Premier has restructured its European Growth fund as a large/mid cap portfolio after Michael Jennings took over as manager earlier this month.
The high conviction fund had a small-cap bias and its former manager, Rupert Morrell, used a pure stockpicking approach.
Jennings, who uses a combination of macro and bottom-up factors in the construction of his portfolios, has sold 20 of the 34 positions in the fund he inherited and has repositioned the portfolio towards the larger end of the market.
“You don’t keep what you’re not happy with and you should do it quickly,” he says.
Jennings, also a conviction manager, has 31 positions in the portfolio, with a focus on high-quality companies with strong management, although he adds that he has learnt from a few of Morrell’s holdings and has decided to retain certain positions he otherwise would not have looked at before.
The top five positions in the Continental European portfolio are all new: Amheuser-Busch Inbev, Fresenius Medical Care, Nestlé, Novartis and Syngenta.
Although he does not invest the fund according to geography, Jennings sold out of positions in Austrian and Greek banks because of their exposure to eastern Europe, while he has increased exposure to Switzerland.
Jennings says he has not withdrawn entirely from financials and has kept a 6% weighting to the sector, which still represents a massive underweight position.
He adds that there is likely to be some crossover between the European holdings in his Global DSR portfolio and the European fund but the latter will be more aggressive in style and more invested.
The European fund has a relative benchmark and as such Jennings has only a small cash position at 5%.
The tracking error in the European portfolio was probably above 10% under Morrell, Jennings notes, but he adds that this has subsequently come down to about 6-8%.
Although Jennings officially took over the portfolio on March 1 he has worked on the fund since early February when it was announced Morrell was resigning and leaving the industry.
Over six months to March 13 the Premier European Growth fund is ranked 102 out of 107 funds in the Europe ex UK sector, after it fell 47.4%.
Over one month the fund has fallen 10.9% and is now ranked 86 out of 107, according to Trustnet.
Jennings says the higher turnover resulting from the sale of so many holdings, combined with the wider spreads in smaller stocks, affected performance through February.