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Rob Burnett’s long-term view of the financial sector is unusually negative. In contrast to Anthony Bolton, who at the recent Morningstar Investment conference suggested current valuations of banking and insurance stocks looked attractive by historical standards, Neptune’s chief financials analyst believes other sectors “have lower multiples and higher visibility”.

The difference is a philosophical one. Whereas Mr Bolton is a bottom-up investor with a value bias, Mr Burnett follows Neptune’s trademark growth approach.

“Financial services have seen ferocious growth over the last 25 years. In the US, they were 10 per cent of the S&P 500 in 1980 - now they are 26 per cent," he says. "That’s an astonishing expansion of market share. The tide has now turned and financial services will now shrink as a share of GDP. When these long-term trends change, they tend to last a while."

Besides his responsibilities on the global financials desk, Mr Burnett also manages the £483m Neptune European Opportunities fund. He says his aggressive underweight in financial stocks has been a key driver of the fund’s relative outperformance since the credit crisis started in earnest in October last year – as it has for Neptune’s whole range.

In the eight months to 2 June, Neptune European Opportunities returned 8.4 per cent, compared with a fall in the sector average of 0.8 per cent. This placed it second out of 98 funds in the IMA Europe ex UK sector.

This strong spell followed a difficult six weeks, however, as Mr Burnett zero-weighted financials in mid-August last year, shortly before their pre-bear rally in September. While the sector grew 2.6 per cent on average between August and October 2007, his fund consequently lost 0.03 per cent, placing it 85th in the rankings. “We were almost tearing our hair out,” he recalls. “From 16 August to the end of September was the toughest bit of relative performance we’ve ever had.”

But his high-conviction mis-timing of the bear market has proved a relatively minor blip in the fund’s long-term track record. Neptune European Opportunities is still the strongest performing fund in the sector over both three and five years.

The way Mr Burnett has handled the financial weighting in his fund over the past year illustrates Neptune’s broader approach, as developed by founder Robin Geffen in 2002. Every member of the investment team except Mr Geffen is responsible for one of the key MSCI industrial sectors. The industry experts then form a view on the pricing power of their sector over the next 10 years and make a weighting recommendation to the fund managers accordingly. The managers will usually accept their advice, ensuring sector allocations – and performance – across Neptune’s range are usually very similar.

The industrials team is currently keen on power-generation infrastructure, for example. “Riots are happening in India because of the prevalence of black outs," Mr Burnett says. "There’s a lot of creaking infrastructure out there that needs to be updated. It’s also an indirect play on the oil price, as the more it rises, the more efficient it becomes to invest in efficient power generation.”

A third reason to favour infrastructure stocks at the moment, according to Mr Burnett, is their independence from the global economic cycle, as projects are mostly government-sponsored.

The power generation theme has led to an overweight in industrials. The fund’s other key overweight is in materials. “Steel, industrial gas and chemicals make up the bulk of that,” explains Mr Burnett. But he is cautious about commodities in their raw form - "we prefer stocks to the exchange-traded metals”.

Although the Neptune approach revolves around sector weightings, Mr Burnett is keen to stress that stock selection within these is as valuation-driven as any bottom-up manager. “Sometimes the industry fundamentals are good, but the market has priced in the reality,” he admits. One example is fertiliser stocks, which Mr Burnett has now sold following aggressive price appreciation.

Neptune attaches great importance to its sell discipline. “Our ability to sell our top-performing ideas when we think fair value is reached is one of the key drivers of our performance,” says Mr Burnett.

A stock’s fair value is derived from projections of the company’s potential for cash generation. The investment team then looks for stocks priced at 20 per cent or more below their estimate. When a stock reaches fair value, the company’s position is reviewed, and if no change has taken place, it is sold.

Mr Burnett says this often happens very quickly. Unlike many managers, he is comfortable with high turnover, which typically ranges between 100-200 per cent. “We’re not looking to hold stocks for five years,” he says. “We believe turnover is to be relished, cherished and worshipped. That’s where you’re adding value. Our ability to outperform is in large part due to turnover. One of our abiding principles is that the market is not consistently wrong.”

At 4.6 per cent for the three years to 26 May, volatility is also high. Neptune European Opportunities is for investors who, like Warren Buffet, would rather earn a lumpy 15 per cent over time than a smooth 12 per cent.

Apart from the stark underweight in financials and a 10 per cent cash holding, Mr Burnett says his portfolio is positioned for economic recovery. “We’ve gone back to our old favourites like materials and industrials," he says. "We’re more bullish than we have been for a year. The one thing holding the market back is the oil price. If that corrects, then the equity market will rise because inflation expectations will fall, and the ECB could be less hawkish about interest rates. If the oil price continues to rise, equity will remain flat. It really is as binary as that.”