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aLLIanCE tRust eURopeAn eqUiTy FUnD
ASSET MANAGEMENT
ExPERIEnCE Counts
Fund highlights
•Concentrated portfolio of 25 to 35 holdings
•High conviction stock picking approach
• Long-term investment strategy: low turnover
•Creative and disciplined strategy
It taKEs ExPERIEnCE to BuILD a HIGH ConVICtIon PoRtFoLIo oF EuRoPEan CoMPanIEs FoCusED on LonG tERM REtuRns.
to create a concentrated portfolio of 25-35 holdings from the diverse range of companies and economies of Europe is no simple challenge. Head of European Equities, Fiona MacRae, has managed European investments for over 22 years and has developed a deep understanding of European markets. such knowledge can only be gained through many years of experience. Fiona and her team adopt a creative but disciplined approach to high conviction stock selection and aim to invest in their chosen companies for the long term.
Fiona MacRae, Head of European Equities, is the Manager of the alliance trust European Equity Fund. she is supported by a team of three dedicated European equity analysts. the structure of the team allows for flexible and quick decision making.
Fiona joined alliance trust PLC in 2008, bringing to the company a rare wealth of experience of European markets and companies. Her team is based in our Edinburgh office and can boast over 40 years combined investment experience. In addition, the team is able to call on the experience and expertise of our Global Financials and Global Resources analysts, as well as our well-respected in-house Economics Research Centre to assist in asset allocation and to identify market and sectoral themes.
Concentrated portfolio constructionFiona encourages a creative but disciplined approach to investing. a high conviction stock picking approach is the key to the fund’s long-term returns. Each member of the team is responsible for carrying out genuine long-term analysis within the sectors they cover. a pragmatic approach to building a concentrated 25-35 stock portfolio is adopted and Fiona looks for the fund to offer a diversity of investment themes. she is risk aware but not risk averse.
aLLIanCE tRust assEt ManaGEMEnt alliance trust European Equity Fund
the European Equity team maintains a balanced approach across cycles. Fiona describes the team’s investment rationale as generally pragmatic and occasionally contrarian. the team actively seeks those stocks which they consider are trading below their intrinsic value – for example, a company which has a good product, but may be driven by cyclical returns. they also look out for investments with solid management, which give a high rate of return on invested capital, generate cash flow, maintain a sustainable dividend policy and have a good / improving rate of return on equity.
conferences and aim to meet with the senior management of the companies in which they invest at least once a year. the team uses external and internal company research, further input from the Economics Research Centre and works closely with our Global Financials and Global Resources analysts in order to identify themes to assist in the stock selection process.
Team DiscussionEach of the European team members is responsible for carrying out in-depth analysis of their chosen stocks and produces a standardised template which details:
• thecompany’sbusinessactivities
• themajordriversandpotentialrisksofthe company
• thehistoricdevelopmentofthecompany’s results
• theassumptionsregardingthefuturedevelopment of the company
the formal investment process of the European Equity team is based around the 5 steps shown in the diagram above. It is driven primarily by a bottom-up stock selection approach although there are times when themes and top-down issues are equally important.
idea Generation and ResearchFiona and her team use macro-economic input from our Economics Research Centre, allowing them to create a portfolio with the ability to take advantage of evolving market conditions. the team initially discusses and agrees their view of the overall macro picture and the individual members are then able to concentrate on their designated sectors and analyse the stocks within them which they consider offer the best opportunities.
the members of the team engage with prospective investments across Europe through one to one meetings with company management, site visits or
the team’s investment process encourages creativity through open discussion and lively debate. team members regularly discuss portfolio holdings and potential new ideas. the analysts enjoy a positive environment to contribute ideas for possible inclusion in the fund. overall portfolio responsibility lies with Fiona MacRae, as Head of European Equities, but the analysts have a major role in stock selection.
Fiona and the team have regular formal meetings including a daily morning meeting to discuss markets and company results and a weekly meeting to debate stock templates. ad hoc meetings to consider portfolio matters are held frequently.
once the template is prepared, the team meets to discuss the findings. It is very much a team based discussion with the aim of ‘stress testing’ the idea. the conclusion may be that the stock does not meet its’ criteria, that further analysis is required, or that the idea is compelling enough to be included in the portfolio.
portfolio Construction and Monitoringthe portfolio is managed in a concentrated manner, with strong conviction in the team’s stock picking ability and a disciplined approach to both buying and selling stocks. the minimum size of holding is targeted at 2% of the fund. If the value of a stock falls below this level it is subject to review. a decision is then taken to either buy more or sell out of the stock. Median holdings tend to be between 3% and 4%. If a stock reaches its price target, it will be reviewed and a decision made whether to move the target upwards, to reduce the weighting or to sell out of the stock. sell decisions are primarily event or development led, such as changes in senior management, corporate activity or earnings disappointment and are not necessarily target price or valuation led.
the team monitors the risk profile within the portfolio continually and ensures a level of diversification through asset allocation and risk management. although all analysis and discussion is team based, ultimate decision-making lies with Fiona as Head of the team.
CoMMunICatIon: tHE IMPoRtanCE oF tEaM DIsCussIons
IdeaGeneration Research Team
DiscussionPortfolio
ConstructionMonitoring
LooKInG FoR tHE BEst IDEas
ContaCt us
For more information on alliance trust asset Management and our investment capabilities, please call us or visit our website.
www.alliancetrust.co.uk/assetmanagement
Edward troughton Managing Director, Business [email protected] 321000
tom Pearson Director, Head of UK Retail [email protected] 7710 8800
Past performance is not a guide to future performance. the value of investments and the income from them may go down as well as up and is not guaranteed. You may not get back the amount you invested. Whilst care has been taken in compiling the content of this document, no representation or warranty, express or implied, is made by alliance trust asset Management Limited as to its accuracy or completeness. alliance trust asset Management does not give financial or investment advice. If you wish to invest, you should read the simplified Prospectus including the terms and Conditions document carefully, particularly the section on Risk Factors. the simplified Prospectus and Full Prospectus are available by calling 0844 892 0349 or by writing to alliance trust asset Management Limited, Po Box 23910, 12 Blenheim Place, Edinburgh EH7 9aJ.
alliance trust asset Management Limited is authorised and regulated by the Financial services authority.
Alliance Trust Asset Management Ltd8 West Marketgait, Dundee DD1 1Qn.
09-541 (December 2009)
alliance trust asset Management Limited is a subsidiary of alliance trust PLC. alliance trust asset Management Limited is registered in scotland no. sC330862, registered office, 8 West Marketgait, Dundee DD1 1Qn; is authorised and regulated by the Financial services authority whose address is 25 the north Colonnade, Canary Wharf, London E14 5Hs firm reference number 479764; gives no financial or investment advice.
Investing for Generations – at alliance trust asset Management, we offer a focused range of investment solutions to meet clients’ needs. Managed by our experienced team of investment professionals using proprietary research, our unique long-term, high conviction approach to global investing has been tested and developed over generations through diverse market conditions. Furthermore, we benefit from the integrity, durability and strength of alliance trust PLC.
