Anand casts net wider for best ideas

Before Anand took over the fund in May, it was run using ideas from research carried out in DWS’s London office. But now he is taking advantage of DWS’s Continental presence to capture ideas produced by colleagues in Frankfurt, Paris, Madrid, Milan and Zurich.

Anand (pictured) is also taking more input from DWS’s European small-cap teams based in London and the European mid-cap team based in Frankfurt, as part of a shift towards smaller stocks. He says: “I changed all but one of the stocks in the fund on day one to reflect first of all my favourite stocks from a bottom-up perspective, but also to try to have a greater element of small and medium-cap stocks. I want to get to things below the radar of a lot of people.”

Unlike several commentators, Anand says the small and mid-cap rally still has further to run. One of the themes he is running is mergers and acquisitions, and he believes that several smaller companies will become takeover targets over the next few years.

After a period of cost-cutting and rebuilding their balance sheets, many companies now have excess capital to spend on acquisitions. Anand says: “We may find there is a protracted period of M&A activity that would be a much more natural culmination of what has been an extended mid and small-cap rally, rather than just a few commentators deciding that it has gone on long enough.”

His biggest overweight in the fund is the consumer discretionary sector, although the stocks within that are quite varied and are supported by different drivers. He holds Puma, Paddy Power, the Italian state lottery Lottomatica and Swatch, the luxury goods brand.

Another theme he is playing is exploitation of the discrepancies in economic growth rates resulting from the single European currency. He says: “As long as there is a one-size-fits-all monetary policy for the region, you will get discrepancies in terms of underlying growth rates. What can be appropriate for one country is too loose for another.”

He adds: “We have a very gradual economic recovery, but there are still some serious headwinds overall. There are high levels of unemployment in key European markets and the other headwind is a strong euro, which can make a big part of the manufacturing base in Europe uncompetitive.”