The Citywire A-rated duo, who co-run the €933 million JOHCM Global Select fund, said they had moved back into financials having held a pronounced underweight for the past six years.
Richyal and Lees said that they still run a 1.61% underweight relative to the fund’s benchmark – the MSCI AW TR – but this compares to 8% and higher underweight previously held in the portfolio.
‘The financials sector is no longer three red lights on our top-down score card and it is where we have made the most changes of late.’
‘Fundamentals have improved to above average; valuation is attractive; and trend is now positive, so we are heading towards a more benchmark-neutral position,’ the duo said in an investor note.
This change of stance has seen them take positions in banks such as Barclays (2.35%) and UBS (2.25%), where Lees and Richyal said senior management changes and restructuring had helped lessen leverage and increase the attractiveness of the stocks.
‘These moves significantly improve future shareholder returns. We expect financials to continue to outperform, but not by the magnitude of last year when they outperformed the benchmark by a factor of more than two,’ they said.
Tech remains the largest sector exposure in the fund, accounting for 30% of the portfolio. At the end of last year, Lees and Richyal went on record to dismiss claims they had become ‘one trick ponies’ with this focus on tech names.
The JOHCM Global Select fund returned 44.86% in the three years to the end of December 2012. This compares to its Citywire benchmark, the FTSE World TR EUR, which rose 34.19% over this time frame.