abn amro fund to be run by atlanta-based fund management group
The ABN Amro North American Growth Fund, to be launched on 5 November, is to be managed by Montag & Caldwell, bringing its large-cap focus and investment process to the UK industry.
The Atlanta-based fund management house, bought by ABN Amro Bank last year and as yet unknown in the UK, manages assets of around $22bn, a boutique by US standards focusing almost exclusively on large-cap US equities.
The ABN Amro fund, which, like all of ABN Amro's growth funds will have an initial charge of 5%, an annual management charge of 1.5% and offer intermediary commission of 3% plus trail of 0.5%, will be run as a mirror of Montag & Caldwell's existing portfolios.
Like the group's other funds, the ABN Amro fund will contain between 30 to 40 stocks, a level of stock-diversity largely reserved in the UK for highly aggressive funds and fitting closely with the growth-style of ABN Amro Asset Management.
According to Nick Wells, product and communications director, the fit between the style of the two asset managers was noticed at ABN Amro's Amsterdam conference earlier this year.
Despite the focused portfolio approach, Montag & Caldwell is a risk averse, fundamentals-based stockpicking house by nature. Wells said that in nine out of the past 11 years, the Montag & Caldwell model portfolio has outperformed the S&P 500 and the Russell 1000 Index.
David Watson, portfolio manager at Montag & Caldwell, said the group's narrow focus almost exclusively on large-cap US stocks and its policy of, wherever possible, running all its portfolios as mirrors of each other, has allowed it to achieve results that less capitalisation-specific houses struggle to reproduce.
Watson said Montag & Caldwell begin with a universe of 9,000 companies with a starting market cap for this universe of $3.5bn. However, initial quantative computer screens reduce this number to just 500.
Generally, Montag & Caldwell does not invest in companies with a sub $5bn market capitalisation but it covers companies between $3.5bn and $5bn simply because it is from this area of the market that tomorrows large-cap stocks will appear, Watson said.
Following the screening of the stock universe, Montag & Caldwell's team of eight research analysts run the remaining stocks through a proprietary risk-adjusted, discounted growth projection model, which creates a measure of present value that can be compared to the current stock price.
This risk-adjusted, discounted growth model, which uses growth projections covering the next 10 years, provides an indication of the upside that is offered by the stock.
This model is conservatively applied and the stocks in the top third of this slimmed down universe, those that are most promising, comprise a final universe of stocks from which the portfolios are selected. This universe numbers around 140 to 160 companies.
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