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Overview

The managers of this fund aim to capture long-term capital growth from an equity portfolio of primarily large and medium-sized European companies. In addition to delivering long-term capital accumulation, we believe that the managers should be able to outperform the FTSE World Europe ex UK index over rolling three to five year periods, with the emphasis on the latter. In general, funds investing in the region are exposed to moves in the European bourses, which can be volatile, particularly over the short term and, as such, growth in capital is not guaranteed.

Square Mile’s Expected Outcome

We believe that the fund should be able to outperform the FTSE World Europe ex UK index over rolling three to five-year periods, with the emphasis on the long term.

Square Mile’s Opinion

This fund has a relatively short history, as it was launched in October 2015, but the managers had successfully managed a similar strategy at their previous firm. We would note that the managers have struggled to meet their objectives in this fund since its inception, but we believe the reasons for the underperformance are explainable given market conditions in recent years and the pair should be able to outperform the FTSE World Europe ex UK index over the long term given their capability, although there will be periods of variable performance.

Richard Pease joined the financial industry over 30 years ago and, during this time, he has managed European funds with notable success at Jupiter and New Star. He continued to run money in an identical manner following Henderson Global Investors' acquisition of New Star in April 2009. CRUX Asset Management was established in 2014 and is wholly owned by the directors and employees of the company. James Milne, who is the co-manager of the fund, has worked closely with Mr Pease since the days at New Star, when he joined in July 2006.

The managers seek to deliver long-term capital growth whilst attempting to protect the portfolio from potential downside losses relative to the wider market. They believe that ultimately the market will reward companies with recurring revenues, due to their certainty of earnings. Moreover, these companies tend to be more resilient than others in challenging times. They prefer to invest with a long-term horizon and turnover in the portfolio is typically lower than competitor strategies. Given such an approach, over a full cycle, we believe the fund should deliver attractive risk adjusted returns, however, there will be periods when the strategy may struggle, such as when the markets are very narrowly led and are chasing certain themes, for example rewarding richly valued stocks or lower quality, more cyclically sensitive companies.

Fund Manager’s Formal Objective

The investment objective of the Fund is to achieve long-term capital growth by investing primarily in equities of European.

Outcome: Capital Accumulation	Domicile: -
Active/Passive: Active	Benchmark: FTSE World Europe EX UK
Asset Class: Equity	IA Sector:
Yield: 1.13%	Fund size: -
Fund Manager:	Distribution Pay Date: -
Fund Price: -	Dividend Frequency:
Currency of Share Class: -	Share Class Launch Date:
NAV: -	Year end: -
Discount/Premium: -	Gearing: -
Permission to distribute from Capital: -	Fees charged: -

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Asset Manager Overview

We have a high regard for funds that go the extra mile, typically with a well-defined investment philosophy, clear process, sensible portfolio construction and a supportive investment group.The managers behind such funds usually have clear investment objectives and an appropriate time horizon to meet their targets. This fund is a fine example of such characteristics. We like the straightforward investment approach that the managers follow, which over a great many years, they have built a bank of knowledge of company managers and have observe their successes and failures through a range of different economic and market conditions.

Essentially, the managers like companies that have a clear and differentiated business strategy, sound finances, quality management and are attractively valued. They look for companies with recurring revenues where they might have gained a competitive edge, through an intangible asset, for instance. Firms with high barriers to entry typically have strong pricing power, which can enable them to grow and generate a strong earnings stream. The managers prefer businesses with low capital requirements (i.e. meaning that only a low level of funding is required to produce a good product or service). These businesses ought to be able to generate a high return on their limited capital and should have plenty of excess cash on the balance sheet, which they can use to return to shareholders or fund future growth. Firms with strong free cash flows and attractive dividend yields are highly desirable and company management need to have a proven track record as well as meaningful equity ownership of the company they manage. Finally, the shares of these businesses have to be on relatively conservative valuations versus their peers and the market. In general, the managers would rather invest in firms that are masters of their own destiny, ones that do not have to rely on the economic environment to forge ahead, such as "services" companies. They typically like to avoid businesses that are vulnerable to political or regulatory interference, such as certain utility and telecom businesses.

