Hermes Europe manager Tim Crockford has moved into the likes of gaming company Ubisoft as he continues to favour “new economy” businesses embracing a broad shift towards digital goods and services.
Mr Crockford, who runs the asset manager’s €232m (£194m) Europe Ex-UK Equity fund alongside James Rutherford, said he had been targeting those names adapting to new technology and other changes in 2016, in an approach that had seen the vehicle span different sectors.
“I wouldn’t read too much with regard to sector positioning,” he said. “However technology is a pretty obvious and perpetual overweight for us. I like what I would call new economy stocks within the European space.
“If you talk about the new economy, the first places you think of are the far east and Silicon valley. But there are some companies that have repositioned themselves in Europe. The opportunity lies within the valuation because it hasn’t registered that the company is moving from an old economy company to the new economy.”
Significant industry allocations at the end of November included 28 per cent in industrials and 13.1 per cent in financials. Meanwhile technology made up 5.6 per cent, compared with 4.4 per cent in the product’s FTSE World Europe Ex UK benchmark.
As part of his approach, Mr Crockford has initiated positons in a number of companies, including gaming firm Ubisoft, this year.
“At the beginning of the year we bought into Ubisoft,” he said. “By definition that’s a new economy company but the interesting change is there has been a shift towards digital delivery of games.
“We are seeing that the revenue profile is changing dramatically for these companies. They are focusing on getting the core idea of the game and then tweaking it.
"Even if it’s unsuccessful for the launch, they will go heavily with the promotions and give it for free online for a weekend, for example. Because there is multiplayer, once you have critical mass the game becomes exponentially attractive to people.”
Other additions include Kion Group, a German industrial name.
“It’s the number two forklift maker in the world after Toyota,” said Mr Crockford. “What they are doing now is shifting their business to intralogistics and areas such as automated warehouses. The timing [of our investment] was opportunistic because it had been hit on the back of Brexit.”
Not all names have fared well, however. One, mid-cap Irish food ingredients company Kerry Group, was removed from the portfolio in this year, helping to fund some of the additions.
“Nothing has changed with that company,” Mr Crockford said. “It’s just a question of whether that growth is slowing, and it’s an expensive stock.”
On a sector basis, the manager has also been questioning his healthcare allocation. This sector represented 15.4 per cent of the fund at the end of November, compared with just 12.8 per cent in its benchmark.
Mr Crockford, who holds the likes of Roche and Sartorius, said: “I have been tweaking down our healthcare holdings because sentiment has got really negative over there. We are still trying to make our minds up about the sector.”