In a tough market, some fund managers “have developed strategies to maintain the investor’s equivalent of the stiff upper lip”, says FT’s Matthew Vincent. One is Charles Heenan, manager of the Kennox Asset Management Strategic Value Fund.
The £66m fund, which has returned 48% since July 2007, compared to a 12% rise in its benchmark, takes a contrarian stance, trimming holdings when prices rise. “Conversely, when prices fall and the margin widens, they buy.” With only 26 holdings (from UK retailer Tesco to small Hong Kong electronics subcontractor Fujikon), Heenan seeks out unloved firms that are “structurally sound and with healthy cash flows”, says Patrick Collinson in Fund Strategy. With all his equity wealth in the fund, Heenan shared his investors’ relief that during the financial crisis in 2008 “we were essentially flat”.
So how does he avoid firms that are unloved for good reason? “We are looking for companies that are having a tough time. But we are also looking to see if they have net cash on their balance sheet.” There is a focus on stronger European economies, such as Switzerland and Germany, with Swisscom and Munich Re the two largest holdings. “Swisscom has a nice 7% yield, in a safe economy, [with] a flight-to-safety currency.”
In total, 23% of the portfolio is in the troubled European market. However, Heenan sees value in the region. While risk remains in the zone, at least it’s in the stock price, he says. One of his latest acquisitions is a TV company in France. “Even if everything goes wrong, people will still watch TV.”
Contact: 0131-240 3870.
Kennox Strategic Value top holdings
| Name of holding | % of assets |
|---|---|
| Munich Reinsurance | 4.7 |
| Swisscom | 4.6 |
| Johnson & Johnson | 4.3 |
| Tesco Plc | 4.2 |
| ETFS Physical Swiss Gold | 4.1 |
| Canon Marketing Japan | 4.1 |
| Sankyo Co Ltd | 4.0 |
| M1 Ltd | 4.0 |