Tuesday 19 September 2017

High end goods and military pay off for top Irish fund manager

Oshkosh won the US military contract for an armoured truck
Oshkosh won the US military contract for an armoured truck
Peter Flanagan

Peter Flanagan

The UK's decision to exit the European Union and Donald Trump's election shocked the world. At the headquarters of Ireland's best-performing fund manager, David Ryan shrugged and carried on as usual.

Head of multi-asset funds at Dublin-based Setanta Asset Management, Mr Ryan said the firm was a long-term investor, focusing on underlying value rather than risk being swayed by short-term surprises.

That strategy paid off in 2016 for Setanta, owned by Great- West Lifeco. Setanta's Managed Fund gained 10pc in the 11 months to the end of November, compared with an industrywide average of 3.4pc, according to Rubicon Investment Consulting.

The fund holds as much as 80pc of its assets in stocks, with Ryan buying shares in truck maker Oshkosh and Cie. Financiere Richemont, the luxury goods company. He has pulled back from government debt, instead preferring high- yielding securities tied to companies as far afield as Norway and Mexico.

"As a firm we don't trade in and trade out of positions in the short term,'' Mr Ryan, who helps manage €8.1bn at Setanta, said in a phone interview. "We are risk- averse by nature, and most asset classes look expensive."

The bets on Oshkosh and Richemont both reflect underlying value investors may have missed, said Ryan, who joined Setanta in 2003.

In 2015, Oshkosh won the US military contract to produce a new armoured truck known as the Joint Light Tactical Vehicle, replacing the Humvee. Since February, the stock has more than doubled to about $65.72.

"The market fixated on concerns around other cyclical divisions of its business, with some sell-side analysts happy to go along with that," Mr Ryan said. "It's a classic example of market short-termism versus our long-term horizon perspective."

Some investments have yet to fully pay off. Richemont, based in the lakeside town of Bellevue, just outside Geneva, fell about 7pc in 2016. The company is cutting watchmaking jobs in Switzerland, as slumping demand in Asia spread to Europe and the US this year, forcing Richemont to buy back unsold inventory from retailers and refocus on more affordable pieces.

Mr Ryan remains unconcerned about the owner of brands such as Cartier, Dunhill and IWC Schaffhausen.

The company "takes a long-term view, has a strong balance sheet and has grown earnings and dividends over the last 20 years," he said.

Mr Ryan's fund currently holds more cash than government debt, and has instead moved into short-dated corporate debt.

For Mr Ryan, talk of the so-called 'Trump Trade' on higher interest rates and a stronger dollar, or Brexit, distract investors from what should be their main focus: company fundamentals.

"Even if we knew for certain where economic variables were going in a year's time, it wouldn't make much difference to us," he said. (Bloomberg)

Irish Independent

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