Artemis’s Niznik admits to medium-term ‘struggle’

Mr Niznik, manager of the £289.8m Artemis UK Smaller Companies fund, said its performance had lagged in months where the market had bounced.

“The way I run money tends to struggle in bullish years and do better in negative times,” he said.

The fund has delivered top-quartile returns over the short term, ranking second out of 58 companies in the IMA UK Smaller Companies sector over the one-year term to January 20, according to Morningstar.

But it suffered a loss of 4.4 per cent over five years, compared with a sector average gain of 5.5 per cent.

Mr Niznik said 2011 had “suited [his] investment style” while the previous two years had not.

He added he would rather have “modest, plodding returns” than have a fund that would race ahead with bouncing markets but fall sharply in a downturn.

The manager said he prefers to keep the fund “fully invested” and holds cash levels close to zero even when he thinks markets will go down because he believes investors have put money into a fund to be utilised rather than held defensively.

But Mr Niznik said he rarely holds more than 3 per cent in one stock, with an “absolute maximum” of 5 per cent to diversify his portfolio and reduce volatility.

“The chances of one small cap blowing up and causing problems is higher than large caps. That’s why I don’t allow any one stock to get too large. No matter how much I love my top holding, I’d sell it down,” he said.

The manager tipped companies with a niche market, such as Ocean Wilsons, which controls more than half the Brazilian tugboat fleet. He said offshore oil developments in Brazil would create demand for tugboats to transport between offshore rigs and mainland harbours, making the company an “attractive proposition”.

He added that he hoped over a three to five-year time horizon that the “value of companies will assert themselves” and result in steady gains.

“Whether that’s enough to trump a euro collapse, I’m not clever enough to know,” he said. “But I’m as confident as I can be without having a big macro call.”

While Mr Niznik invest on a stockpicking basis, he said he is “conscious of macro-drivers and careful not to have too many eggs in one economic basket”.

He said his primary macroeconomic concern in 2012 is the debt burden of the Western world, particularly the sovereign debt crisis in Europe, and how government would reduce bloated levels of debt.