Although this fund was launched in October 2015, its genesis goes back much further, to the days when Mr Pease ran a similar offering at New Star and Henderson. The fund is managed along similar lines as its sister fund, FP CRUX European Special Situations, with the same investment philosophy and process. However, this fund will have a larger exposure to large and medium sized companies (around two thirds of the portfolio) and it will own a slightly shorter list of holdings (45-55) as opposed to the 60 odd holdings within the European Special Situations fund. In addition, the fund can invest up to 10% in global stocks: the intention here is to have the flexibility to pursue specific investment themes and opportunities, which are not available in Europe. Furthermore, the fund may have an allocation of up to 5% to the UK.

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ESG Integration

Fund ESG Integration

Although there is no formal environmental, social or governance (ESG) screening of stocks undertaken, the managers of this fund tend to invest in companies which have proven management teams who can demonstrate good corporate governance. The ongoing monitoring of controlling stakes in a business is crucial in the effort to hold well governed companies within the portfolio. In addition, the management company is a signatory to the United Nations supported Principles for Responsible Investment (PRI).

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Risk Summary

The fund has a high asset class risk score as, in general, European equities and its associated currencies can be volatile investments. The managers seek to build a portfolio of their best stock ideas and, as a consequence, country and sector positions are driven by the stock selection process and can therefore differ from the benchmark index. The managers strict set of criteria as well as their long-term investment horizon can increase the fund's volatility in the short term. This fund has a lower fund risk score within the asset class, for it is well exposed to larger sized stocks in the benchmark, however, the fund could lag the index, should smaller sized companies outperform. To help mitigate some of these risks, we believe any any investment should be considered with a long time horizon.

Additional Information

Annualised Return: -

Annualised Volatility: -

Max Drawdown: -

Max Gain: -

Max Loss: -

Sharpe Ratio: -

Sortino Ratio: -

(3 years data to last month end unless otherwise stated)

Qualitative Risk Assessment

	Significant	Potentially Significant	Not Significant
Equity Risk
Interest Rate Risk
Credit Risk
Exchange Rate Risk
Liquidity Risk
Emerging Markets Risk
Derivative Risk
Manager Risk
Gearing Risk
Discount/Premium Risk

For the full summary of the risks, click here

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Value for Money

Under MiFID II regulations, asset management firms are now required to disclose all costs and charges related to the running and administration of funds. CRUX will continue to pass on the costs associated with their research to investors, through the fund's ongoing charge figure (OCF), which was increased slightly to take this into account. When considering the impact of transaction costs, the fund's overall total cost of investment (TCI) is marginally above the average within its peer group.

Despite this, we still believe the charging structure to be reasonable. We consider this fund to offer investors good value for money as they gain access to a well respected pair of managers, with a deep pool of company knowledge who have a tried and tested approach to selecting companies in the region. Such characteristics are not so easily found.

OCF v Peer Group

0.93%

Transaction Costs v Peer Group

0.65%

TCI v Peer Group

1.58%

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Rating Changes

The Square Mile ratings are reviewed every 6 months. For full details on the methodologies, click here.
For a full list of all Square Mile rated funds, click here.

Rating Changes over last 12 months	Time & Date rating changed

Disclaimer

This document is issued by Square Mile Investment Consulting and Research Limited which is registered in England and Wales (08791142) and is a wholly owned subsidiary of Titan Wealth Holdings Limited (Registered Address: 101 Wigmore Street, London, W1U 1QU).

Unless otherwise agreed by Square Mile, this factsheet is only for internal use by the permitted recipients and shall not be published or be provided to any third parties. This factsheet is for the use of professional advisers and other regulated firms only and should not be relied upon by any other persons. It is published by, and remains the copyright of, Square Mile Investment Consulting and Research Ltd (“SM”). SM makes no warranties or representations regarding the accuracy or completeness of the information contained herein. This information represents the views and forecasts of SM at the date of issue but may be subject to change without reference or notification to you. SM does not offer investment advice or make recommendations regarding investments and nothing in this factsheet shall be deemed to constitute financial or investment advice in any way and shall not constitute a regulated activity for the purposes of the Financial Services and Markets Act 2000. This factsheet shall not constitute or be deemed to constitute an invitation or inducement to any person to engage in investment activity. Should you undertake any investment activity based on information contained herein, you do so entirely at your own risk and SM shall have no liability whatsoever for any loss, damage, costs or expenses incurred or suffered by you as a result. SM does not accept any responsibility for errors, inaccuracies, omissions, or any inconsistencies herein. Unless indicated, all figures are sourced by LSEG Lipper (all rights reserved). Past performance is not a guide to future returns.

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