Rathbones has launched its Recovery fund, the product of a merger of its Smaller Companies and Special Situations funds.
The group’s newest offering is managed by Julian Chillingworth, the chief investment officer, and Marina Bond, a small- and mid-cap specialist. Alan Dobbie will assist with large-cap European stock selection, which may account for up to 20% of the portfolio.
The fund has 50-60 holdings and is £65m in size.
Chillingworth says the vehicle aims to capitalise on improvements in the economy and corporate earnings. The managers will use both top down and bottom up analysis to select stocks, which may include recovery stories from consumer facing sectors such as retail. The team is also considering the property sector, with firms such as Land Securities eligible for inclusion.
Bond says she is seeking macro, structural, management or financial recovery stories, where companies are cleaning up their balance sheets. “We have been seeing lots of management team recovery stories in the small- and mid-cap space,” she says. “The key is being able to identify the catalyst for change. With a situation in which a company is mending its balance sheet, you have to be sure it won’t raise capital and then breach its covenants again anyway.”
The European part of the portfolio will include high conviction ideas to which the managers cannot get enough exposure through the British market. This includes Nokia, a telecoms firm, that Dobbie says is difficult to play in the domestic market.
Later holdings may include Norwegian oil services companies, German and Swedish engineering firms and European financials, which are less damaged than their British counterparts, Dobbie adds.
Follow our Tweets!