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EXCLUSIVE: Devon Equity Management’s Luca Emo on constructing a winning portfolio

by | Feb 23, 2024

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Luca Emo, Senior Fund Manager at Devon Equity Management

In the next instalment in our series of exclusive interviews with industry experts, Luca Emo, Senior Fund Manager at Devon Equity Management, provides his insight on the biggest growth opportunities and most common risks for investors, and discusses his company’s approach to investing.

1.) What tax-efficient schemes does your company work with, and how do you offer a unique/compelling approach for advisers?

We only have a single product available to UK retail investors, the FTSE 250 investment trust, European Opportunities Trust PLC (EOT). EOT is available on a range of retail platforms and may be held in both ISA and SIPP tax-efficient wrappers by UK retail investors.

 
 

2.) How active are you in providing education to advisers on the types of clients that are suitable for these types of investments, as well as any changes in regulation or nuances in the existing rules?’

EOT is available to all types of investors. Following implementation of the Consumer Duty regulations in 2023 we have redoubled our focus on the suitability disclosures on our website, www. Devonem.com, in addition to the disclosures previously set out in the KID published for EOT.  We would welcome and seek to assist in person with any enquiries from advisers or their clients (contact: enquiries@devonem.com or Tel: +44 20 3985 0445).

3.) Where and in which types of companies are you seeing the biggest growth opportunities?

 
 

Our portfolio is positioned for uncertainty; we have not built the portfolio on the expectation of a particular economic scenario. Rather, we have tried to construct a portfolio of structural winners, companies that can flourish in a range of economic scenarios, a fund for all seasons.

This approach mitigates the risk of predicating the success of the portfolio on the precarious art of macro forecasting. Given the huge uncertainties in such forecasting, we think that identifying ‘special’ companies whose fortunes depend largely on their own efforts, not macro developments, represents better quality risk.

We consider ‘special’ companies to be those that can prosper in a range of economic scenarios, and which are well protected from competitive pressures. Typically, these are companies with strong proprietary characteristics, strong intellectual property (IP), serving customers for whom their products are non-discretionary and often with a global presence.

 
 

4.) What do you see as the biggest risks for investors?

Our investee companies are not without risk, but that risk is mostly different from macro risk. The success of our companies depends on maintaining and furthering technology leadership and innovation, satisfying unmet needs.

5.) Should advisers be worried about a lack of diversification, and why?

Each holding in EOT’s portfolio is selected individually, seeking out companies that possess distinct characteristics, expected to generate significant benefits for shareholders in the long term. Therefore, we consider there it be significant diversification of risk with the portfolio at a company specific level, albeit that the portfolio is relatively concentrated.

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