F&C launches Europe ex UK small cap fund for Cosh

The group said eight of the 15 funds in the European Smaller Companies peer group had exposure to UK stocks meaning there was pent-up demand for a fund with holdings only on mainlaind Europe.

Mr Cosh also runs the group’s European Assets Trust but the manager said while there might be a similarity in the stocks held between it and the new fund, one of the trust’s main appeals was its 6 per cent dividend. The open-ended fund will not target income.

Mr Cosh also runs a Luxembourg-domiciled European Small Cap Sicav, but this does have exposure to UK companies.

The onshore fund will hold between 40-60 stocks which will be among the smallest 25 per cent of the European market.

Rob Thorpe, head of UK sales for F&C Investments, said there was a “lack of talented managers running funds which are ex-UK”.

He said a founders’ share class had been launched at a lower price for seed investors but that the £50m capacity for the share class had “largely been committed” already. He added the fund would definitely launch on Monday with £30m in and should be at £50m in the first couple of months.

This means other investors are likely to be charged the rates of the standard unbundled share class, which Mr Thorpe said is projected to have an ongoing charge of 95 basis points.

The manager, whose alternate on the fund will be Lucy Morris, also said he was running roughly €950m (£678.1m) across all his products but based on the market conditions now, recent capacity calculations showed he could run up to €1.6bn. He added this would be assessed on an ongoing basis.

Mr Cosh said his process focused on capital preservation, something which he said had helped his Sicav perform well.

In the past five years to the end of December 2014, the Sicav’s maximum drawdown was 18.4 per cent compared to 26.2 per cent by the benchmark index, data compiled by F&C showed.

The Sicav has produced a top-quartile return of 74.3 per cent during Mr Cosh’s tenure since March 2011, vastly greater than the 34.5 per cent rise in the Euromoney Smaller European Companies Including UK index, according to data from FE Anlaytics.

The European Asset Trust’s shares have also risen 133 per cent since Mr Cosh took over in October 2011 compared to a 24.3 per cent rise in the benchmark index, data from FE Analytics shows.

In terms of sectors, Mr Cosh said his largest exposure was to financials at present and the area still interested him.

“Financials is not an expensive area,” he said. “It is a cheap part of the market and there are some good businesses distinguishing themselves.”

Mr Thorpe said the fund would not have a hedged share class at launch but this “would be looked at” in line with demand.