Dividing Europe for added value

Mark Pignatelli is a fund manager whose approach to managing money stems from his academic background. He recalls: "I went to the London School of Economics, where I studied economics and economic history. I like numbers and was keen to do something where this could be put to practical use. What attracted me to fund management is that I quite like the idea that money can be 'put to work'. It doesn't actually do anything but you can still make sizeable profits from it".

Mark Pignatelli is a fund manager whose approach to managing money stems from his academic background. He recalls: "I went to the London School of Economics, where I studied economics and economic history. I like numbers and was keen to do something where this could be put to practical use. What attracted me to fund management is that I quite like the idea that money can be 'put to work'. It doesn't actually do anything but you can still make sizeable profits from it".

After graduating in 1986, Mr Pignatelli's first port of call was Baring Asset Management, where he stayed for 13 years, becoming head of the group's European equities team. He joined Schroders in February of this year, again as head of European equities and a director of Schroder Investment Management, at which point he took over responsibility for the Schroder European Growth Fund. Mr Pignatelli's career has not solely focused on Europe. He explains: "At Barings, I started on the US desk and transferred to the European desk in 1989 as it gave me the opportunity to work with Crispin Odey who is a fascinating guy and one of the best managers in the sector." (Mr Odey has since left Barings and set up his own specialist management house).

Mr Pignatelli says: "The European markets were very inefficient in those days. If you knew a bit about macroeconomics and how to read a balance sheet you would make money. Today it is a much more difficult job as the markets have become considerably more efficient."

He explains: "The central objective of the fund is to add value to the returns from the index, and we try to do this through a very disciplined approach. This is not a 'good luck' fund: We have got to try to find stocks that will outperform the universe."

Mr Pignatelli's method for identifying these gems is based on three major themes. He says: "There are three things we look for. The first is to evaluate the quality of a company's business franchise and whether the market fully understands that value on, say, an 18 month or two-year view. Secondly, we work out the earnings momentum of a stock and whether it is liking to surprise positively or negatively, and seek to only invest in those companies which are likely to surprise positively. Thirdly, we do a lot of technical analysis to work out what the market as a whole thinks about stocks. This is extremely important, since it is the market that will decide whether a stock goes up or down."