Interview: Rory Powe of Man GLG Continental European Growth

8 August 2017

Moneywise’s Helen Knapman meets Rory Powe, fund manager of a new addition to the Moneywise First 50 Funds list, the Man GLG Continental European Growth fund. 

What is the fund?

It focuses on continental Europe, so it’s not a pan-European fund. This means it excludes the UK, although it can invest up to 5% in UK companies.

We run a reasonably concentrated portfolio of between 30 and 40 equities [shares in companies]. The fund is a stockpicking fund, it’s success depends on stock selection. We stick our neck out compared with the benchmark – our active share (the amount that doesn’t overlap with the benchmark index) is 95%.

We also take a long-term approach – a three-year view – on the firms we invest in. Our aim is to deliver returns of at least 10% annualised on a three-year rolling basis.

How do you select investments?

We want to invest in Europe’s strongest companies, so one key feature we look for is a strong market position that is sustainable for many years. Moreover, this competitive advantage needs to be widening.

We also look at whether a company has sustainable prospects for economic expansion, and we prefer firms whose fortunes aren’t reliant on factors such as the price of natural resources or interest rates.

How frequently are stocks traded?

We probably replace one third of the portfolio each year. Portfolio turnover was 72% last year. I’d prefer it to be lower – the dream would be 0% turnover, as then you have a portfolio you’re extremely happy with. But we make mistakes. We get stocks wrong, and then we need to get rid of them.

Also I don’t think I’m capable of knowing more than about 40 companies properly (today we have 37 positions). For me, conviction is the holy grail, and if I don’t know companies well enough, I’m more likely to wobble in the face of share price weakness. I don’t want to invest in firms I don’t understand.

What have you added?

Ferrari is quite a big new position, as is Gestamp [a manufacturer of car parts] and Vitrolife [IVF products].

Ferrari was offered to the public for the first time in 2016. Its share price was quite volatile, but we were extremely impressed by the efficiency of its production when we visited the company earlier this year. Ferrari is one of the most powerful brands in the world, it has a market share of more than 25% and we think there is enough headroom to double production in a few years.

What have you sold?

We’ve reduced our holdings in Geberit [toilets], Essilor [lenses for glasses and contact lenses] and Assa Abloy [security solutions], all of which have been among our top 10 holdings. They’ve all performed well, but their room to grow has lessened significantly.

We sold out of Intrum Justitia [credit management services]. It did well, but the share price was overcooked because of a proposed takeover of Lindorff [a debt collection firm], which has now gone through.

What’s has been your worst investment?

Novo Nordisk. It’s the world leader in providing insulin for people with type 1 diabetes and serves a market that’s sadly growing. It has an outstanding track record and is one of Europe’s best companies. But we underestimated how difficult pricing would become in the key US market. The share price was weak as a result. We sold half our holding in August 2016 and the rest in autumn 2016.

And your best?

Ryanair. Its share price in 2014 was about €7 (£6); it’s now about €18 (£16). The firm has a 15% market share of European short-haul flights. Excluding fuel, its cost per passenger is less than €27 (£24), while the figure for Wizz Air, which has the second-lowest cost, is about €40 (£36). The average age of the planes in Ryanair’s fleet is six years, so maintenance costs are low. A seat occupancy level of 94% and fast turnaround of planes also keeps costs down.

Is Europe a good place to invest at the moment? 

Compared with 12 months ago, Europe is in much better shape. Right-wing parties did badly in recent elections in the Netherlands and in France, Emmanuel Macron is intent on reforming France’s labour markets and we think Angela Merkel will win out in September’s election in Germany. The European economy is recovering, and the European Central Bank has forecast eurozone growth of 1.91% in 2017.

What’s your top tip for a novice investor? 

Don’t take tips, particularly stock tips. If you want to invest in single stocks, do your research and take a long-term approach, as the rewards from equity investing principally come from compounding.

Otherwise, invest in funds run by a manager with a good track record and a disciplined approach.   

Visit Moneywise’s First 50 Funds for beginners.

Man GLG Continental European Growth fund: Key stats

Launched: 1998

Fund size: £693 million

Ongoing charges: 0.9% (professional share class)

Source: Man GLG fund factsheet, 31 May 2017 

The man behind the fund

Rory Powe has managed the Man GLG Continental European Growth fund since July 2014. He also manages the Man GLG
Pan-European Equity Growth fund.

Prior to this, he founded Powe Capital Management (PCM) in 2001 and for 12 years managed its European funds. Before founding PCM Rory was a global partner at Invesco and ran its flagship continental European strategy for 10 years.

He graduated from Trinity College, Oxford University, in 1985 with a BA (Hons) in modern history.

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