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Continental climate

European equity boutique 2CG was set up by Charles Glasse and Chris Garsten in 2000, with their identical initials presenting a simple and memorable company brand. They initially shared an office with wealth manager Laing & Cruikshank, which was subsequently bought out by UBS, serving as its European expertise.

Both managers have a strong reputation in the relatively thin European equity space.

Glasse was head of M&G’s continental Europe team, managing the then S&P AAA-rated European dividend fund for over 10 years. Garsten ran various successful country portfolios at Credit Suisse during, including the popular Netherlands offering.

2CG remains a tight operation, with the two principles plus an accountant and Kevin Snell as head of sales and marketing. Snell joined last year as part of the group’s efforts to grow its presence in the market, having built up a strong industry reputation at firms including Resolution, HSBC and Barings.

Glasse and Garsten launched their debut fund in 2001, European capital growth with the latter as lead manager.

They followed up with an income-focused offering under Glasse in 2005, along similar lines to his dividend-focused vehicle at M&G.

Both are domiciled in Dublin and the firm also runs an onshore mirror of the European income fund on behalf of PSigma Asset Management. That group’s founders, Ian Chimes and Bill Mott, both worked with Garsten at Credit Suisse and have pursued a strategy of outsourcing to managers they know and trust.

The team also runs the Close Finsbury continental European portfolio on an outsourced basis.

At 2CG, the aim at outset was to offer a good-value product range, as shown by lower charges relative to most boutique peers. They have no front-end charges, for example, with clients mainly coming from the private client and top-end adviser channels.

The group also wanted to outperform without taking excessive risk and has largely achieved this since launch.

Both managers used a similar investment style before joining forces, basically looking for recovery stocks in the large-cap universe.

They seek out companies and sectors where things have been tough but something has changed that will allow margins to improve. Such triggers include industry consolidation, demand rising faster than supply or an improvement in the management team. This process is built on the fact that analysts tend to project past events into the future and often miss inflection points, with surviving companies in a troubled sector often going on to outperform.

Apart from these margin improvers, the pair will also sometimes buy stocks trading at a significant discount to fair value and occasionally under-rated growth.

Overall, they tend to buy cheap companies with a catalyst in place to drive improvement and sell expensive stocks with high margins, reinforcing the basic buy low, sell high investment mantra.

They highlight several reasons for considering investment on the continent, primarily that many of the biggest firms on a pan-European basis have similar eurozone/US client base.

Glasse says: “Many firms report in dollars and we feel it is unnatural when looking at large companies to restrict your universe to just those that happen to be registered in the UK.”

According to Glass and Garsten, compared with the US in particular, European companies are also cheaper than they have been in 30 years, Stocks are currently yielding more than government bonds for the first time since the Second World War and the continent offers strong global franchises at a 30 per cent discount to US counterparts.

In the background, the managers also highlight a key technical factor that should drive decent equity returns from European markets after a relatively poor last decade.

Insurance and pension funds on the continent have been selling down equities across the board.

Many of these companies are looking to rebuild their equity exposure, bringing a new and considerable source of demand to the market.

Fitting the boutique template, both managers are heavily invested in their funds and own the business between them.

They currently have no plans for further launches and would only consider more products if they identified a manager with a similar investment app- roach, most likely in another geographic area.

In total, the group has £40m under management.


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