French managers’ faith in equities pays

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One of the most respected fund managers in France, Roger Polani has delivered outstanding performance with his European and French equity funds.

Mr Polani works for independent Paris based investment firm Société Privée de Gestion de Patrimoine (SPGP), created in 1992 by its president Xavier Roulet.

Part of the three-man team that runs the company, Mr Polani has a Citywire AAA rating in France for his individual risk-adjusted performance over the past three years.

He is ranked in the Equity Europe sector for the average monthly return he has generated with the €160m RP Selection Europe fund, a France domiciled fund that he co-manages with Gonzague Ruchaud. Other funds under his management include the €229m RP Selection France and the €238m RP Selection Carte Blanche, a go-anywhere fund that over the past three years has returned 162 per cent after charges. This compares with a 37 per cent return from the average fund in its Global Mixed Asset Euro Flexible sector.

The Selection Europe fund has returned 274 per cent after charges over the same three-year period, while its benchmark Dow Jones Euro Stoxx index has risen 102 per cent and the average fund in the sector has returned 80 per cent.

In running the fund, its managers base their investment process on stockpicking without any comparison to a specific index. A minimum of 75 per cent is always invested in European stocks, but the remaining 25 per cent can be held in bonds or in non-European equities. The portfolio also has a bias towards mid and small-cap stocks.

Mr Polani and Mr Ruchaud say the fund is defined by three “keywords”: pragmatism, mobility and reactivity. Pragmatism means seeking new opportunities without restricting themselves by definitions such as growth or value; mobility means they can hold stocks for any time period and reactivity means responding to daily news.

Mr Ruchaud says one of the main drivers of the recent performance was a positive view on the direction of the stock market. “As a consequence of this assumption, the fund was fully invested in equities, and mainly in stocks with a growth profile,” he says.

The predominance of small and mid-cap stocks was another positive influence, as was the fund’s focus on French, Benelux and German equities over the past 18 months. At the end of 2005 some 15 per cent of the fund was invested in Japanese equities, although this has since been reduced to about 8 per cent.

Stocks the managers currently like include Germany’s Commerzbank, according to Mr Ruchaud. “The retail business of the bank is becoming more efficient and the bank might win investment banking deals with German mid-sized companies,” he says.

Favoured French stocks include Pinguely Haulotte, which manufactures lifting machinery, and Geophysique, which provides specialist services to the oil and gas industries.

“Pinguely keeps publishing results far above estimates,” says Mr Ruchaud. He believes the company stands to benefit from expansion in emerging markets.

Geophysique produced 2005 results in line with market expectations, Mr Ruchaud says, but it also confirmed an improvement in margins with a good performance from all its business lines during the fourth quarter of last year.

Angus Foote is the editor of Citywire’s Fund Manager International magazine. E-mail for a free copy

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