Asset strategy is the key

Best performer YTD:Canada Life/Setanta Irish Equity: +3.9% Worst performer YTD:Quinn Life Celtic Freeway: -7.8%

IT REMAINS a turbulent time for Irish equities as the uncertain economic environment, combined with volatile financial stocks, continues to weigh the Irish market. According to Moneymate, in 2010 up to July 16th, Irish gross domestic funds invested in Irish equities lost 2.2 per cent on average, although returns over the past year are up by 10.9 per cent.

Selecting the appropriate asset allocation strategy with regards to the volatile Iseq index is key, with just a third of the 31 Irish equity funds tracked by Moneymate in the black – the rest having lost money over the year to July 16th.

Top of the heap is Canada Life’s Irish equity fund, which is managed by Setanta Asset Management. An actively-managed fund, it is up by 3.9 per cent this year, or 21.2 per cent over the past 12 months.

While David Coyne, portfolio manager with Setanta Asset Management, is keen to point out that year-to-date performance is too short a time period in which to measure a fund, he attributes Setanta’s positive performance to its investment process where it “applies a low-risk and common sense approach”.

“Setanta’s approach to investing is to understand businesses and buy them at what we consider reasonable valuations based on conservative assumptions of the future. We have a preference for financially strong companies,” he says.

Setanta’s Irish equity fund is invested in 15 stocks, with a median weight of 6-7 per cent per stock. Its greatest weighting is in building materials group CRH at 11 per cent. It also favours Kingspan and Readymix, with just 3.5 per cent in financials.

At the other end of the scale are index funds which track the overall performance of the Iseq. Although a cheaper option than actively-managed funds, they are performing the worst in the current environment.

The Iseq has long been over-weight on a couple of stocks, but where once it was financials which dominated, they have now been superseded by stocks such as CRH – which makes up about 30 per cent of the entire index.

Worst of the bunch in the year to July 16th is Quinn Life’s Celtic Freeway, which invests in the 20 largest companies in Ireland according to market capitalisation. It is down by 7.8 per cent in the year to date although it is up by 7 per cent over the last 12 months.