A neutral investment style is the key to outperformance in any market, according to Glen Pratt, mana...
A neutral investment style is the key to outperformance in any market, according to Glen Pratt, manager of the £115.6m Fidelity Recovery Fund.
Pratt, manager of the Recovery unit trust since October 1998, said: "In my view, any thematic approach to stock selection can be flawed and runs substantial risk over certain periods of time."
He said the trouble with taking a sector or thematic approach is the fund is exposed to factors out of the fund manager's control.
The advantage of not adop-ting a particular style means that regardless of whether interest rates fall or rise, or the strength or weakness of the economy, the fund can continue to perform strongly.
He added: "If interest rates or the economic outlook changes quickly and there is a sector rotation in the performance of stocks, then it is difficult to achieve value. If neutral, then the fund should continue to perform well."
Rather than employing a particular investment style, Pratt captures Fidelity's best research ideas, regardless of their size or sector.
The research team has 50 analysts, which cover some 2,000 UK companies. There is an emphasis on meeting companies, with at least three meetings held each year with each of the portfolio's holdings.
Pratt said: "Any risk therefore is at the stock level, rather than at a macro level. In stock selection, we look for positive surprise in earnings or newsflow over following 12 months. Valuations are secondary, and analysed in terms of their peer group."
Two global vehicles
'Further plug advice gap'
Must appoint separate CEOs and boards
Advisers do come out well
Will report to Mark Till