The fund outperformed the sector by 2.78 per cent over September making it the second best performing fund in the sector over this period. The funds good performance extends into longer time periods as well, being top quartile on one and three year performance returning 39.67 per cent and 24.23 percent respectively.
This compares favourably to the sector index which returned just 16.32 per cent and 7.12 per cent over the same time periods. The fund has made an impressive 92.31 per cent since launch on 12 May 2005 to 30 September 2009, outperforming its benchmark, the MSCI Europe ex UK index, by 43.41 per cent. Although the fund’s performance record is enviable, it did endure a torrid 2007, finishing bottom quartile and losing 9.16 per cent.
The fund is certainly living up to its name; the annualised alpha figure for the last three years is 5.18 per cent, which suggests the active approach of this fund is certainly paying off. The stated aim of the fund is to produce an excess return of three per cent over the benchmark rolling three year performance. This appears to have been happening over the last year as can be seen in the below chart.
Source: Financial Express Analytics
Barry Norris, who is rated by Trustnet as an Alpha Manager in recognition of his ability to repeatedly add value, has managed the fund since its launch and uses a bottom up approach to stock picking to identify companies trading at levels below their fundamental value. The fund relies on a mixture of in house and third party research, as well as a proprietary quantitative model to identify suitable investments.
Currently Norris is looking for recovery stocks, those that have been beaten down by the bear market on cyclical issues that should make excess returns as economic conditions normalise. He sees good opportunities in companies with operational gearing where analysts are predicting below average profit margins, he hopes to profit as earning forecasts are upgraded as the economy continues to recover.
He is also bullish on the outlook for the fund and European Equities as a whole. He feels that the recovery has already occurred and that it has been "V shaped". He also sees it as being sustainable: "Returns from the market low in March really need to be put into some kind of longer term perspective. Even now developed market equities still trade at the same level as in 1998 and would have to rise more than 65 per cent to get back to their 2007 (and 2000) peak.
Leading economic indicators – as opposed to lagging ones such as unemployment – are consistent with not only all major economies having already emerged from recession but with above trend GDP growth by year-end. This is likely to be the strongest period of synchronised growth between the US and Europe since 1975."