Over half of the profits and revenues of European companies are derived from outside of Europe, thanks to their direct access to key long-term structural trends.
GAM Star Continental European Equity is led by Niall Gallagher, Investment Director, who is supported by investment managers, Chris Legg, and Christopher Sellers. Niall has overall responsibility for the investment strategy, portfolio construction, research management and financial sector research. He was awarded FE Alpha Manager in 2018, 2020, 2021 and 2023. He also received a Sauren gold medal in 2020, recognising outstanding performance and experience.
The team works as a focussed, nimble group of investors bound together by a highly collaborative, tight-knit culture. 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 ten-year relationship with leading expert network company Thirdbridge, which enables the team to meet the experts who help build its knowledge on companies and industry sectors as part of its research work.
Our goal is to identify and maximise stock specific risk that cannot be replicated by smart beta / factor ETFs, in a way that maximises idiosyncratic alpha and is consistent with our fundamental research process.
The team believes the most consistent method by which to achieve above average portfolio returns is to rely on the compounding effect of high return companies that allocate capital intelligently. It selects companies where their ROCE is greater than cost of capital and capital allocation is a key source of value creation, as such choosing companies that reinvest if return accretive investments in the business are possible, acquire if acquisitions are strategically and financially accretive (ROIC > cost of capital) and return excess cash to shareholders intelligently through dividends, or buybacks when shares trade below intrinsic value.
The team’s process combines research-driven stock selection, rigorous portfolio construction and active stewardship with stock-specific ESG analysis, which is undertaken both pre and post investment (utilising quantitative and qualitative analysis). Firstly, the team identifies ‘value creators’ by excluding companies from the investment universe where their ROCE is below their cost of capital over the course of an economic cycle. Proprietary, fundamental research and analysis are then conducted to form an understanding of the value drivers for each part of a business, in order to determine the prospects for future earnings. The team conducts more than 300 meetings each year across Europe. Its long-standing relationships across the market, excellent access to company management and strong use of expert networks enable it to gather insights into a company’s strategy, industry dynamics, competitors, customers and suppliers to identify potential long-term growth opportunities. The team also considers various types of stock specific risks, such as disruption risk, regulatory risk & sustainability issues and environmental threats (and opportunities) which are relevant to the long-term cost of capital that the company is likely to enjoy. The portfolio is built from the bottom up, with positions explicitly sized in a bid to maximise stock-specific alpha (ideally >50% of tracking error), minimise factor risks (10% of tracking error) and avoid excess concentration. 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 and active share of >80%. The team believes it has a duty to act responsibly in pursuit of capital preservation and sustainable value creation for clients. To this end, it regularly undertakes portfolio level reviews of ESG in investment risk, engages with Boards and company management, is active in proxy voting and meets all of its investee companies during the year, in addition to those companies being considered.
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.
Investments in equities (directly or indirectly via derivatives) may be subject to significant fluctuations in value.
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.
We think there are some very good long-term structural growth trends in areas related to the energy transition.
11 min read
European Equities – We remain positive on the prospects for the European banking sector; market pricing of the stocks has failed to appreciate the sustainable nature of the increase in earnings and return on equity from a return to positive interest rates
9 min read
GAM Investments’ Niall Gallagher explains why he believes investors must adapt to a new global post-deflation environment, highlights how he aims to capitalise on opportunities in the new era of higher inflation and the challenging energy transition, and states his long-term positive view on the luxury sector.
13 min read
At GAM Investments’ latest Active Thinking forum, David Dowsett highlights the four key issues he will be watching going into the second half of the year. Niall Gallagher discusses a strong earnings season for European equities and shares his thoughts on the European banking sector.
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Disclaimer: Past performance is not an indicator of future performance and current or future trends. The indications could be based on figures denominated in a currency that may be different from the currency of your residence country and therefore the return may increase or decrease as a result of currency fluctuations. 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. Any reference to a security is not a recommendation to buy or sell that security.
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