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Effectus Capital Management

Investment approach

Structural growth, found early.

We invest in companies with a structural, long-term earnings growth outlook, combining a top-down view of the trends reshaping economies with bottom-up work on the companies best placed to benefit.

Sweeping white ribs of a modern vaulted structure.

How we invest

From signal to conviction.

  1. 01

    Read the structural trends

    We start top-down: identifying the mega structural trends, the technologies, innovations and shifts in the South African and global economy that create long-term tailwinds.

  2. 02

    Find the innovators

    Then bottom-up: the companies that are best in class, with a sustainable technological advantage or innovation edge, niche disruptors in large, long-runway industries, and aggregators building self-reinforcing platforms.

  3. 03

    Execute with discipline

    Effectus means execution. Conviction is expressed through actively managed portfolios, delivered via discretionary mandates and modern investment platforms.

Themes we research

Where innovation meets earnings.

Disruptors

Niche innovative disruptors operating in massive industries with growth and quality trajectories and long timelines.

Aggregators

Companies that harness convergent industries and technologies to create self-reinforcing platforms for growth.

What we believe

Growth, at the right price.

Growth drives value. Long-term, sustainable growth in economies, sectors and companies drives capital appreciation and intrinsic value.

Valuation discipline matters. Momentum pushes markets beyond fundamental value. We aim to buy with a margin of safety, below our estimate of intrinsic value, and to sell at or above fair value.

Three risks. Losing money, failing to beat the benchmark, and underperforming alternative strategies. Our process is designed to reduce each.

The ITD framework

How we choose what to research.

Innovation, Technology, Disruption: an in-house framework for finding the companies that structural change will reward, and avoiding those it will erode. ITD tells us where to look; valuation tells us what to pay.

Lens The question we ask What it helps us find or avoid
Innovation Does the innovation change the company's competitive position? Companies and sectors that lead through genuine innovation.
Technology Which incumbents is technology eroding, and where does it unlock structural growth? Structural growth, and the value traps to avoid.
Disruption Which disruptors are not yet fully priced? Disruptors and niche categories, and established businesses in structural decline.

How we invest

Four stages, every mandate.

Bottom-up, with a macroeconomic overlay: growth, policy direction, interest and inflation expectations and the rand feed into our earnings forecasts.

  1. 01

    Screening

    We start with the JSE Top 100 and screen for dividend yield, volatility and quality to reach a working universe of 50 to 60 stocks. ITD candidates can enter research outside the screen.

  2. 02

    Valuation and research

    Macroeconomic, industry and company research feed our intrinsic value model, built on forecast earnings normalised to mid-cycle. We buy below intrinsic value.

  3. 03

    Portfolio construction

    Valuation upside and the ESG-MOAT star rating set the maximum active weight for each position. The Chief Investment Officer sets the actual weight within that limit.

  4. 04

    Monitoring and review

    We review a position when the thesis changes, when the price reaches fair value, or when its ESG-MOAT score deteriorates.

Responsible investment

ESG helps set how much we own.

Every stock we consider receives an ESG-MOAT star rating out of three. ESG carries two of the stars (67%); financial MOAT carries one (33%): consistent margins and earnings, cash conversion, and return on invested capital relative to its cost. The rating, with valuation upside, sets the maximum active weight.

We build ESG into research and sizing rather than excluding whole sectors, and score every stock in-house. A deteriorating score is a reason to review a position, whatever the valuation says. We vote on our holdings, engage management directly and report voting activity to clients.