Investec Asset Management has pledged to retain Albert Morillo as manager of its European fund. This...
Investec Asset Management has pledged to retain Albert Morillo as manager of its European fund. This comes after it ended the management contract with Blackrock for its onshore and offshore pan-European funds.
David Aird, managing director of Investec, said the European fund is recovering after three years of underperformance. The fund was one of the most popular European funds in the late 1990s but has suffered from two main factors.
These were Morillo's continued focus on blue chip large cap stocks despite the outperformance of small and mid cap stocks in Europe in recent years. Aird said the market environment also moved against Morillo in 2003.
He remarked: "The fund selects large caps with strong balance sheets, good quality earnings and attractive valuations. But in 2003, it was low-quality earnings and high gearing which did well. All the characteristics Morillo avoids prospered.
"Morillo believes the market environment began to change in October 2004 and performance is now picking up. The fund has started to outperform as a result, as company fundamentals are rewarded and large caps have returned to favour."
As a result of this underperformance, the European fund has returned -20.53% over the past five years compared with -16.43% for the sector average and -13.51% for the FTSE World Eur Ex UK index, according to Standard & Poor's.
"We have no intention of ending the contract with Morillo," Aird added. "The two funds which we have brought in-house only have £11m in assets."
As a result of this decision, James Hand is taking over as lead manager of the pan-European funds. "We have moved the pan-European portfolios in-house so the global equities team can build up a track record for managing equities," Aird added.
Hand moved to Investec in 2000 from Schroders where he was a smaller companies manager. His appointment is expected to signal a change of approach for the fund, which had a larger-cap bias under Morillo. Hand will be assisted in managing the fund by Beverly Thomson and the global equities team.
The onshore Investec Pan European Equity fund has returned -5.8% over the three years to 20 June 2005 against a Europe including UK average of 12%.
Despite improved risk appetite
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