The performance record of the fund is too short to have earned the fund a Morningstar rating but last year it outperformed the average of its category – Europe Mid Cap Equity – and the category’s index, the MSCI Europe. However on absolute terms the fund fell over 16% but it is up about 4% so far this year.
The growth in the fund’s name refers to its objective of capital growth rather than a strict emphasis on investing only in
so-called growth companies. Mr Pease said he does not mind buying cheap shares and currently holds a number of high yielding shares in the fund.
Mr Pease looks at four basic criteria when evaluating a firm’s shares: the business itself, the management, the financials of the firm and the valuation of the shares. He prefers service companies to commodity-based businesses, such as manufacturers. He said service companies tend to have greater client retention and higher barriers to entry.
He holds a lot of his own money in his fund and looks for the same commitment in the management of the firms in which he invests. He said that managers with a significant stake of their own money invested in the company tend to have interests better aligned with those of the shareholders.
In terms of risk Mr Pease said: “If you look, the average P/E [price earnings ratio] of the fund is below the market, the average growth rate is above the market, the average balance sheet is stronger than the market, the cash generation is certainly stronger than the market, the percentage [of the firm] owned by the management is definitely a lot higher than the market.
“All those contribute to a lower risk.”
The fund, which New Star benchmarks against the FT Europe ex UK index, currently has 72 holdings with the top ten comprising about 30% of the portfolio. About 24% of the fund is invested in Irish firms but they tend to have a global or European reach. It has a small investment in the UK – just over 2% of the portfolio.
