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Liontrust screens stocks to beat index

Liontrust Asset Management is looking to bridge the gap between passive and active fund management with an innovative quantitative-screened index fund.

Indextra will track the FTSE 100 index, omitting any stocks which fail either of two quantitative tests.

The first screen tracks rolling three-month earnings&#39 forecasts from a range of analysts, taking note of whether a stock has received more upgrades than downgrades and eliminating those which fall into the latter category.

The second screen follows share price momentum, analysing how well a stock is doing relative to its competitors. Stocks falling into the bottom two quintiles of the peer group will be stripped out. The aim is to produce a fund which consistently outperforms the index or at least eliminates the element of underperformance that every standard tracker delivers.

The two tests are used as preliminary screens for Liontrust&#39s actively managed fund run by William Patterson. The new fund will be priced somewhere between a tracker and active fund, probably at around 1 per cent a year.

Marketing director Jonathan Harbottle says: “The question we are looking at is, if we took out all the stocks which are eliminated by these screens, would the balance as a group outperform the index? Early indications are that it would.”

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