This £115m fund is run by Stephen Moore and is a member of the Investment Adviser Hidden Gem Club 2016. He says: “The fund aims to deliver a positive return irrespective of market conditions over a rolling three-year period. It has a cash benchmark (Libor 3 months) and a long/short structure, typically holding 60-95 long and 50-95 short positions. We use these short positions both to hedge away market risk and to generate alpha.”
The manager works closely with the other members of Artemis’s seven-strong US equity team to generate a range of ideas for the portfolio, which are checked “from a range of perspectives”.
“Once we have identified an idea, we use bottom-up analysis to verify the thesis,” he adds.
The team’s approach to investing was brought to Artemis by Mr Moore and his colleagues from Threadneedle Investments (now Columbia Threadneedle) when they moved firms in 2014.
He explains: “The US funds we manage at Artemis all have direct antecedents with proven performance records. For example, I managed a Ucits long/short fund from launch for Threadneedle. The Artemis US Absolute Return fund draws on exactly the same research.”
He acknowledges macroeconomic factors play a part in portfolio construction. “We want to identify parts of the market that are set to benefit from economic changes, as well as those that might suffer. On its own, however, this macro-analysis does not determine our investment decisions. It is the beginning rather than the end of our stockpicking.”
Recently, the manager has been building short positions in a number of large “money centre” banks, as he calls them. He elaborates: “The market seems to be hoping that higher interest rates later this year could improve their net interest margins (the ‘profit’ they make on lending). Meanwhile, faster economic growth has led to hopes that loan growth could accelerate. Our view is different: the gap between the two- and 10-year US Treasury yield recently narrowed to levels not seen since the recession, making it hard for banks to increase their lending margins. Meanwhile, any further regulatory interference will only lower the banks’ returns on equity.”
According to the key investor information document for the I accumulation clean share class, the fund is fairly low risk, at level three out of a possible seven on the risk-reward spectrum, while ongoing charges of 0.90 per cent apply.
|EXPERT VIEW - Jake Moeller, head of UK and Ireland research, Thomson Reuters Lipper|
Stephen Moore is an impressive fund manager with strong US stock experience and a pedigree in short selling. Although this is a recent launch by Artemis, Mr Moore built up a good track record at Threadneedle. The fund is in negative territory year to date but has accrued eight months of strong rolling yearly Sharpe ratios and sits in the top decile of the IA Targeted Absolute Return sector over one year to May 31 2016.
The fund has a fairly short track record, having only launched in October 2014. FE Analytics shows in the year to June 14 2016 the fund has returned 5.4 per cent to investors, compared to the IA Targeted Absolute Return sector average of -0.60 per cent, while its benchmark, the Libor GBP 3 months, is up 0.6 per cent over the same period. Mr Moore points out over the year to the end of May 2016 the fund generated a 6 per cent return, putting it in the top quartile of its peer group and ahead of a 0.2 per cent return from its cash benchmark.