Best Offshore Fund: Argonaut Pan European Alpha
Company: Argonaut Capital Partners
Argonaut is a London based asset manager that has built a strong reputation for investment performance across a range of European equity products. The company was launched in 2005 by Founding Partners Barry Norris and Oliver Russ and manages over £1bn of assets under management across Alpha, Income and Absolute Return strategies.
Argonaut is majority owned by its key staff members and became operationally independent from Ignis, its founding partner, in 2012. The company has a distinct “earnings surprise” investment process. We believe that stock prices move up (or down) on the basis of rising (or falling) market expectations of future corporate profits. We therefore focus our research efforts on finding companies where consensus is significantly over (or under) estimating future profitability. We believe that if we invest in stocks with superior earnings momentum this will lead to superior investment performance.
Our belief in the primacy of “earnings surprise” distinguishes us from the vast majority of fund managers who categorise themselves either as “growth” or “value” and believe either that investing in the best companies will generate superior returns or that the cheapest companies will generate superior returns. Although “growth” and “value” styles are capable of generating periods of significant multi-year outperformance, the obvious flipside of this is periods of significant multi-year underperformance. We also believe that this outperformance of “growth” or “value” stocks is primarily linked to corporate profits, not quality or cheapness, and that any periods of outperformance are purely coincidental with superior earnings momentum.
During periods of anaemic economic growth, for example, more often than not, only high quality “growth” companies are capable of generating the earnings growth upon which equity valuations are so sensitive, leading to their outperformance. By contrast, in periods of more robust economic growth, the average (or below average) company can generate profit growth, thus negating any reason to pay a premium for higher quality companies, and leading to the outperformance of “value” managers. We believe that both “growth” and “value” managers are equally deluded and that our “earnings surprise” style has demonstrated more consistent and superior outperformance. We firmly believe that is our competitive advantage, and is what makes our company unique.