Tetrem follows a disciplined investment process that encourages constant interaction and the continual vetting of ideas among our investment professionals. Our fundamental approach is focused on finding securities where the misalignment of fundamentals and expectations has created a compelling investment opportunity. Tetrem's process is designed to preserve and grow our clients' capital over time, by structuring the portfolios to offer superior risk/return profiles. We utilize a Portfolio Management Team approach that is collectively responsible for approving investment decisions within our Canadian and U.S. strategies.

Tetrem's research process is iterative and collaborative by design, as we believe this is the best way to promote sound decision making and continually improve our approach to investment management. Potential investment ideas are typically generated by the Portfolio Management Team, with members of the Analyst Team performing an initial review. The focus of this review is on determining whether or not the company meets Tetrem's criteria to be considered a viable portfolio candidate. Our Valuation, Mean Reversion, Economic Moat, and Risk (VMER™) framework forms the pillars of this evaluation criteria.

There are various components of risk management embedded throughout our investment process. Risk is primarily analyzed at the individual security level and then managed at the portfolio level to ensure appropriate diversification and a compelling risk/reward profile. Tetrem's Portfolio Management Team is responsible for overseeing the risk management of the portfolio, as they collectively approve the investment decisions. The Team's years of experience serves them well in this capacity and enables members of the Analyst Team to uncover their own investment recommendations and present their highest conviction ideas for approval.

VMER™ Valuation, Mean Reversion, Economic Moat, and Risk

Tetrem's Valuation, Mean Reversion, Economic Moat, and Risk (VMER™) Framework forms the pillars of our evaluation criteria. We approach analyzing all potential investment ideas through our VMER™ lens, ensuring each potential investment fits our framework before approving the security for purchase in client portfolios.

  • Valuation
  • Is the stock at a discount to its fair value?
  • Where are the market expectations vs fundamentals?
  • Mean Reversion
  • Company, industry, or economic drivers of profitability?
  • Where are margins or valuation relative to history and peers?
  • Economic Moat
  • Is the competitive position unique/sustainable?
  • Do company fundamentals create an advantage?
  • Risk
  • Does the stock help diversify the portfolio?
  • Is there a sufficient margin of safety?

PWAP™ Probability-Weighted Average Price

Once an idea moves to a formal review, Tetrem's research is focused on determining multiple views of fair value. This is done by modeling a company on the basis of its normalized earnings and applying a justified multiple to those earnings. These results are then used to establish three scenarios of fair value: a base case, a bull case, and a bear case, with the Portfolio Management Team assigning different probability weightings to each scenario. A calculation is then performed to arrive at Tetrem's probability-weighted average price (PWAP™), which is used to monitor the potential upside for each security in the portfolio.

Large Cap Value Equity PWAP Process