The Focus Funds offer clients shareholder engagement funds across the UK, Europe and Japan. In addition, the Focus Funds have a strategic marketing alliance with Relational Investors, the leading US investment managers with a shareholder engagement philosophy. Thus, we can offer clients a shareholder engagement suite of funds covering around 90 per cent of the world's equity markets.
The stated aim of the funds is to achieve significant outperformance of the benchmark through being actively involved with investee companies. The approach taken by each fund is broadly similar but is adapted to suit the cultural and other distinct features of the markets in which they invest. Each Focus Fund concentrates on working with a small number of companies (c.12 − 20) to improve performance and thus can have a high tracking error. Each Fund is detailed below.
The European Focus Fund was launched in February 2002 and is concentrated with typically between 10 and 20 stocks in its portfolio, selected from quoted companies in the European Economic area (including Switzerland and Norway). The Fund is Euro denominated and aims to outperform its benchmark, which is the FTSE World Series Europe Total Return Index. Typically there are between 10 and 20 companies in the portfolio and the team's investment analysis will have identified a value upside of at least 20 per cent before a company is included in the portfolio. The tracking error of the portfolio is typically between 10 and 15 per cent.
The Hermes Specialist UK Focus Fund (formerly the UK Small Companies Focus Fund), which was launched in March 2002, actively engages with companies outside of the FTSE 100 excluding investment trusts and uses the customised benchmark of the FTSE Small Cap ex-Investment and FTSE 250 ex−Investment Trusts Total Return Index (weighted 50/50). The Fund is concentrated with typically between 10 and 20 stocks in its portfolio and has a tracking error of typically between 6 − 12 per cent.
The Nissay Hermes Stewardship Fund (NHSF) is managed jointly by Nissay Asset Management Corporation (NAM) in Japan and the Hermes Focus Funds in the UK. NAM provides the equity investment research and portfolio management services and also leads the dialogue with portfolio companies, whilst Hermes provides investment advice regarding stock selection, reviews the governance aspects and assists with company dialogue.
The Fund typically holds between 12 and 20 stocks. Investing in companies listed in Japan, the Fund seeks to achieve significant long-term outperformance relative to the TOPIX Total Return Index through responsible shareholder activism. The Fund tracking error is typically between 6 − 12 per cent and Japanese Yen denominated.
The Relational Hermes Fund is managed by Relational Investors and was launched in May 2001. Relational Investors' original fund (RLIP) was launched in June 1996, making it the longest running fund of this type that still operates. The Relational Hermes Fund is US dollar denominated. The fund invests in US and Canadian public companies, giving it a universe of approximately 10,000 stocks. Typically there are between 8 and 12 stocks held in the portfolio. Relational's investment analysis will have identified a value upside of at least 50 per cent before a company is included in the portfolio. The tracking error of the portfolio is high. Relational Investors Website
