Global Asset Management has established the GAM star UK dynamic fund for new investment director Ross Hollyman.
Hollyman joined GAM in August. He spent 12 years at JP Morgan Fleming, where he had been a fund manager since 1997.
The GAM Star UK dynamic fund is a Dublin-based Ucits containing between 50 and 100 stocks that represent Hollyman's best ideas. The stocks are selected on a bottom-up basis according to three factors – positive momentum where earnings' forecasts are being revised upwards, low valuation and quality earnings – rather than profit forecasts and speculation about the economy.
Around 1,000 stocks will be screened to identify suitable stocks. Hollyman will look at positive momentum among companies with low valuations because investors tend to underestimate these companies. In his view, the more popular stocks that are expected to perform well tend to be sold sharply when their share prices fall. Meanwhile, less fashionable stocks of which the market has low expectations may pleasantly surprise investors.
Hollyman will also assess a company's cashflow and its use of capital as part of his assessment on quality earnings. Many of his chosen stocks are likely to be small or mid-caps.
This fund's focus on small and mid-caps may achieve a good level of return for investors as these companies tend to be most affected by the domestic economy, which is showing signs of improvement. However, if interest rates continue to inc-rease after the recent rise, this could have a negative impact on the growth prospects of some companies.
According to Standard & Poor's, the GAM multi-UK fund is ranked 37th out of 144 funds, based on £1,000 invested on a bid-to-bid basis with gross income reinvested over three years to November 3, 2003.