Burnett’s European fund launch a ‘brave step’

Strategy to be reminiscent of his Neptune fund but could suffer from bad timing for European markets

Burnett

Rob Burnett’s decision to launch a European equity fund at a time when the asset class is deeply unloved has been labelled a “brave step” but the ex-Neptune manager could be “one to watch” if value investing returns.

The fund, the debut product from his new investment boutique Lightman Investment Management, is slated to launch in late March and will be a concentrated, high conviction portfolio of 40-50 European companies.

It aims to invest in firms that are perceived to be below intrinsic value, favouring those that have positive operational momentum yet trade at low price to book and price to earnings ratios with high free cash flow yields.

Adrian Lowcock, head of personal investing at Willis Owen, said the fund is in keeping with Burnett’s investment style and the focus on value will be one familiar to supporters of Burnett (pictured).

He added: “The philosophy of the new fund and its concentrated nature should serve the manager well. While we do respect Burnett, I think it is important to watch how a manager settles in a new company and the fund performs.”

Bad timing

Ryan Hughes, head of active portfolios at AJ Bell, questioned whether now was a good time to launch a European equity fund.

“Rob Burnett has taken a brave step to set up his own firm at a time when European equities are pretty out of favour with UK investors and the European economy looks to once again be entering a challenging period with slowing growth and political discontent.”

Burnett himself believes now is an ideal time to invest in the European stock market, arguing the long-term consensus view is more bearish than the reality.

Hughes explained that the fund builds on the philosophy and process in place at Neptune for well over a decade where Burnett was known for being comfortable investing very differently to the index.

“Performance was volatile over his Neptune tenure but ultimately Burnett outperformed in 10 years out of 13, albeit, his final year was very challenging with assets falling considerably, from £450m to around £230m,” he added.

“It will be interesting to see how Burnett performs with his own fund, particularly given it is a new team working together and additionally interesting to watch if the fund gathers assets as the environment does look to be difficult for the foreseeable future.”

In December last year, it was revealed that Burnett would be exiting Neptune Investment Management after 16 years to set up his own business.

At the time, investors were fearful over the future of the fund at Neptune and it was labelled as “another blow”.

The return of value

Darius McDermott, managing director at Chelsea Financial Services, said Burnett is one of the few managers in the sector that has a “genuine valuation style”.

“Focusing on low P/B and P/E stocks but with high cashflow yield, Rob believes these are the best characteristics over the long term for European shares.

“Our view is that if value investing returns as the major factor this new fund will do extremely well.”

Likewise, Lowcock added: “While value hasn’t had much support in global markets, it is important value investors continue with their approach and remain disciplined.”

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