Despite the name of his firm, Axiom Investors portfolio manager Andrew Jacobson accepts nothing as self-evident.
A molecular biologist by training, he instead wants empirical facts before he backs a company.
‘We say we’re empirical but not algorithmic,’ he said. ‘We’re looking at the fundamental drivers of the business but not having computers make decisions for us.
‘My background was a hard science background. My thought was to take that structured approach to looking at growth stocks outside the US. We do a detailed fundamental analysis to isolate a handful of stocks where we would look at medium-term projections and spot specific aspects of revenues, earnings and cashflow in order to make investment choices.’
Jacobson’s scientific attention to detail was honed at Princeton, but after studying an MBA at Wharton he moved into investment management and hasn’t looked back.
Along the way, he worked at Booz Allen Hamilton and Columbus Circle Investors, which would eventually be acquired by Pimco. From there, Jacobson and some colleagues spun out, taking their international growth strategy with them to start Axiom.
‘That’s how we launched in 1998,’ said Jacobson, who is chief executive and chief investment officer at the firm. ‘We had no continuing tie to Pimco. Most of our institutional clients came to Axiom.’
Things have evolved a lot since then. The Greenwich, Connecticut-based boutique today employs 48 staff, of whom 25 are investment professionals. It is 100% employee-owned with 20 equity shareholders.
The firm runs around $12 billion across 10 strategies. It has seven long-only growth equity strategies, primarily focused on international and global stocks, with the exception of one US small-cap offering and three hedge fund strategies: International Opportunity, International Micro Cap Equity and Global Micro Cap Equity.
The long-only strategies are all available as separately managed accounts. While the firm does not offer its own mutual funds, it is a subadvisor on a number of multi-manager mutual funds, including:
- Northern Trust Active M Emerging Markets Equity
- SEI Institutional Investments Trust Small/Mid Cap Equity
- SEI Small Cap Growth
- Russell Investments Multi-Asset Growth
These, alongside other subadvisor relationships, account for 15.5% of the firm’s assets.
Axiom’s first strategy was International Growth, which has a 21-year track record, while both Global Growth and Global Small Cap have been going 13 years. The emerging market strategy has been running for a decade and has become Axiom’s largest, accounting for 54.8% of assets, or $6.1 billion.
The fund is managed by Christopher Lively, Donald Elefson and Jose Gerardo Morales, who run a portfolio of around 85 predominantly large- and mega-cap names, whittled down from a universe of some 2,000.
Its top two holdings are Korean technology giant Samsung and Chinese internet firm Tencent. At 5.7% and 5.3% respectively, both are slight overweights to the MSCI EM benchmark’s 4.4% and 4.9% allocations.
‘We’ve owned [Tencent] since 2013,’ Jacobson said. ‘We understood the medium-term forecast for Tencent and it’s up 40% since then. We saw smartphones were becoming inexpensive, passing through critical price points, and that data networks were becoming more ubiquitous. Back then it was growth at a reasonable price.’
This exemplifies what Jacobson describes as the firm’s specialism, finding ‘attractively valued growth equity with under-forecasting of its growth trajectory.’
To find such stocks the managers assess companies against two dozen criteria, including earnings, cash flow, the pace at which underlying growth is compounding, the sustainability and quality of growth and the return on equity.
Samsung also fits with this approach.
‘We’ve been successful recognizing stocks that have a cyclicality to them,’ Jacobson said. ‘We saw that we were in a strong memory cycle, with rising demand for memory in servers. And because of Samsung being in Korea, and the headlines surrounding that, it was deeply undervalued.’