An unsung hero is Alec Foster, manager of the Hiscox insurance portfolio unit trust, because of his investment performance as well as his stockpicking acumen. He has managed to outperform the insurance sector benchmark and the FTSE All Share index by substantial margins since the fund was launched in late 1998. Since then, the fund has risen by around 40 per cent, the benchmark by around 10 per cent but the All Share index has fallen by about 5 per cent over the period.
Foster believes that the outlook for insurance companies is outstanding, particularly for property and casualty insurance in the US. This is partly a result of world terrorism, which has resulted in major companies making sure that they are fully and comprehensively insured. This, in turn, has meant that insurance premiums are higher than they have been for some time.
Foster believes this position will continue to remain strong over the next two or three years. It is expected that the property and casualty sector will show profit growth of between 15 and 20 per cent over the coming year. This is a level of growth that cannot be matched with any certainty in most other sectors of the stockmarket.
In the UK, which accounts for around 20 per cent of the fund, Hiscox's total exposure is investments in Lloyds' companies, based on Foster's belief that many will surprise the market on the upside in announcing their profits and dividends.
The fund has no exposure to UK life companies but does invest a small proportion of the portfolio in some of the betterrun US life companies. There is also a holding of round 6 per cent in Warren Buffet's company, Berkshire Hathaway.
This fund should certainly be part of all bigger equity portfolios for at least the next two or three years.