FTF Martin Currie European Unconstrained

FTF Martin Currie European Unconstrained fund offers a focused, high conviction portfolio of quality growth European equities, with no constraints on regional or country allocations. Manager Zehrid Osmani takes a long-term approach and his belief is that it’s important to avoid short-term noise and focus on a 5-10 year time horizon. He has considerable experience of investing in this way and a strong track record from his days managing similar funds at BlackRock.

Previously Legg Mason IF Martin Currie European Unconstrained

Our opinion

We like the concentrated, unconstrained nature of this fund. Active managers can only outperform if they aren’t tied to a benchmark. Zehrid has a lot of experience of investing in European equities in this way and had considerable success at BlackRock with a similar fund. He takes a long-term approach, which is refreshing at a time when many investors are becoming increasingly short term.

Fund manager

Lead manager, and head of strategy, Zehrid Osmani joined Martin Currie in 2018 from BlackRock, where he spent 10 years as head of European equities research. At BlackRock, Zehrid ran several pan-European equity funds with a focus on unconstrained, high conviction, long-term portfolios. Zehrid has over 21 years of investment experience and a BA in economics and finance from the Sorbonne and a masters in international finance from Glasgow university. He took over management of FTF Martin Currie European Unconstrained fund in December 2018. Zehrid is supported by Amanda Whitecross and Sam Cottrell.

My father, who was a locksmith, used to say to me that when a client decides to trust you, you have to work as hard as you can to show them that they were right to do so. That fuels my passion to relentlessly look for the right stock ideas.

Zehrid OsmaniFund manager

Investment process

Zehrid believes that markets undervalue the compounding characteristics of quality growth companies. He aims to identify these companies and hold them for the long term to enable them to generate excess returns with lower risk. He takes a 5-10 year investment time horizon and anticipates that turnover will be less than 20%, which has the benefit of reducing transaction costs.

FTF Martin Currie European Unconstrained fund invests in medium and large companies with low gearing. Balance sheets are analysed to highlight those companies which have grown by acquisition rather than organically, which then enables the team to asses whether acquisitions have created value.

The screens used throw up approximately 200 stocks, which are then whittled down by seeking those companies with strong balance sheets; experiencing secular growth; with strong corporate ethos; good capital allocation and, most importantly, a reasonable valuation.

Company meetings are an integral part of the process and the team will not invest until it has met the management. The managers believe that understanding how major decisions are made by management is just as important as scrutinising accounts and they will therefore meet with management at least annually and like to speak not only to the CEO and CFO, but also the head of sustainability, the legal counsel, the head of HR and the head of accounting.

It is this approach, alongside the forensic accounting analysis, that enables the managers to have the confidence to invest for the long term.

Whilst the process is based on individual stock selection, the managers do like certain themes: the future of technology; resource scarcity and demographic change. The future technology portion covers such areas as security and defence; cloud, data and IT and gaming. The resource scarcity theme covers climate change; alternative energy and electric vehicles. Finally, the demographic change portion combines themes such as a growing emerging market middle class; increased longevity; urbanisation and vanity.

ESG

ESG - Integrated  

This fund has a strong dedication to ESG, with proprietary analysis fully integrated throughout the process. The process includes a research scorecard in which ESG factors feature heavily. There are over 50 scores for governance and sustainability factors, with a separate 20 criteria for purely social factors. This means that a wide variety of ESG factors are considered, scored and incorporated into the analysis for any stock, and these scores will make a considerable difference as to whether a company is deemed an attractive investment or not. The fund also excludes companies involved in weapons, tobacco, and fossil fuels from the portfolio. ESG considerations don’t stop at investment. During the regular meetings with company management, there is strong engagement on issues ensuring anything the team has identified is known to the management, and they have an improvement plan in place. The fund has recently improved its own internal monitoring, and now maps the contribution of the portfolio to the UNSDGs - both positive and negative - and reports the carbon intensity score.

Risk

The portfolio is concentrated with 20-40 stocks, so there is considerable stock-specific risk. A maximum holding is 10% and the portfolio, but initial position sizes will be 2-5%, depending upon conviction, and maximum position size is 10%. Risk is closely monitored at a stock level via detailed due diligence into potential investments.

The team will also assess the portfolio to discover any unintended risk. The managers look at the portfolio’s sources of geographic revenue and any under/over exposure to developed and emerging market growth. They also analyse the breakdown of their end user markets.

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