
We run concentrated portfolios of 25-40 securities aiming to capture opportunities among large and mid-sized companies.
And, finally, we target sustainable businesses with compelling Carbon and ESG Risk scores. We construct portfolios with a Carbon Risk Rating of lower than 10 on a scale from 0 (negligible) to 50+ (severe).
Director – Distribution (UK & Ireland)
No, we believe it is more effective and holistic to fundamentally integrate ESG into each step of the research and portfolio management process. We believe combining ESG risk factors with rigorous, fundamental investment analysis improves the chances for superior risk-adjusted returns for our clients, so all members of our investment team are trained on ESG principles.
Our employees also invest a significant amount of equity in our strategies alongside our clients, confirming an alignment of interests that underscores our prudent decision making and drive for meaningful performance. From our offices among the redwoods of the Santa Cruz Mountains, we offer perspective and independent thinking that we believe provides alpha versus our peers.
From our offices among the redwoods of the Santa Cruz Mountains, we offer perspective and independent thinking that we believe provides alpha versus our peers.
ESG integration is taken into consideration while assessing each stock in order to build a sustainable and resilient portfolio. Our integrated investment approach includes portfolio monitoring and active ownership.
Our analysts utilize the extensive database of ESG research and score ratings from Sustainalytics, findings from our ESG Stewardship Team, and other relevant sources of ESG data. ESG analysis is included in each stock report with focus on pertinent issues.
The investment team and the ESG Stewardship Team continuously monitor portfolio holdings using company filings, news flow, buy-side and sell-side research, and ESG Risk and Carbon scoring from research databases including Sustainalytics.
Companies with poor Carbon or ESG Risk scores, trends, or severe controversies are flagged and added to an ESG Watch List by the ESG Stewardship Team.
We also think engagement with management can produce positive ESG outcomes with special attention paid to minority shareholder interests, board independence, executive compensation, and management’s capital allocation track record.
Apart from being a UN PRI signatory, we are also a supporter of the task force on climate-related financial disclosures (TCFD). Also, our UCITS fund—the iMGP US Value fund—has been classified as Article 8 under the European Union’s Sustainable Finance Disclosure Regulation (SFDR).
Founded in 1983 and based in Los Gatos (CA, USA), the firm manages US and global equity strategies with a concentrated quality value approach.
The firm had $4.5bn AUM at the end of December 2023.Visit Scharf Investments