The fund will be managed for Collins Stewart by Walker Crips Weddle Beck’s Stephen Bailey and Jan Luthman. Bailey and Luthman currently run a UK growth fund for Walker Crips and the Collins Stewart fund will be a Dublin-based mirror of the existing onshore fund.
The fund will be based on a top-down analytical approach to stockpicking. Bailey and Luthman regard as less volatile than a pure bottom up stockpicking approach because it enables them to identify over time which companies are going to benefit from the wider economic trends. On the flip side, this approach also enables them to identify which companies are likely to suffer so these can be avoided.
To get to a short list of companies, they will look at factors such as the credibility of the management teams, the financial strength of companies because those who outlast their competitors will offer better products, and valuation. Of particular interest are valuation anomalies where the company is under or over valued, shifts in commercial strategy and hidden signals where important information is said between the lines in annual reporters.
Overweighted sectors include life assurance because the political and regulatory environment is improving, which has led to better products, distribution and controls. Underweighted sectors include banks, as the Walker Crips duo note that HSBC has a growing exposure to sub-prime debt and Barclays has growing exposure to high-risk markets.
While a UK growth fund may not be at the top of advisers’ wish lists because there are already enough funds out there, this fund may have appeal because many of its competitors are pure stockpicking funds. With the UK economy slowing and this yet to be reflected in the stockmarket, a macroeconomic approach could be useful in unearthing investment opportunities. However, as an offshore fund, it may attract more interest from European investors.