The Calvin Vaudin-run vehicle has produced a compound annual return of 35%, some 16% above its benchmark
The Ashburton European fund not only invests in individual stock positions, but other funds as well. Currently the fund, managed by Calvin Vaudin, is favouring commodities and salmon stocks. Richard Robinson assists Vaudin in running the fund, which has produced a compound annual return of 35% versus its benchmark MSCI Europe of 19% over the last three years.
Robinson says: "The fund is overweight in oil. The industry has suffered considerable under-investment since the mid-1980s and, combined with the high oil price, drilling capacity has been extremely tight."
Due to this, Robinson is now focusing on Norwegian rig stocks, such as Seadrill. He says the company is building additional rigs to capitalise on the current supply and demand imbalance in the market.
Seadrill's decision to invest in rigs was unusual because many similar companies have been reluctant to build further rigs because of cost and the length of time (up to four years) they take to complete.
As a result, it is benefiting from increased hire rates. For example, renting a semi-submersible rig in October 2004 would have cost $200,000 (£107,000) a day, now it costs over $500,000.
Another company Robinson favours is steel and alloy tubing producer, Vallourec. Its products are used by the oil and gas refining, petrochemicals, construction and automobile industries.
Robinson notes Vallourec has concentrated many of its manufacturing facilities to cheaper labour areas near or in markets such as China,Indonesia, Singapore, South Korea and Brazil.
In the mining sector, the fund has invested in zinc producer ZincOx. Robinson likes this company because it has developed a processing approach, which allows zinc to be recovered from unconventional oxide, for example non-sulphide sources.
Normally companies would have to dispose of non-sulphides, which are highly toxic, in an environmentally acceptable way, which can prove costly. However, ZincOx is turning a cost into something that provides revenue, he says.
One feature of the fund is its ability to invest in other funds. Robinson explains: "The portfolio virtually always invests on an individual stock basis.However, we took the decision to gain some exposure to emerging Europe.
"Naturally, with the amount we wished to commit to this area, we realised individual stock selection would not give us the required spread we needed to benefit from the whole region or, more importantly, reasonable risk parameters.
"We therefore decided on this occasion to use a specialist fund and purchased the Longbow fund run by Bonfield Asset Management."
Although Robinson is underweight consumer staples because the domestic economy is still in the doldrums, he favours salmon stock Pan Fish.
He prefers this stock because of its appetite for growth following recent acquisitions, including Fjord, which have helped boost its market share.
Robinson believes demand for salmon will increase following Russia's decision to lift a ban in April on Norwegian fish, which was put in place in January this year after a high level of metal content was found in the salmon.
Decisions for the fund are primarily made at sector level, according to Robinson, with particular emphasis placed on the global economic cycle. He looks for stocks that show growth at a reasonable price.
The fund has around 50 positions, with no more than 5% allowed to invest in any one stock. Stocks are reviewed if they underperform the MSCI Europe index by 15%.
Marcus Brookes appointed CIO
In association with Professional Adviser
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