Pan European Accelerando Fund celebrates 3 years outstanding performance

Threadneedle's Pan European Accelerando Fund was launched three years ago and, since then, it has delivered a total return of 105.70% versus 82.48% from the MSCI Europe Index.

The fund takes the best ideas generated by manager Phil Cliff (AA-rated by Citywire) and his colleagues on Threadneedle's European equity team and deploys them with high conviction in a focused portfolio of around 30 stocks. Such an approach relies on successful stock selection and the fund has benefited from the vindication of its high conviction views in a number of areas.

"When you are focusing on a small number of stocks it is important to have a high level of confidence in each holding," says Phil Cliff. "To achieve this confidence we conduct a high number of company meetings each year and go into great depth in analysing a company's business and prospects."

In addition to stock selection, risk management is always high on Phil Cliff's agenda: "I look for around 30 stocks that are all driven by different themes, but have very strong stock prospects. Its important to me to run the fund with a diverse range of uncorrelated themes with maximum conviction on the upside."

Some of the themes in the portfolio today are:

Food price inflation (e.g. French flavourings manufacturer Givaudan);
German hospital privatisation (eg healthcare stock Fresenius);
Steel market capital discipline (eg Arcelor Mittal of the Netherlands)

The portfolio has also benefited from Phil Cliff's ability to take contrarian views. "We bought French cabling manufacturer Nexans in May 2006 when most of the market thought it was an expensive and cyclical stock of dubious quality," he explains. "We disagreed. We saw that the company had new and improved management, that the consensus valuation was based on margin assumptions that were too low and that the company would benefit from increased capex in the energy sector. So we took a high conviction contrarian view and it paid off. The stock has almost doubled since we bought it."

There are numerous other examples of high conviction positions in companies from diverse industries that have paid off in the fund, including:

Mersey Docks: UK transport infrastructure, unique assets, taken over
Roche (Switzerland): high quality pharmaceutical with superior product pipeline
Hanson (UK): strategic asset bought by Heidelberg cement as aggregates assets are key to protecting their local markets

"The European market still has inefficiencies, it is not perfectly researched and we have shown that we can really add value for investors by going out and unearthing stocks that the market has not priced correctly. I'm looking forward to continuing the good start we have made."