Liontrust Asset Management launched the UK-domiciled Liontrust European Absolute Return fund managed by Gary West and James Inglis-Jones.
Liontrust Asset Management launched the UK-domiciled Liontrust European Absolute Return fund managed by Gary West and James Inglis-Jones.
The fund uses the same investment process, the Cashflow Solution, as the Guernsey-registered Liontrust European Long/Short fund, which was launched on 6 December 2006 and is available for professional investors only.
The aim of the new fund is to make money for investors over the medium term in both rising and falling markets through applying the Cashflow Solution process.
The investment philosophy is based on the mistakes people make forecasting, particularly profits forecasts made by company managers. Investment decisions taken by company managers to support their forecasts often create profit expectations in the stock market that are unsustainable.
The objective of the Cashflow Solution is to exploit the opportunities created by the failure of company managers to forecast profits accurately.
West and Inglis-Jones (pictured) believe the best way to exploit these investment opportunities is to focus on company cash flow. Cash flow reveals valuable information about the scale of a company’s investment decisions. Strong company cash flows after investment spending are a good indicator of strong growth in future reported profits. Conversely, weak cash flows often predict a collapse in reported profits.
The fund managers create a list of companies with strong cash flows that they believe are likely to beat investors’ low profit expectations and companies with weak cash flows likely to disappoint on investors’ high profit expectations. West and Inglis-Jones then select the best long and short positions for the fund.
The fund will have 50 to 80 positions with a typical position size of one per cent to five per cent. Each holding must have a capitalisation of at least EUR1bn at the time of investment. The fund will have gross market exposure of 100 per cent to 200 per cent, volatility of around eight per cent and the net of the fund will remain close to zero and kept within a range of + or -20 per cent.
There is a minimum investment of GBP1,000, an initial fee of up to five per cent and an annual fee of 1.5 per cent. There is a performance fee of 20 per cent on the outperformance of a cash hurdle (three month GBP Libor) on a high watermark basis.
Rob Page, marketing director at Liontrust, says: ‘The launch of the Liontrust European Absolute Return fund provides the retail market with access to Gary and James’s long/short expertise. It is their proven ability and experience of shorting stocks through successfully running a long/short fund that differentiates Gary and James from some of the other managers of absolute return funds in the market.
‘We believe the fund can be a core holding for investors as Gary and James have shown they can generate positive returns through a market cycle. This is a key requirement for many investors because they are generally still risk averse and continue to worry about future volatility in stock markets.’
