WS Lightman European
This is a genuine European value fund - a rare breed in this day and age, as there are not many value funds left. WS Lightman European is all about being contrarian and going against the herd. It relies on a process built around the years of academic research which show that value has historically outperformed in the long run.
Previously LF Lightman European.
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Rob Burnett, Fund Manager Rob manages Lightman’s funds and has been running European equity portfolios since 2005. Before founding Lightman in 2019, he managed the European Opportunities Fund at Neptune Investment Management from 2005 to 2018 and led analysis of global financials. Rob also managed the Neptune Japan Opportunities Fund earlier in his career. He studied Politics, Philosophy, and Economics at Oxford.
George Boyd-Bowman, Fund Manager George co-manages Lightman’s funds. Before joining Lightman he worked at Liontrust managing the Liontrust US Opportunities Fund and the Liontrust US Income Fund. He previously managed these two funds at Neptune Investment Management. George has a first class degree in Economics and Management from Oxford University.
Rob Burnett, Fund Manager Rob manages Lightman’s funds and has been running European equity portfolios since 2005. Before founding Lightman in 2019, he managed the European Opportunities Fund at Neptune Investment Management from 2005 to 2018 and led analysis of global financials. Rob also managed the Neptune Japan Opportunities Fund earlier in his career. He studied Politics, Philosophy, and Economics at Oxford.
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George Boyd-Bowman, Fund Manager George co-manages Lightman’s funds. Before joining Lightman he worked at Liontrust managing the Liontrust US Opportunities Fund and the Liontrust US Income Fund. He previously managed these two funds at Neptune Investment Management. George has a first class degree in Economics and Management from Oxford University.
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Investment process
WS Lightman European fund is quite concentrated with between 40 and 50 holdings, but the team aims to construct a well-diversified portfolio. The fund’s philosophy is rooted in the empirical research which has shown that the value style of investing outperforms over the long term.
The focus is on the investment characteristics which have worked with the greatest consistency over the longest time frames. This has led the team to favour high cash flow yields over low cash flow yields; low price to book and price to earnings over high multiples; and positive operational momentum – because an operational improvement in an already cheap stock can lead to an increase in earnings and a multiple expansion leading to very strong share price performance.
Rob is supported by George Boyd Bowman and their process begins with a screen of companies for liquidity and low valuations which leaves them with around 600 stocks. The team then screens for companies with high free cash flow yields and low valuations.
The team also screens for companies with low incremental investment rates leading it to typically invest in more mature industries. These stocks are then analysed for balance sheet strength, operational momentum and environmental, social and governance issues. The team aims to find businesses with an imminent improvement in revenue, margins, or free cash flow. Strong balance sheets are now a part of the process. In the past, finding value meant compromising on balance sheets but that is not necessary today.
Risk
Given the fund is very stylistic, the team tries to invest in at least 7 of the 11 MSCI Europe ex-UK sectors to aide diversification. Typical position sizes are 2-4%, with a soft limit on individual positions of 5%. Performance is likely to be very lumpy, depending on whether the fund’s style is in or out of favour.
ESG
As a value fund, WS Lightman European holds many companies with weak ESG profiles. This not to say that ESG is not important though, far from it. The team views ESG ratings in a similar way to earnings: a higher ESG rating can drive a re-rating in the company’s shares. Their process is therefore focused on those companies which can improve their ESG ratings the most, rather than those which are already high. The rate of change is what the team considers to be the most important factor.
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