Neptune’s Rob Burnett has urged investors not to write him off in a bullish defence of his £668.6m European Opportunities fund, after it was dismissed as a ‘sell’ in a critical broker note last week.
The manager told Investment Adviser, “I would encourage investors to buy as I am very confident”, adding that he was “personally buying the fund now”.
The remarks come after Bestinvest research slapped the fund with the firm’s one-star rating, saying the manager had “struggled to adapt” to the changing market environment and the fund was characterised by “significant drawdowns”.
The fund gained 6.9 per cent in the past five years versus an IMA Europe excluding UK sector average gain of 15.5 per cent, according to FE Analytics.
Mr Burnett said: “We were quite negative on the European sovereign crisis from 2009, through to 2010 and into 2011 which is why we beat the index in those years.
“The one thing that helped us in those years was off-benchmark positions in the US, but these hindered us last year. We don’t hold these now.
“By the end of this year we will be ahead of the index and 2012 will have been just one bad year in a few reasonably good ones.”
He said in the current European equity market he believed that eurozone banks were offering a “once-in-a-decade opportunity”.
“The window will be open for a little while but it will shut soon,” he said.
“When you get to a turning point you get shake-outs, such as with the flare up in Cyprus, but that is designed to make people nervous and make them change what is the right fundamental decision.
“It makes it tough to stick to your guns but it will play out and we will have a good year. I would encourage investors to buy as I am very confident.”
The manager added that investors should view European Opportunities as a recovery fund, as he said he was ploughing his own cash into the product.
Mr Burnett said his 2012 performance had “done a lot of the damage” to his long-term performance figures, which put him in the bottom quartile of the IMA Europe excluding UK sector in one, three and five years.
“The core of what we are doing is good but we held on to positions in the S&P 500 for longer than we should have done but we don’t have those now,” he added.
Bestinvest’s research note was highly critical, recommending BlackRock’s Alister Hibbert as an alternative.
“Whereas in previous years the top down process had yielded impressive returns to investors, more recently the manager has struggled to adapt to difficult and often opaque macro prudential environment,” analyst Mark Lane said.
“While during this period Mr Burnett has still had periods of outperformance the net effect has been disappointing for investors and the fund has been characterised by periods of significant drawdowns.”
Mr Lane added investors should consider to switch into the five-star rated BlackRock European Dynamic fund, managed by Mr Hibbert, which is top quartile in five and three years and second quartile in one, according to FE Analytics.
Analysis: Burnett vs Bestinvest
Fund broker Bestinvest has put the boot in to Rob Burnett’s £668.6m European Opportunities fund labelling it a ‘one’ or ‘sell’, but the manager has fought back vehemently.
When you look at Mr Burnett’s (pictured) performance using data from FE Analytics on a calendar-year basis, you discover that it outperformed its benchmark MSCI Europe ex UK index in 2008, 2009, 2010 and 2011.
But the manager’s underperformance in 2012 dented his long-term numbers and the fund, as at May 22, is bottom quartile in the one, three and five-year timeframes compared to peers in the IMA Europe ex UK sector.
BlackRock’s Alister Hibbert - who Bestinvest is recommending a switch to - outperformed the sector average and benchmark index in 2008, 2009, 2010 and 2012.
In 2011 his 17.8 per cent loss was greater than that of the sector, the index and Mr Burnett, but his stronger outperformance since the financial crisis means his BlackRock European Dynamic fund ranks in the sector’s top quartile in three and five years.
The data suggests that Mr Hibbert is a more consistent alternative.
However, Mr Burnett has returned 13.7 per cent already in 2013 and the Neptune manager’s 25.8 per cent exposure to financials, which he thinks provide a great opportunity, could see him catch up with rivals fast - if you think the market will keep on rallying.
Investors might also want to consider Investment Adviser 100 Club member funds Jupiter European and Threadneedle European Select.
