The Indocam Mosais UK fund is managed by Alessandra Gaudio, who is based in Paris. The fund is run w...
The Indocam Mosais UK fund is managed by Alessandra Gaudio, who is based in Paris.
The fund is run with a growth bias. Gaudio selects broad themes and then picks stocks within these using fundamental disciplines.
She commented: "It is clear the communications industry is growing. We believe this sector and those associated with it are the best areas to find growth at present. We started off investing heavily in telecoms but have since expanded our area of focus to cover new technology linked to the telecoms theme. As a result, we have invested in telecom equipment companies and operators, as well as IT services and media companies, particularly those working with data transmission."
One of the fund's best performing stocks this year has been ARM holdings which makes microprocessors for mobile telephones.
"We have also invested in TeleWest, the cable company. Telecoms are increasingly linked to cable companies that can transmit data at a higher speed and we think this trend will develop further in the future."
Despite this primary focus, the fund is broadly diversified to control risk, containing around 75 stocks.
Gaudio remarked: "Although my approach is broadly thematic, the tracking error of the portfolio is not particularly high against the benchmark. It is important to control the risk/ reward characteristics of the portfolio.
"A subsidiary element of the investment process is tactical asset allocation, playing market trends. For example, we were overweight oil stocks early in 1998 and we also followed the cyclical rebound. At the start of the year our tactical allocation was to banks and oil stocks to follow the cyclical rebound."
While she remains positive on the long-term growth prospects for the telecoms and IT sectors, Gaudio is currently taking some profits on individual stocks because of concerns about potential volatility.
"ARM remains a favourite stock, but the level of holding in the portfolio has risen from an initial 0.5% to around 1.3%. We see it as important to top-slice these holdings from time to time."
The fund's potential UK universe comprises around 250 stocks. This is made up of the FTSE 100 plus another 150 stocks that are then examined on filtering criteria, including liquidity, growth and a qualitative assessment. This then gives a UK 'eligible list' of 150 stocks from which the portfolio stocks are selected. The fundamental process is based on intensive research and company visits, according to Gaudio.
"Having ascertained the sectoral plays we want, we then examine individual stocks, focusing on a number of factors including quality of management and profitability. If the company seems interesting then we will investigate further. Our team (fund managers and buy-side together) make more than 300 company visits per year to the companies in our European universe."
The results of company visits, as well as inflows of company news, are discussed by the team on a regular basis and feeds into the managers' ranking of the eligible stock list.
There is a strict buy and sell discipline with weekly meetings to update rankings of stocks on the eligible list. Within these meetings a team decision prevails over individual recommendations.
Gaudio commented: "We also believe speed of implementation is important and all portfolios must be brought in line within one week."
An electronic order book system is used to provide portfolio guideline monitoring and provides a daily trade statement.
Tracking error and performance are carefully monitored via monthly BARRA analysis to assess tracking error . There is also weekly performance monitoring and quarterly attribution analysis.
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