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Long/short’s long-term leader: BlackRock star driving ahead

Long/short’s long-term leader: BlackRock star driving ahead

Citywire A-rated manager David Tovey found his feet in the fallout of the global financial crisis and has since emerged as one of the leading lights in the long/short equity field.

Tovey, who co-runs the €633 million BSF European Opportunities Extension fund at BlackRock, has produced notable performance over both the long and the short-term.

This analysis is from Citywire Discovery, our proprietary system that evaluates fund manager track records and their performance, rather than that of actual funds.

Tovey boasts the strongest performance in the Alternative Ucits – Long/Short Equity sector when viewed on a seven-year and three-year risk-adjusted basis.

On a seven-year basis, Tovey has a risk-adjusted return of 1.17, the highest of his peers over this period, while similarly leading the pack over the shorter-term with 2.8.

The BlackRock fund, which focuses on the European equity market, has most recently contended with the New Year rally driven by stimulus measures in the region.

‘Sentiment was buoyed by the ECB’s announcement of quantitative easing towards the end of January and an eventual four-month extension of the Greek bailout. Economic indicators for Europe to pick up, with consumer confidence increasing, PMIs remaining well above 50,’ he said.

Nordic nations

While much discussion centres on how the peripheral nations will profit from action, Tovey, alongside co-manager Simon Hunter, has focused his attentions on non-core Europe.

This is with a particular emphasis on the Nordic nations.

They currently have a nine percentage point overweight to Denmark, which makes up 11.7% of total exposure, and six points above the benchmark in Sweden, which stands at 11.3%.

It is within the Danish market which Tovey and Hunter have uncovered one of their strongest plays, which is Danish jewellery company Pandora. ‘It was up over 24% in February,’ Tovey said.

‘The company reported a stronger fourth quarter than expected and issued a bullish guidance statement to the market, indicating an EBITDA margin of around 37%.’

Financials, which is actually a slight underweight in the fund at present at 19.7% compared to a 22.1% weighting, have been recent drivers of performance, as well.

‘The fund’s positions in KBC and Bank of Ireland also performed well as the banks sector rallied. We believe Bank of Ireland’s capital position and mortgage write-backs will be more benign than expected.’

Outperforming pair

On an absolute basis, Tovey and Hunter are also among the strongest in the field. The duo has returned 123.5% over five years in euro terms at a time when the average manager in the sector returned 17.6%.

This makes the duo the second best performers out of the 108 managers boasting a five-year track record. The bulk of this outperformance has come during a period of semi-regular manager changes.

Tovey originally launched the fund with Carl Lee, who was replaced as co-manager by Simon Hunter in March 2013. The team was further bolstered by the addition of European equity specialist Zehrid Osmani.

Osmani stepped down to focus on his is other funds at the end of 2014, leaving Tovey and Hunter as a management duo overseeing the fund.

BlackRock has noticed the performance also pulling in investor interest and opted to impose investment restrictions on the fund in July of last year.

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