Denis Clough, former manager of the Schroder Tokyo fund, has made several stock-specific changes to the 280m Schroder European since taking over the portfolio in October.Clough took over the European fund from Adriaan de Mol Van Otterloo, who left the group at the end of last year, and has so far sold 18 holdings and purchased 11. Clough managed the Tokyo fund for just under 20 years until April 2004, before taking a 12-month sabbatical. He returned to the group last April as a member of the European team. He says: “In a broad sense, since taking over the fund I have been making the portfolio more concentrated, particularly in the large-cap area. “Adriaan was very much a value investor and, while value is also important to me, so is quality and long-term earnings visibility.” Clough says that since taking over the fund he has reduced the number of stocks in the portfolio from 72 to 64. “This could fall to the mid-fifties by the end of the year as I am more comfortable taking bigger overweight exposures in stocks than Adriaan was,” he adds. Clough says the adjustment from managing a Japanese equity fund to a European equity fund has been both easy and difficult. “Managing money in different markets is in ways familiar as you are looking at the same ratios and asking companies the same questions,” he says. “Indeed, my investment process has not changed. However, I am looking at an entirely new universe of stocks and understanding their management takes time. “I am also having to get to grips with merger and acquisition activity, because whereas this is at the margin in Japan, it is a key factor in Europe. As a result, I have already visited a number of companies on a one-to-one basis. I have seen up to 400 already.” While Clough perceives there to be a robust outlook for growth and decent profits in Europe, he says that valuations have risen a long way and bond yields are also up a long way since January. “The momentum of profits growth is likely to slow after three years’ of rapid growth,” he says. Reed, a publishing company, is one firm that Clough has added to the fund since taking over. Listed in Holland and Britain, he says that while not being a high growth company, it is good at the margins and has predicted growth of 10% a year. As a result, he adds, in an environment where profit growth slows, it will become more highly valued.