The firm’s Small Cap philosophy emphasizes a fundamental research-driven approach to stock selection which emphasizes high quality, under-followed investment opportunities.

A bottom-up approach is used to identify these quality growth companies.

The Jones Heward small cap investment process can best be described as the blending of quantitative techniques with a qualitative overlay for stock selection.

The process begins with the Idea Generation task where the manager seeks opportunities in the Canadian small and mid-cap universe, (most of these fall in the range of $100mm to $1.5bn in market capitalization). Using a quantitative screen in combination with other independent sources, the manager compiles a list of ideas to pursue, based on the likelihood of the opportunity to possess certain sought after qualities. Examples of these qualities are quality of management team and potential for greater than market average growth rate.

The task of Fundamental Research is performed by the small cap team and includes, management interviews, internally generated estimates and strategic analysis and assessment of the company. The team holds approximately 150 management interviews and/or site visits over a one year period. 80% of the research function is performed internally, with only 20% derived from external sources.

Portfolios are then constructed based on a compilation of the best small cap ideas in the Canadian market, based on the team’s viewpoint.

Risk is controlled through three primary strategies. Firstly, all companies are put through a thorough research screen and due diligence process before investment, secondly, portfolios are diversified through number of holdings, where a typical small cap portfolio would have 60-80 holdings and finally sector representation is broad with most market sectors represented in the portfolio. A typical position size will range from 1 to 3% of the total portfolio.

Jones Heward is committed to its investment philosophy and to a disciplined investment process. Stocks will be sold when a material change in company outlook occurs, such as a change in management, industry outlook or strategy, or earnings forecasts are revised downward. Stocks are not sold based on appreciation to large cap status, but are only sold based on the sell criteria stated above.