The Confidence Quotient is a measure of company quality, a measure of our conviction in a sustainable growth estimate, a language for use in debate and discussion with portfolio managers, and a driver of discipline and rigor in our investment process.
The Fundamental Growth & Core Equity (FGC) team at State Street Global Advisors takes an active, concentrated, high-conviction approach to equity investing. Investing like owners, not like traders, we seek to hold our companies for the long term. This approach demands that we get to know our portfolio companies well through deep due diligence and ongoing engagement. Our investment philosophy is based on the premise that identifying quality companies with sustainable growth at reasonable valuations can drive above-average, long-term investment returns.
A critical element of our proprietary investment process is our Confidence Quotient (CQ) framework for assessing company quality. We believe company quality cannot easily be measured through backward-looking quantitative analysis, and in this respect our approach differs from those used by smart-beta/index providers. CQ focuses on five key qualitative attributes of a company that are likely to contribute to sustainable growth: management team, market position, fundamental momentum, transparency, and financial condition. In addition, ESG considerations are incorporated into all quality assessments, based on our belief that companies that are strong in ESG are more likely to deliver the sustainable growth we seek. ESG considerations are therefore integral to the FGC alpha thesis and are not merely an overlay in the process.