Artemis' Steer boosted from Connaught collapse

Artemis UK Growth fund manager Tim Steer says his short on stricken social housing and environmental services contractor Connaught has been the single biggest contributor to the outperformance on his Artemis UK hedge fund.

Steer told Citywire he had first started shorting the stock nearly a year ago in the top performing hedge fund, and had 'made a lot of money' from the short.

He said it had been trading at around £4 when he first put the short in place, and had opened the position because of a 'lack of accounting transparency' at the firm.

Its previous worst close before shares were suspended last night saw the stock close at 12p on 24 August although it had been trading at a year high of 444p as recently as last October.

Steer told Citywire the stock has been the biggest single positive contributor to his hedge fund, which has posted a return of some 24% year to date. Steer said that up to 10% of the Artemis UK Growth fund could be in short positions but more typically it would be around 5% - its current level.

Steer believes if he had had clearance to run the short portfolio six months earlier he would be 'right at the top 'of the IMA All Companies sector. The fund is currently top quartile over one year, with a return of 22.9% compared to the FTSE All Share return of 19.35% to the end of July.

Former analyst and Citywire cover star Steer is well known for taking a forensic approach to screening companies, with a particular focus on company accounts.

He said he had first stated to worry about a 'lack of transparency' in its accounts a year ago, and that he expected rival Meers to be a major beneficiary of Connaught's demise. Meers closed Tuesday (7 Sept) up more than 5%.

Steer added: '[Connaught] has gone bust with debts of over £200 million. I started shorting it a year ago and have ridden it all the way down. It has been the top single performer in the hedge fund.'

'Accounting is the major reason [he started shorting]. It was not recognising its revenue aggregates and had a lack of earnings visibility. It was also not generating any cash and had been far too acquisitive.'