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GAM Star Continental European Equity

Reasons to Invest

Global exposure

European companies are often exposed to long-term, global secular growth trends, for example, accessing emerging markets middle class growth via the luxury goods market.

Potential earnings growth

Underlying earnings growth is accelerating from a depressed level and compelling opportunities can be sought in certain domestic consumer and industrial cyclical stocks.

Market opportunity

Algorithmically-driven investment activities and those aligned to factor risks are increasingly impacting on short-term European equity movements, creating market inefficiency and therefore opportunities for long-term investors.

Select buying opportunity

The team views a bearish environment as being an opportunity to invest in ‘value creating companies’ on a highly selective and active basis.

Our Edge

Innovative, risk-driven portfolio construction

A combination of rigorous, bottom-up stock selection and dynamic management of stock specific and factor risks is designed to deliver stock-specific alpha.

Experienced, high calibre team

Niall Gallagher has over 20 years of European equity investing expertise and has built a skilled team with strong experience and previous research coverage of the sector.

Active stock selection

The team has a clear vision of the types of companies it seeks to own and avoid, based on strict investment criteria and an understanding of trends in select areas of the market.

360 degree view on companies

We believe strong reliance on expert network firms are a vital research component when building a full understanding of industry and company dynamics on the key aspects of a business.

Philosophy and Process

Investment Philosophy

The team believes reliance on the compounding effect of high return companies is the most consistent method of achieving capital growth and above average equity market returns. Therefore they seek to target ‘value creators’ – businesses that exhibit a Return On Capital Employed (ROCE) above their Cost of Capital – and purchase companies at a discount to intrinsic value. The team believes that understanding the risks behind each stock’s fundamental prospects and carefully considering the economic correlations between them is key to creating strong, risk-adjusted returns.

Investment Process

The process combines fundamental analysis with risk-based portfolio construction. Following the identification of ‘value creators’, industry and company level research is combined with ‘triangulation’. The team typically participates in over 300 meetings annually. This enables them to identify a company’s future earnings prospects, while an absolute valuation approach seeks to determine whether a stock is attractively valued on a fundamental basis. Positions are explicitly sized in a bid to maximise stock-specific alpha, minimise factor risk and avoid unintended risk concentrations. Each stock is expected to contribute significantly to returns in a concentrated portfolio of 30-50 stocks. No individual stock or factor may contribute more than10% to tracking error, while the fund has a typical tracking error of 4-6% per annum.

1. Identify ‘value creators’

  • Excluding companies where ROCE is below Cost of Capital
  • Focus on balance sheets, competitive positioning, management and franchise strength

2. Intensive stock specific analysis

  • Strategic industry analysis and company specific research
  • Absolute stock valuation based on cash flow

3. Risk-based portfolio construction

  • ≥50% stock specific risk target; detailed analysis of 47 BARRA risk factors
  • Dynamic adjustment of position sizes to maintain desired risk/return trade-off

Investment Team

GAM Star Continental European Equity is led by Niall Gallagher, Investment Director, who is supported by three investment managers, Swetha Ramachandra, Chris Legg and Chris Sellers.

The team works as a focussed, nimble group of investors bound together by a highly collaborative, tight-knit culture. A focus on short lines of communication within the team promotes quick decision making. Although research responsibilities are split by broad sector specialisations, team members also work interchangeably across the market. This makes for a stronger and more flexible team, drives interaction and enables knowledge sharing of specific sectors.

The team draws on its long-standing relationships with an international network of industry experts, economists and analysts, as well as a six-year relationship with leading expert network company Thirdbridge, which is used extensively for ‘triangulation’, the independent verification of management or consensus data.

The most consistent method of achieving capital growth and above average returns is to rely on the compounding effect of high return companies
Niall Gallagher, Investment Director.

Our Thinking

Investment Opinions 3 min watch

GAM Talks Q4 2019: What themes are you currently playing?

7 November 2019

We asked a group of our portfolio managers a series of questions about their respective asset classes. This third video, in a series of three, looks at the themes the managers are currently exploring.

3 min watch
Investment Opinions 3 min watch

GAM Talks Q4 2019: What are the most significant market events at present?

31 October 2019

We asked a group of our portfolio managers a series of questions about their respective asset classes. This second video, in a series of three, looks at the overall market environment.

3 min watch
Investment Opinions 3 min watch

GAM Talks Q4 2019: Why should investors consider your asset class?

24 October 2019

We asked a group of our portfolio managers a series of questions about their respective asset classes. This first video, in a series of three, looks at the reasons for investing in their asset classes.

3 min watch

Fund Information

Key Risks

Currency Risk - Non Base Currency Share Class

Non-base currency share classes may or may not be hedged to the base currency of the Fund. Changes in exchange rates will have an impact on the value of shares in the Fund which are not denominated in the base currency. Where hedging strategies are employed, they may not be fully effective.

Equity

Investments in equities (directly or indirectly via derivatives) may be subject to significant fluctuations in value.

Capital at risk

All financial investments involve an element of risk. Therefore, the value of the investment and the income from it will vary and the initial investment amount cannot be guaranteed.

Resources

Fund Profile - GAM Star Continental European Equity

Risk management at GAM

Contacts

GAM Star Continental European Equity is a sub-fund of GAM Star Fund p.l.c., registered office at George’s Court, 54-62 Townsend Street, Dublin 2, Ireland, an umbrella investment company.