Gideon Smith, deputy CIO at Axa Rosenberg, describes the firm’s approach to investment as a quantitative one “based on traditional, fundamental analysis of stocks in a very detailed way”.
This approach has proved successful in the Axa Rosenberg Eurobloc Equity Alpha fund, which according to performance data from Standard & Poor’s was top performer over three years in the euroland category.
Launched in 1999, the fund’s investment objective is to outperform the MSCI EMU benchmark on a rolling three year basis by investing in a diversified portfolio of undervalued stocks with similar risk characteristics to the benchmark.
The managers focus on selecting individual stocks as opposed to making regional or sector bets, as Mr Smith explains: “We are bottom-up stock pickers so the vast majority of the performance we manage to get is really down to stock level. When you look at the country and sector breakdowns, the portfolio looks very much like the market.”
Its quantitative approach allows the investment team to look at 2200 stocks within the euroland and pick up those with the most potential for capital appreciation.
Five of top 10 holdings of the fund are financial services stocks, “but you shouldn’t read that as if we had any particular views on financial services, it is just a reflection of the market”. Both the benchmark and the fund have a 20 per cent exposure to this particular sector, so the top ten holdings do not reflect the nature of the whole portfolio as Mr Smith explains.
Wide choice of stocks
“The fund holds a total of 147 different stocks, which is possibly somewhat unusual for an active manager such as ourselves. This reflects the idea that we are able to leverage the quantitative process that we have in order to make the most of all ideas.” This approach allows them to have many small bets in the portfolio, “so, in many ways, looking at the top 10 stocks alone doesn’t necessarily give you the full picture of the portfolio.”
Mr Smith says that 2006 was an interesting year for equity investors. “From our perspective we found that many of the themes that we saw in the euroland play out in other parts of the world, clearly in the UK and broader pan-Europe,” he says.
Regarding the recent market volatility he says that events like this don’t impact on the way they manage their portfolios. “We are very, very focused on individual stocks within the portfolio and we are not trying to time markets per se. We are looking to invest in what we consider to be undervalued stocks” he explains. “Essentially when the market does pull back, like it did at the end of last month, we don’t change the way we do things.” However, he adds, volatile periods do provide opportunities for potentially picking up stocks cheaply. He adds: “A little bit of volatility is never a bad thing if you are looking to try and outperform the market.”
The fund manages just under €2.5bn in assets coming mainly from European investors wanting to gain exposure to euroland.
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