Both funds are managed by Dalton partner and head of equities Glen Pratt. He joined Dalton in 2005 and has 13 years’ investment experience with Newton and Fidelity.
Like the onshore fund, the new fund will take a high conviction investment approach to a concentrated portfolio of 30-50 companies. It will invest in stocks where positive changes within those companies are likely to drive prices at least 25 per cent higher over the next two years.
Pratt will look at companies that are undervalued and under researched but have sustainable earnings growth. The cashflow of these unrecognised growth opportunities will grow faster than the market expects but the companies are often small-mid cap companies that are not covered by analysts. They tend to have higher risks than bigger companies that provide a lot of information to the market.
Pratt will also exploit price anomalies, focusing on companies where valuations are lower than their intrinsic value. Companies where returns are below average but where there is a catalyst for change that the market has not spotted will be considered. This catalyst may be due to changes in how the company is managed, positive earnings revisions or restructuring which will make the company more efficient.
As a company, Dalton believes funds which hug an index will not produce the best returns, The managers believes the underperformance of growth stocks over the last six years will provide good stockpicking opportunities.
The ability to access Pratt’s investment skills offshore may be appealing to clients who like what he has been doing in the onshore fund. However, the concentrated portfolio means that the manager has little scope for lapses of judgement as the performance of every holding will count. This makes it higher risk than the average UK equity fund.