Artemis rising star Jacob de Tusch-Lec has admitted October was a “bad month” as his high-flying Global Income fund faced its first major headwind.
Since its launch in 2010, the fund has become one of Artemis’s crown jewels, with consistent top-quartile performance prompting investors to place significant sums of money with the asset manager.
But it has slid down the performance charts in recent months as macroeconomic calls and stock-specific bets have gone against Mr de Tusch-Lec.
While the fund is still top decile for performance in the IMA Global Equity Income sector in the past year, it has slipped below the sector average and the index in recent months. In the past six months it has delivered a return of 6 per cent while its benchmark MSCI AC World index has risen by 9.9 per cent, according to data from FE Analytics.
In an update to investors, Mr de Tusch-Lec admitted several things went “wrong” for the fund in October in particular.
“It was also an unusual month in that some of our top-down positions and some of our bottom-up stock picks went against us,” he said.
The manager explained, from a top-down perspective, the fund had suffered from his bet on European mid-cap value stocks. “These stocks are cheap and have high, often safe, dividends,” he said. “But the market is simply not interested.”
In the past three months, the MSCI Europe Mid Cap index has risen by 1 per cent, significantly less than the MSCI World index’s 5.5 per cent rise.
On a bottom-up, stock-specific basis, the fund has also been hurt by the profit warning from French pharmaceutical giant Sanofi, one of its larger holdings. Sanofi saw 15 per cent wiped off its share price at the end of October after it warned it was facing pricing troubles.
Mr de Tusch-Lec said he had considered Sanofi “a safe but unexciting position” but that it had turned “sour”. He added: “Sanofi’s problems were a useful reminder that even relatively diversified mega-caps can fall victim to broader trends and investor positioning.”
Pharmaceutical stocks have attracted hot money of late, meaning negative news is treated extremely harshly, he noted.
In response to market sentiment turning away from his current positioning, he said he had “reluctantly” added to so-called quality US stocks that have risen inexorably this year.
He has been adding to stocks such as power company GE, pharmaceutical firm AbbVie and chipmaker Intel, while reducing exposure to European financials and cyclicals.
“We have not embraced the hype surrounding expensive but popular quality stocks in the US; their valuations are stretched and their yields are low,” he said. “But in an uncertain market, and given the growing growth gap between the US and the rest of the world, investors are happy to pay a premium for them.”