“So when the market goes one way or the stock goes one way or another you ought to have a much better feel for why it has reacted the way it has and you can therefore make a more measured judgement.”
While the number of holdings has remained constant one important change in the fund was the gradual move towards American firms and away from European ones. The fund now has about 80% of its assets in American and Bermudian – most of
which are dollar-based – firms.
Mr Foster finds these firms more transparent. Also many of the firms in the US focus purely on underwriting insurance. They do not get involved in other things like stockmarket investment, pension schemes and property development.
The fund has an emphasis on the property and casualty insurance sector. It has been the strongest focus since the fund launched and is likely to remain so for at least the next year or two.
The value tilt in the fund is likely to have helped its performance over the past few years. Since 2000 the only negative annual return for the fund was in 2002 when it still outperformed the category average by over 12%. With growth firms returning to favour this year the fund has suffered relative to other funds in the Finance Sector Equity category but it is up 12.5% in the year-to-date.
Other funds in the category tend to have a broader remit than this fund. They invest in a wide range of financial services firms, not just insurance companies, which is likely to affect performance comparisons.
Nick Martin has assisted Mr Foster for just over two years. The two operate a stockpicking approach, looking for businesses they like and setting entry and exit prices for investment. The fund is about £70m in size with almost all investments over £1m each.
The volatility of the fund’s returns over the past three years is much lower than its peers.
Yet because of its concentrated focus within a narrow sector this fund is more likely to be a specialist investment than a core holding for many investors.
