14th June 2013
Chris Rice, the star manager of the £1bn Cazenove European fund has announced he is leaving the firm, after 10 years service, next month.
Under Rice’s tenure the fund returned 37% over the past 12 months. Over the three and five years it has achieved 25% and 22% respectively. With no immediate plans to take the reins of another portfolio elsewhere, investors could rightly be asking whether they should stay or seek out another European fund elsewhere.
Following the announcement analyst group Morningstar OBSR has placed the Rice’s former funds’ ratings under review. Both funds previously held a Morningstar OBSR Analyst Rating™ of Silver.
Adrian Lowcock, senior investment manager at Hargreaves Lansdown, says: “Chris Rice has a unique and distinctive approach to investing which is not easily replicated, however management of the fund will be taken over by Steve Cordell who has over 19 years’ investment experience and worked with Chris at HSBC prior to joining him at Cazenove.
“This gives existing investors continuity and we do not suggest they need to sell at this time. For new investors it makes sense to adopt a wait and see approach, particularly as the departure follows the merger of Cazenove and Schroders. There are a number of excellent managers in the region from which to choose.”
Below Lowcock looks at three alternative managers for investing in Europe.
Leon Howard-Spink manager of the Schroder European Alpha Plus fund
Howard-Spink does not see it as his job to predict where markets are heading although he acknowledges looking at the macro environment has become more important over the last five years. Instead he looks for consistent returns which he hopes to achieve through the diversity of his holdings. He does not want any one style bet to dominate performance. His key barometer of a company is pricing power. Howard-Spink is looking for companies that dominate their market or their close competitors if they are going to take over the top spot. He looks for growth companies which are growing at a rate ahead of GDP i.e. structural growth with good balance sheets and return on capital.
Richard Pease manager of the Henderson European Special Situations fund
Pease believes at some stage attention will return to the high levels of debt remaining in many European countries. He anticipates investors could be in for a bumpier ride than many expect. Key to his selection criteria is high-quality management, niche products and high barriers to entry, so the company’s market share cannot be easily eroded by new competitors. He seeks businesses who have continued to grow market share in their specialist niches. Pease has over twenty years’ experience investing within European equities during which time he has hugely outperformed the index with performance being dominated by stock selection. He has been successful in selecting companies which have continued to grow regardless of the political and economic environment.
Barry Norris manager of the IM Argonaut European Alpha fund
Norris has more of a macro-economic approach to investing, looking at the landscape and outlook for growth before identifying which stocks to invest in. Similar to Chris Rice he pays close attention to the economic cycle. Norris believes the ECB has done nothing towards stimulating economic growth. The economic environment will remain difficult so stock selection has become even more important. He is only interested in buying into areas with healthy earnings growth potential and in strong relative earnings momentum. He also believes owning world-class international companies with good visibility of earnings should be an excellent long-term strategy.