What does 'quality' investing actually mean?

"Quality" is one of the most overused words in fund literature. It is attached to almost every equity strategy in one form or another, yet ask five fund managers to define it and you are likely to get five different answers. But advisers assessing funds or explaining a strategy to clients need a clear definition. At its simplest, we think of quality as a company's ability to allocate capital effectively over time. A high-quality business reinvests its cash flows into projects that earn attractive returns, without stretching its balance sheet to do so. Done consistently, this creates a...