Fleming Asset Management is intending to launch two European offshore funds in February targeted at ...
Fleming Asset Management is intending to launch two European offshore funds in February targeted at the top end of the UK intermediary market, writes Jane Wallace.
Domiciled in Luxembourg, European Growth and European Value will be managed by Andrew Spencer, head of UK and European equities, and his team. As their names suggest, the funds' portfolios will be biased towards growth stocks and value stocks respectively. Flemings is currently seeking regulatory approval to market the two Luxembourg-domiciled funds into the UK.
Spencer said: "These are the first funds to be established which are based on investment style. They are based on the idea behind the Premier Equity Growth fund."
The S&P Premier Equity Growth fund takes what the group has described as a bar-bell approach to investing. Spencer believes that there are essentially two ways to make gains in the market - from pure growth stocks and very cheap stocks which, with the aid of a catalyst, will eventually increase in price. All stocks between these two positions are excluded from the Equity Growth portfolio.
Spencer takes small bets on a large number of stocks in a bid to keep risk low and to dampen volatility of the portfolio against its benchmark index. He aims for a tracking error from the index of about 3% to 4% and sticks fairly closely to the benchmark in terms of stock and sector weighting within the fund.
The maximum variance in the fund on a sector weighting would be 5% away from the benchmark, although in practice that variance is usually closer to 1%. For stocks, the maximum active bet would be just 1% more than the benchmark.
Instead of having that process in one fund, Spencer will split it between the two new portfolios. Investors can therefore choose between the growth or value styles or have a combination of both.
Spencer took over management of the S&P European Growth and Fleming Flagship Europe funds in September last year. The reason behind the move was to speed up the application of the UK desk's investment process to European funds. At the time, the process had not been fully established. It was perceived that the quickest way to achieve transfer of methodology was for Spencer to run the funds directly.
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