The power of compounding – the duration effect

31 May 2021

A company which possesses the ‘duration effect’ is able to build value over time through compounding its free cashflows.

A portfolio of companies possessing this duration effect creates multiple sources of alpha generation, enabling a fund manager to look through short-term market noise to focus on a company’s long-term value creation potential.

It also enables a fund manager to capture upside as well as protect on the downside.

The duration effect is one of the market inefficiencies targeted by the Loomis Sayles Global Equity Fund.

Investment Specialist Peter McPhee discussed this recently with Co-Portfolio Manager Eileen Riley.

In the full interview [11min], Boston-based Eileen discusses how Loomis Sayles is able to take advantage of the duration effect to add value for investors, and provides examples of companies which Loomis Sayles believes possess the duration effect.

This content is suitable for financial advisers and other financial services professionals. By proceeding to access this content you acknowledge that the information it contains is intended for financial advisers and financial services professionals only and must not be distributed to retail clients.

Please sign in or register to access