By Robert Stock Originally launched as a private client vehicle, Singer & Friedlander Continental Tr...
By Robert Stock
Originally launched as a private client vehicle, Singer & Friedlander Continental Trust is now looking to market its frA-rated European Equity unit trust to an intermediary audience.
Singer & Friedlander uses a bottom up approach and is run by the head of the European desk Nick Williams with short term price target horizons and a disciplined, risk-averse style.
The £90.9m fund was launched in May 1990 and Williams, who joined Singer & Friedlander from Fleming Private Asset Management where he was an assistant fund manager, took over its running in 1994 from Richard Sargent.
In the last three years up to 23 August 2000 the fund achieved offer to bid returns of 83.3% compared to S&P's Europe excluding UK sector average of 83.9% ranking it 22 out of 91 funds. It is ranked 53 out of 102 on its performance in the last 12 months and 20 over the last three months.
The objective of the fund is the same as most of the unit trusts in the sector, which is capital growth through investment in European equities.
As a private client portfolio for S&F Investment Management it had a conservative brief. Latterly because that approach has paid off in terms of performance and low volatility, the group has moved to market it more broadly.
How has the marketing initiative worked?
We have retail and specialist consultant-type money often as part of a stable of investments with different fund managers within Europe. They choose one or two of our obvious competitors for high growth but relatively high volatility and they also like to balance that with the slightly different returns we provide, the low volatility returns we have provided over the years.
How would you characterise your investment style?
The investment style is very much bottom up with a risk aware approach and by risk aware we normally mean averse to the risk that you might find in certain sectors, such as biotechnology or deep cyclicals of one sort or another. We are averse to the risks of momentum in the markets and low liquidity in some of the stocks that we are interested in.
In the small to mid cap companies we aim not to own more than three day's trading volumes in that stock and maintain tradable positions. It is a disciplined approach to bottom-up investment such that we set price targets at the time of purchase and we at least take profits when those targets are hit. We do not have huge positions in any one stock, which means we are quite different to the benchmark in terms of our top 10.
How do you play sectoral themes?
We are very sector aware in terms of our current weightings but we are more interested in how the fund is performing and whether our current sector weightings are hampering or helping the fund's performance.
We are more interested in geographical weightings, largely because we have up to 40% of the fund invested in small to mid cap at any one time, which we decided would be our peak level because of the risk we would run against the benchmark.
How do you refine your universe into a manageable list of attractive stocks?
Our universe is theoretically any equity quoted and headquartered in Europe so we do not invest in an Israeli company quoted on the Neuer Markt because it should be in an Israel or an emerging Europe fund.
The qualitative and quantitative criteria we have mean we do not invest in companies where there is no turnover available and there are an awful lot of the smaller ones which are also low volume and effectively untradable. We do not invest in certain sectors or companies where we have no likelihood of meeting the management because they are not shareholder aware or friendly.
We do not typically invest in stocks that are subject to government regulation. We typically have underweight positions in utilities and tobacco stocks for example. These steps go some way towards cutting down the original universe of more than 5,000 companies.
We screen the ones that are left on a quantitative basis to start off with just in terms of their weightings in the market to see whether they are investible. Then we slowly whittle that down to the ones that look attractive to produce a list of around 250 stocks which changes as some drop out and others come in.
How wide do you prefer to run a portfolio?
The portfolio has 55 to 75 stocks as an unstated target range. What we are trying to do in having an upper limit on holdings is to make sure we don't fall asleep holding a stock and get stuck with something, forget that it is in the portfolio and let it sit there. It is also a question of the value of having something less than a 1% unit. Even if it goes up 50% it is not going to make much difference to the fund's NAV.
What are the greatest difficulties you face as a European fund manager?
My biggest difficulty is getting to see the companies as often as I would like to. I go on trips to Europe about seven times a year and the management of my holdings come here on a regular basis. I also have an assistant who goes on trips for me. The other difficulty is keeping abreast of the 5,000 stocks in my universe.
What are your sectoral weightings right now?
In terms of sectors we are underweight telecoms because I cannot see where the earnings growth is coming from. They are having to pay so much for UTMS licences and they were overvalued at the beginning of the year, and frankly I am not sure the management of all of them is all that I would want it to be. It is a strategy that has stood us in good stead year to date.
The next question is that we have to look at increasing our weightings if these things come back to more sensible valuations. We are 9% compared to 12% of the index. We do not have Deutsche Telekom or France Telecom.
We have a neutral weighting in financials, overweight in insurance companies and underweight in banks. We are slightly under
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