A: One of them would be automatic because we have a small-cap stock mandate. When a stock becomes twice bigger than our benchmark, we’ll let it go because it’s really not a small-cap stock anymore. We do let our winners run, but I don’t think its quite right with the characteristics of the portfolio to let it run indefinitely.

The other reason to sell is related to our regular screenings. We have many tools available for monitoring valuation and we utilize price targets. Many of our companies are not covered by analysts, but if they are, we know them. If the price is 15% within its target, I’ll know because every Monday morning I run the screen which gives us something to consider. In terms of valuation, we monitor the absolute and the projected valuation to consider whether we might want to take a profit.

Otherwise, there’s an automatic sell decision if the rationale for buying the stock is violated. Another factor would be if we find a company which has much greater upside potential. Most of the time we’re pretty close to being fully invested, so we may have to sell to buy something else.

Q: Since you have a global mandate, how do you handle fraud or other risks related to East European markets, especially Russia?

A: We have to find companies that make sense in terms of quality, growth, and valuation. The problems in Russia bother me very much but from the start we sought to avoid Russian companies where the government is involved directly or indirectly. So we don’t have anything that has to do with the energy sector in Russia. That was a strategic decision, part of the top-down approach, because I just didn’t feel comfortable with them. But I don’t think that the consumer theme is affected by these developments.

Q: Could you explain your portfolio construction process?

A: Everything we buy has a growth bias, which really hasn’t been the place to be in the past couple of years. In terms of portfolio construction, once the companies have gone through the filter of entering our working universe of stocks, then we only have some broad constraints in terms of regional allocations.

These are risk control guidelines where we delineate according to the North American block, the Euro block, and the Japanese block. Relative to the benchmark, the broad parameters will be 50% towards the lower part and double weighting towards the upper part on a relative basis. The other cross selection is according to the potential risk of underperformance. The number of holdings tends to be between 115 and 150 at maximum, while the turnover is about 85%.

Q: What kind of risks do you monitor and how do you mitigate them? Since you are a global investor, do you also hedge currencies?

A: I don’t do hedging as this is a concept that I’m not comfortable with. We look at individual company risks using the broad valuation tools that we have. We’re relatively widely diversified and regarding the risk in individual holdings, we do analysis using Northfield Risk Analysis in terms of the overall tracking errors and factor analysis to see where the risks are emulating from. We also do portfolio attribution analysis, which identifies if something is going against us and of we should back to doing the bottom-up stock analysis. I believe that one of the greatest risks for growth managers is the risk of stock implosion if we are wrong, so our bias toward the quality side serves us well. Naturally, if growth really comes back into favor, that should help too.