​Howard-Spink looks to increase Schroder European Alpha Plus conviction

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Schroders fund manager Leon Howard-Spink is overhauling his portfolio as he admits mistakes were made in stock selection.

However Howard-Spink, who manages the £971m Schroder European Alpha Plus fund, is confident that the fund will see better performance by the end of the year. 

The fund’s performance has recently lagged the IMA European ex UK sector, returning 29.26 per cent over the year to 12 August 2013 compared with the peer group’s average return of 33.64 per cent. In the past three months, the fund has returned 2 per cent compared against the sector’s 4.33 per cent average return. 

With the fund now at 38 holdings, compared with 51 at the end of February, Howard-Spink is looking to follow a higher conviction approach.

Howard-Spink says: “Over the last four to five months we have made a conscious decision to reduce the number of holdings in the end. Did we get into a position where we were not backing high conviction bets enough? I think we did allow that to happen and diluted our conviction a little bit.

“When we find a good idea we really want to, liquidity permitting, push that up to the top of the fund. If that means taking on a little bit more liquidity risk, then that is something we will do.”

In the past few months, Howard-Spink has sold out of Italian oil and gas industry contractor Saipem, Dutch geoscience firm Fugro, Dutch tank storage provider Vopak and tobacco company Swedish Match.

In the past 12 months, a total of 14 holdings were sold and though Howard-Spink is eager to add more ideas, only 10 new stocks have already been brought to the fund in the same period.

Howard-Spink says: “We do need to drive new ideas into the fund to make sure the next 12 months are better than the last 12 – that is my priority. We have plenty of time this year to bring it back.

“We would like to add a few more buy ideas in the coming months –  maybe further down the market cap scale – to see if we can come up with really stock specific ideas where companies are helping themselves.”

Longer term, Schroder European Alpha Plus has stronger performance – sitting second quartile over three and five years to 12 August 2013.

Schroder European Alpha Plus’ cumulative performance to 12 August 2013

 
Schroder European Alpha Plus 2.00% 8.11% 29.26% 40.59% 44.14%
4.37% 10.70% 33.58% 41.36% 34.97%
-2.27% -2.35% -3.24% -0.54% 6.80%
  90 / 103 89 / 101 81 / 100 43 / 96 23 / 85
4 4 4 2 2

Source: FE Analytics