At the start of February, the investment team made a substantial change within the non ESG models by changing our European holding. Lightman European was bought in the models in place of other active European funds that were previously held.

What is the Lightman fund and who is it run by?

The Lightman fund is an all-cap Europe ex UK strategy that invests with a strict valuation process, meaning that the fund tilts towards being more value orientated. The investment process is to select quality businesses that are undervalued, going through change, or are currently experiencing hardship which is likely to change in the future.

This process makes the fund different to most in the Europe ex UK sector, as many of these invest with a growth or quality growth bias. As with other regions globally, growth and quality growth assets have performed well over the past few years due to the Quantitative Easing (QE) intensive marketplace that we have experienced since the financial crisis in 2008. As a team we think that the underlying market conditions are changing, and that the QE driven market is coming to an end. This means active management is key together with a focus on valuations, business quality and stock selection.

The fund is run by a boutique investment house, and the manager has specialised in European equities for a number of years. The team have known Rob Burnett at his previous roles and have kept in touch with him during the process of setting up this fund. Being a boutique means that this fund is not very well known and is not held widely by other discretionary managers. The fund is small but growing and due to our size at MAIA, we have been able to negotiate a cheaper share class for our clients.

How has the fund performed?

Even though the fund is more value biased than other holdings in the European sector, the fund has performed very well since its inception. Over the short-term the fund has outperformed its benchmark and peers due to having more valuation discipline and
having a greater value tilt compared to other funds. This is one of only two funds that has generated a positive return year to date (01/01/2022-25/03/2022)1. Since we added the fund into the portfolio the fund has outperformed the IA Europe ex UK sector by over 2% (04/02/2022-25/03/2022)2.

Have any changes occurred in the fund with the recent volatility?

The fund has been active in its management of holdings exposed to Eastern Europe. The manager has disinvested entirely out of names that are directly linked to Russia. The manager has also utilised the higher volatility present to change the portfolio by selling out of areas that have become less attractive, and buying assets that have become cheap due to the sell off.

In conclusion

The inclusion of the Lightman European fund is a long-term allocation. The team are extremely pleased with the performance in the short term and how the manager continues to be proactive in the management of the fund in these extremely volatile times. Assessing the whole of the market can help unearth funds that others are not looking at or researching. We believe our long-term experience of understanding how market dynamics change and how to select investments to fit in with the conditions should allow us to outperform over time. We believe the fund will continue to outperform over time and we look forward to working with the Lightman team to provide investors with positive performance from their European equity investment.