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 |
Verdict: 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.
He says it is difficult to generalise about the factors that contributed to this outperformance. Instead, he notes: “In broad terms, the fund’s strong risk-adjusted returns have been derived from good stock selection and portfolio construction, with the long book making a larger contribution than our short positions.”
The manager does not name individual short positions but says the fund has benefited from shorts in a number of traditional “bricks and mortar” stores.
“Retail square footage is growing at a much faster rate, with the result the US now has more than twice the amount per capita of the next most ‘stored’ country,” he confirms. “The other side of this trade has been a successful long position in Amazon, which captured more than 40 cents out of every extra dollar spent last Christmas in the US. More importantly, it has greatly improved its ability to generate free cashflow from those sales,” Mr Moore says.
But he concedes he was too early taking long positions in Seagate Technology and Western Digital. “We spotted an emerging source of demand from the owners of the vast server farms that underpin the rapid shift to cloud computing and storage. While we still believe this insight will eventually produce attractive returns, there is too much capacity in the near term.”
