Investment Process

Investment Process


GFL Capital’s research teams screen the investment universe for securities or assets where the expected internal return meets or exceeds return targets of the services. Such forecasts are supported by extensive field research and disciplined valuation processes. The conversion of all forecasts to the common language of expected return enables comparisons of investments across the capital stack of corporate issuers and all other asset classes.

Our valuation processes include:

A present value modeling framework for common stocks that compares estimates of future free cash flow to current stock prices to compute expected returns. It then compares such returns to a broad universe of companies and establishes both absolute and relative views of return potential.

A fixed income cash flow modeling framework that compares market prices to predictions of loan performance to compute expected returns. Such returns take into account the idiosyncratic features of deal structure (conversion features, pre-payment options, etc.) and the cash flow pathways triggered by defaults and other factors.

Economic modeling at the global and national level. Models predict broad trends in corporate profits as well as supply and demand for real assets near and long term. Surveillance systems to track predictions versus actual results.

Quantitative Tools

Quantitative factors that correlate with future stock and bond returns facilitate screening for opportunities, timing of purchases and sales and sizing of positions. They also signal forecasting error, useful in research review. Still, such tools are adjunctive to the portfolio management process. All investments must qualify on fundamental grounds.

Research Review

The inputs that drive these investment processes are subject to intensive research review and quality assurance by the funds’ Chief Investment Officers and Director of Research, in collaboration with both internal and external research analysts.