Mark Dampier: 'Only a few fund managers make it through in quest for Euro champions league'

Man GLG Continental European Growth has so far performed extremely well under Rory Powe's stewardship

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The Independent Online

At Hargreaves Lansdown our research team meets hundreds of fund managers, and this puts us in a privileged position for gaining valuable insights. Most recently, Rory Powe visited our offices to discuss the fund he took over last year: Man GLG Continental European Growth. He will be unknown to some, but many other readers will know his name well.

Those who invested early in his Invesco Perpetual European Growth fund, which he started managing in 1991, will probably have fond memories given the fund's spectacular performance until 1999. However, those who invested in late 1999 and early 2000 are unlikely to share the same happy recollections.

Let me recap. After starting his career at Invesco Perpetual, Mr Powe became one of the best-known European fund managers, alongside Roger Guy at Gartmore at the time.

However, his time at the fund group did not end well. As he fully admits, he made a huge mistake in placing far too much emphasis on technology companies during the tech boom. When that bubble burst in early March 2000, the fund had a disastrous time.

The manager later founded his own company, Powe Capital Management, in 2002. Its sphere was European equity portfolios.

Man GLG subsequently approached him last year, recognising him as a talented investment manager. Mr Powe assumed responsibility for the Man GLG Continental European fund in October 2014 and immediately shed more than 200 holdings. The portfolio was refocused into a concentrated selection of 30 to 40 positions.

So far the Man GLG fund has performed extremely well under Mr Powe's stewardship. Over his tenure it has returned a remarkable 28.6 per cent against 4.4 per cent for the sector average, placing the fund at the top of the sector performance table. His investment approach is purely “bottom up”. This means the manager focuses on individual company analysis rather than wider views on sector, country, or more general global economics.

Mr Powe adheres to five strict investment criteria, each of which must be met before he considers investing. First, a company must have a sustainable competitive advantage that provides it with pricing power – the ability to raise prices without having an impact on consumer demand. Second, companies should have a long-term – three to five-year – “roadmap” strategy that can ultimately be translated into growing revenues.

Third, Mr Powe looks for long-term drivers of a business –the potential to grow profits and the ability to benefit from scale as the company expands. Financial strength is also vital – a strong balance sheet and cash low. Finally, businesses must be trading on an attractive valuation before the fund invests. Sounds easy, doesn't it?

His requirements help whittle down a universe of 2,000 companies.

Mr Powe points out that his is a dynamic list, with new businesses coming on board on a continuing basis. With such a strict list of investment criteria, meeting representatives from these companies regularly is also important.

Current holdings include the Denmark-based Chr Hansen, which develops natural ingredients for the food, pharmaceutical and agricultural industries.

Abcam, a global biotech company based in the UK, also features in the portfolio. I dared to ask the manager whether any technology companies are held at the moment. In fact, the fund has a very low weighting here as most companies in the sector do not meet Mr Powe's strict investment criteria.

I also questioned whether he plans on staying the course in his new role. He believes he has unfinished business in the fund management world, and expects he will remain at GLG for at least another 10 years.

The real question is, can he repeat his early performance at Invesco Perpetual and avoid the mistakes he made towards the end of his tenure at the group? Time will tell, but I feel this could be one European fund worth a closer look.

Mark Dampier is head of research at Hargreaves Lansdown, the asset manager, financial adviser and stockbroker. For more details about the funds in this column, visit www.hl.co.uk

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