Bestinvest says
Whilst the industrial and productive might of Germany is well documented there are not many ways for UK investors to access this market. Since taking over this fund Smith has provided investors with consistent outperformance above the benchmark. By their very nature this is not something that an ETF, for example, can achieve. The changes that Smith enacted upon taking control of the fun, increasing the number of stocks and the small cap weighting, were very sensible and this, as much if not more than the stock picking, has helped drive performance. This fund is our preferred way of gaining direct access to German equity returns.
Robert Smith started managing the fund in November 2008 at the height of the crisis at that time. Until that point the fund invested heavily in large cap German companies and fund performance had a high correlation to the index. One reason for this is that there are some very large stocks in the benchmark. Deutsche Bank, Allianz, Bayer, SAP, Daimler and Siemens form around 50% of the benchmark.
Smiths approach instead focuses on quality small cap growth companies where he believes price anomalies are more prevalent given the extend to which analysts focus on these large cap stocks and ignore the small ones. This has been successful during the bull market since he took control of the fund.
Smith also conforms to the Barings analyst driven approach to investing. He is responsible, for example, for the auto sector and he is clearly very knowledgeable about these stocks. On other sectors he relies more on his analysts. These analysts are closely monitored and paid for the quality of their recommendations, not fund performance.