At the time of launching, the fund was the first 130/30 retail product from the asset manager: "We have extensive experience in shorting, having developed a successful range of hedge funds over the past seven years.We believe that our success in the hedge fund arena, combined with our excellent track record in the US long-only space, leaves us well positioned to offer 130/30 funds."
Other 130/30 funds are also pushing their performance credentials, including those located offshore and in other sectors, as for example, discussed by the management of the Cartesian UK Equity 130/30.
Performance of Threadneedle fund vs sector, indices over the past 1-yr
Source: Financial Express Analytics
The 130/30 strategy means Threadneedle's fund can short up to 30 per cent of its holdings, although in order to comply with UCITS III regulations it must use derivatives such as short futures, ETFs or total return swaps to achieve this. The essential attraction of this strategy is that it enables the manager to create a long book with a gross exposure of 130 per cent.
Trustnet started by asking why it was the fund had outperformed so many of its peers over the past year.
"Our strong performance is a result of our stock picking approach underpinned by in-depth fundamental research, with access to company managements as central to our process," said Szemere.
"As part of one of the largest US equity teams in London which has an established track record in long-only and long/short funds, the American Extended Alpha strategy fits well with our investment philosophy and has the flexibility to adapt to the changing market conditions. 'Extended alpha' refers to the fund’s ability under UCITS III to use the proceeds from the short sale of stocks to extend the long side of the portfolio in order to increase the alpha potential, while reducing overall portfolio risk and maintaining a broadly 100 per cent exposure to the market."
Q: Will you need to make that any significant changes to investment style of the as conditions change?
A: We believe that our style is robust and can suitably adapt to changing market conditions. Our stock specific focus and ability to short also enables the fund to continue to increase alpha and to reduce the overall portfolio risk.
Q: What are the basics of your stock selection technique?
A: We do our own fundamental analysis. For both long and short ideas, for example we evaluate management quality, balance sheets and business models, and arrive at our price targets in the context of a clear risk/reward framework.
Q: What is your assessment of how the US will perform over the next year?
A: We remain cautious on the outlook for the US economy. The economy will still need to adjust to the effects of the continued downturn in the US housing market and the impact on the consumer, as well as the broader implications of the recession on the real economy. We also acknowledge that the rising unemployment and weak corporate earnings environment is far from abating.
Q: Where is the best value in US equities?
A: We look at our investments on a stock-by-stock basis and as such, we do not have pre-determined sector or thematic biases. The macroeconomic uncertainty and higher levels of market volatility continue to create compelling opportunities at the stock level. Strong fundamentals should increasingly become rewarded on our long book, while working out the implications of a less supportive economic backdrop on stocks continue to translate into good opportunities on the short book. We therefore believe that the environment remains supportive for bottom-up stock pickers.
Q: What are the criteria for the size of the companies you invest in?
A: We do not have a market cap bias.
Q: Have there been/will there be any significant changes in your asset allocation?
A: We seek to hold a diversified portfolio with alpha driven by stock specific factors on both the long and short side of the portfolio. This has been consistent since the launch of the fund and we expect to be the case going forward.
Q: Have you been able to use any other instruments or alternative investments in the fund?
A: Under UCITS III, short positions can be established through the use of derivatives, ETFs or total return swaps.
Q: What are your risk management processes?
A: At Threadneedle, risk management is an integral part of the investment process. Our proprietary system produces a full set of risk reports on a daily basis and these are reviewed daily by the risk analytics team and the fund manager. On a more formal level on a monthly basis, risk is analysed by the chief risk officer and the chief investment officer alongside the fund manager.
Top Holdings
|
Name |
% Weighting |
|---|---|
|
APPLE INC |
6.00 |
|
TRAVELERS COMPANIES INC |
3.40 |
|
BMC SOFTWARE INC |
3.00 |
|
DIRECTV GROUP INC |
3.00 |
|
ORACLE CORP |
2.20 |
Sector Weightings
|
Name |
% Weighting |
|---|---|
|
TELECOM, MEDIA & TECHNOLOGY |
27.30 |
|
CONSUMER PRODUCTS |
15.70 |
|
HEALTH CARE |
13.60 |
|
FINANCIAL |
11.90 |
|
BASIC MATERIALS |
10.70 |
|
MONEY MARKET |
10.50 |
|
INDUSTRIALS |
10.20 |
|
UTILITIES |
0.10 |
Source: Financial Express Analytics, 26 March 2009