I believe that managing director and chief investment officer Robin Geffen has done a superb job in building a structure where inexperienced managers are mentored closely by those with considerable experience.
This approach may have already produced Neptune’s first homegrown star in Rob Burnett, who has taken the Europe ex UK sector by storm. His European opportunities fund is comfortably the best-performing fund over three years in this highly competitive sector.
One way to tap into Neptune’s success would be to look at one of its three global funds. Global alpha is a multi-asset vehicle and balanced invests at least 50 per cent in the UK but it is the global equity fund that I want to focus on this week. It is the purest expres-sion of Neptune’s process and invests in large and mid-cap stocks with a free float of at least $1bn. The fund has an information ratio of 1.6 with a tracking error typically in the range of 8 to 12 per cent.
I mention the tracking error because I know some analysts are besotted by them but I have to say I am more interested in returns. Neptune global equity has consistently been in the top decile of the global sector since it was launched at the end of 2001.
Unlike so many other boutiques, Neptune’s investment approach is very team-driven with no fixed style. It is looking to outperform throughout the economic cycle rather than being fantastic at one point and falling like a stone later. The global equity fund will always invest in at least seven of the 12 global sectors to ensure a minimum level of diversity and can use cash if it wishes.
The top-down global view comes through sector analysts and two experienced economists who input a macro view. I want to stress that this is not a fund that punts the latest stockmarket fashion but instead seeks to find the strongest sectors and the best blue-chip stocks within them. Basically, the team try to formulate a global view after attempting to understand where they are in the business cycle. They then drill down to stock selection in their favourite sectors using a proprietary research system and their own valuation models.
The fund is concentrated down to their best 40 to 50 global stock picks. It has a big weighting in emerging markets at 35 per cent while Europe makes up 21 per cent. There is only 14 per cent in North America and 13 per cent in the UK.
Geffen points out that global growth is strong because of emerging markets, noting that in China the majority of oil demand is industrial and not related to transportation like it is in the West. China’s savings rate is something in the region of 29 per cent and the economy is hugely unleveraged despite the rise in the Chinese market this year. Geffen still feels there is plenty to go for but despite this bullish attitude he does not buy into new issues or punt smaller companies.
The fund is 250m in size and likely to be capped at 500m. It is everything you want from a global equity trust. It is not passive, it sorts out the asset allocation, finds the best stocks and moves around accordingly.
It has a solid process with a good team behind it – just what many people would like from their investments. I expect this fund to reach its 500m target sooner rather than later, so do not hang around.
Mark Dampier is head of research at Hargreaves Lansdown.