Alan Custis and Lloyd Whitworth
A focus fund with heavily research base behind it
• 25-35 stock portfolio
• FT All-Share benchmark
• Fund has large cap bias so a scalable strategy
• Minimum position size of typically 2% in the portfolio – all holdings have meaningful exposure
Investment philosophy behind the portfolio
• Search for financial productivity
• Look for businesses that have high returns that are sustainable
• Then look to see if the valuation justifies buying the stock
• Be flexible on valuations metrics, eg return on equity important for financials, return on capital employed more appropriate for industrials
Stockpicking central to the fund
• Analyst platform consists of 50 career analysts, each with average 10 years’ experience
• They are out and about, businesses are global and emerging markets becoming more important
• This can add value even in UK large caps, a well- researched part of the market
Recent drivers of fund performance have been macro-economic concerns
• Eurozone crisis, US budget deficit and China slowdown
• Stocks such as Johnson Matthey have done well despite this – benefits from fact all governments are tightening up on emissions standards from cars and lorries
• Royal & SunAlliance has not done as well as an investment – harmed by some personnel changes at the top weighing down on share price short term
Fund top quartile over three years but 2011 has been a more challenging environment:
• Portfolio has been underweight classic defensive sectors such as utilities and pharmaceuticals which market has favoured
• We believe these sectors as pretty fully valued already
• Both have regulatory and government pressure to keep prices down in future
UK equities are on just 9 times earnings and yield above 4%:
• They give global exposure, more than 75% of earnings come from overseas
• Corporate balance sheets are strong, much more so than in 2008
• The market is shrinking due to share buybacks
• Dividend payout ratios lower than in the past
Fund is underweight financials and likely to remain so
• Regulatory and political landscape continues to change
• Banks have to hold more and more capital, this will reduce medium term returns
• In the sector prefers Standard Chartered – it is really an Asian bank
Potential headwinds for 2012 – all macro-economic concerns
• A major recession in Europe would hit UK companies abilities to make profits
• But against this stocks are in good shape and the P/E on the market is low
Important Information
Important Information
As at 28 November 2011
This is a financial promotion. This video and document is not intended to constitute investment advice. In the UK this video and document, which is supplied for information only, and is for distribution only to professional investors and advisers authorised to carry out business under the Financial Services and Markets Act 2000.
Securities identified in this document are not necessarily held by Lazard Asset Management for all client portfolios, and should not be considered as a recommendation or solicitation to purchase, sell or hold these securities. It should also not be assumed that any investment in these securities was, or will be, profitable.
Investing in equities may lead towards higher returns in the long term. However considerable fluctuations can apply to equity prices resulting in a greater risk that you may not get your money back.
In view of the concentrated nature of certain portfolios, the level of risk is expected to be higher than for broader based portfolios and the net asset value may be more volatile.
Past performance is not a reliable indicator of future results. Investors are reminded that the value of shares and the income from them can fall as well as rise due to stock market and currency movements. When you sell your investment you may get back less than you originally invested. Fluctuations in the rate of exchange between the currency in which shares are denominated and currency of investment may have the effect of causing the value of investment to diminish or increase.
There is no assurance that the Funds' objectives or performance target will be achieved.
The Lazard UK Omega Fund is a sub-fund of Lazard Investment Funds, a UK-authorised Open Ended Investment Company (OEIC) and UCITS. The Authorised Corporate Director of the fund is Lazard Fund Managers Limited, which is authorised and regulated by the Financial Services Authority (FSA) and is a member of IMA. Copies of the Prospectus, Simplified Prospectus and Report and Accounts are available in English on request from the address below or at www.uk.lazardnet.com.
Issued by Lazard Asset Management Limited, 50 Stratton Street, London W1J 8LL
Lazard Asset Management Limited is authorised and regulated by the Financial Services Authority (FSA).
