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Liontrust unveils European fund details

Liontrust has revealed details of the upcoming European value fund it is launching for Ross Hollyman and Rob Cornish. It is also considering launching a global income product.

The launch of the Ucits III long-only European fund is scheduled for March, subject to regulatory approval.

The fund will be domiciled in Luxemburg and have a similar strategy to the GAM Star European systematic value equity fund Hollyman managed before he joined Liontrust with his team last year.

“The fund we’re launching is very similar to what we did at GAM,” says Cornish.

The managers’ key beliefs are still based in the field of behavioural finance.

“The average investor tends to over-extrapolate trends in the future,” says Cornish. Investors then ’get sucked into’ that and valuations become too high compared to their fundamentals.

Although the investment pro cess will resemble their approach at GAM, the duo’s screening process has changed slightly as they have loosened the criteria for stocks on their conviction list.

“Company research is still very clearly defined in quality valuation and momentum,” Cornish says.

Cornish and Hollyman continue to focus on high quality pan-European stocks that are liquid and cheap but offer earnings growth and momentum.

Their model portfolio holds 70 stocks, but Cornish says that once the fund is launched they aim to have 70-120 holdings. They will usually be almost fully invested, with a cash level of no more than 3 per cent.

The managers prefer large or mid-cap stocks in the more defensive sectors. Cornish says they are cash flow generators and offer high dividend yield.

Some of their active bets against the fund’s benchmark, the FTSE all-world European index, include healthcare and telecoms.

“We have no real bias towards countries and we do keep the stock screening open towards emerging markets in Europe,” Cornish says. However, the model portfolio does not have any exposure to emerging Europe as companies in those countries do not meet the criteria.

Liontrust has previously said it wants to develop at least three new products for Hollyman, with the global income fund looking likely as the next launch.


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