Lead manager Rod Marsden has run this fund since launch in 2003 and boasts three decades of experience. Co-manager Paul Wild joined just ahead of the fund’s launch, but was no stranger to Marsden: He was part of his team at Sanwa Asset Management and this past collaboration strengthens their work. The managers rely on their joint analysis to find portfolio picks as JOHCM does not host a central analyst staff.
The managers start with a top-down approach to form the portf
olio. Marsden’s experience over numerous market cycles is key as few managers can consistently succeed in their top-down calls, and even fewer can run a top-down strategy in a successful manner. They take a macro view on sectors and then hunt for stocks which fit these views across the pan-European equity universe. They use brokers and third party research to help generate ideas and then independently assess companies to identify those with sustainable, high quality growth, earnings momentum, and free cash flows.
This process yields a portfolio that skews towards Europe’s largest companies. The managers have moved even higher up the market-cap scale recently relative to their category peers as part of a defensive move in the current market environment. They have also almost entirely avoided smaller companies this year, which has worked in their favour. As part of their top-down calls, the managers added to financials--especially in the UK--in mid 2008 as they thought valuations were attractive and the regulator was doing the right things to restore confidence. That financials weight has reversed course more recently, falling from 25.8% of equities to 18.8% at 31 October, but the fund remains overweight in the UK.
Those kinds of moves come with risk, but we believe investors are in capable hands here. Indeed, Marsden has guided the fund to a top third or higher return versus its Morningstar peers in every year, and he is on course to do so again thus far in 2008 as smart overweights in healthcare and telecom have helped the fund. (Like most equity offerings, however, the fund's absolute loss is sharp at 29.8% through 9 December.)
The fund’s experienced management and diligent investment approach at modest expenses, make it an appealing pan-European offering. We also like J O Hambro Capital Management as an organisation--the firm puts investing before marketing, keeps costs low, and sets capacity limits on its funds--all of which should work in investors' favour.
