Press Releases

29 August 2007
EEA Fund Management’s CF EPIC Insurance & General Fund sees lower volatility and stronger returns in UK financials.

Boutique house financials fund weathers market storms and looks to produce greater returns with lower volatility than its global peers:

Only if you’ve been sunning yourself for the last few weeks on a very remote beach will you have failed to notice the turmoil on the financial markets. At the beginning of 2007 there were already enough worries about the US housing market and what this might mean for the more indebted households. The market did take some of these fears on board in February and March this year but then appeared to forget them as the market rallied very strongly.

In the recent market shake out though we’ve seen genuine problems in the financial markets with problems in the sub-prime market leading to fund’s collapsing and a dry up in liquidity around the world.

All of this may sound like a very tough time for a fund investing solely in the shares of financials companies. The CF EPIC Insurance and General Fund though has come through this period of uncertainty very well, its UK focus meaning it has suffered relatively low volatility. The fund has relatively little exposure to the sectors of the market that are causing most concern at the moment, for example it has a large holding in the Lloyds based insurance companies. It’s exposure to the banks is in the large financial institutions with a broad mix of income streams.

The fund, which has received a platinum medal from Asset Risk Consultants, an independent, privately owned consulting practice, has achieved a level of consistency and risk-adjusted out-performance relative to the benchmark that places it above expectation.

The EEA fund has also delivered strong returns of 15.1% over one year and 86.8% over three years compared to the FTSE UK Financial index of 0.7% and 33.6% respectively*.

Simon Shaw, Managing Director of EEA Fund Management, said:

“The UK financials sector struggled in the first six months of 2007, with rising interest rates and worries about the property market holding back progress. It is our belief, however, that the UK Financials sector offers good potential going forward and is well placed to benefit in a market bounce back, with much of the bad news discounted in share prices prior to the current market turmoil.

“The market has been most concerned about problems in the credit markets and especially problems in the sub-prime mortgage market in the US. Investors don’t know who exactly is most exposed to these problems and many financial stocks are getting hit although their businesses may have no exposure to this area.

“The Insurance & General fund however, has a well diversified range of investments. It has many investments in the Lloyd’s and Bermudan-based insurance companies and these companies continue to perform well. They tend to be on low PE multiples and pay very good dividends, which is useful in a time of volatility.”

The CF EPIC Insurance & General aims to achieve long-term total returns in excess of the FTSE 250 from a portfolio of companies whose activities are predominately or partly deemed to be within the financial services sector. The investment policy is to seek opportunities that the manager considers offer superior returns either through superior growth prospects or crystallisation of significant undervaluation. It is expected that the portfolio will be mainly drawn from companies outside of the FTSE 100.

EEA, which completed an MBO from EPIC Specialist Investments Limited in 2005, was founded by Simon Shaw in 2003 and specialises in the management of high performance equity mandates. The company now has over £800m funds under management.

* Figures to 24/8/07