InvestmentEurope’s first Pan-DACH Summit: New opportunities

European and US equities, emerging market debt and high yield were the key themes during the first InvestmentEurope Pan-DACH Summit held at the Bayerischer Hof in Munich.

The two-day event, aimed at investors in Germany, Austria, Switzerland and Luxembourg attracted about 40 delegates from across the region.

Mandarine Gestion’s portfolio manager Diane Bruno kicked off the event by making the case for European small cap investing. Presenting her Mandarine Unique fund, Bruno highlighted how the fund screens a universe of 2000 European small cap stocks for market leading technological development and uniqueness in terms of geographical positioning, with no similar competitors. Despite being largely bottom-up focussed, Bruno also considers top down factors such trends in consumer spending and the state of the Chinese economy,  she stressed.

RWC followed up on the equity theme, with portfolio managers Ian Lance and John Teahan discussing their Global Enhanced Dividend Fund, which is characterised by its use of cash and derivatives such as put and call options to offer downside protection. The speakers acknowledged that gains in asset prices had not been matched by fundamentals, making it harder for investors to find value in the market. “Indicators such as the Shiller PE ratio are hopeless in order to assess timing but are still very accurate in forecasting long-term returns” said Teahan.

Kansas-based asset manager Tortoise’s managing directors Edward Russell and Robert Thummel approached the equity theme from a different angle, presenting its North American Energy Infrastructure Strategy. The fund aims to capitalise on the growth of the US energy sector, with the US becoming the world’s biggest producer of natural gas.

Artemis fund manager Paul Casson picked up on the volatility theme by presenting the strategies behind his European Long / Short Equity fund. “People don’t like volatility they should love it because you can’t buy cheap stocks from happy people” argued Casson. He highlighted Airbus and London estate agent as opportunities to go short. Betting on a turnaround in the commodities sector, the fund is now net long on energy stocks. “They are not bad stocks, just deeply cyclical” Casson explained.

AB’s senior portfolio manager Nicholas Davidson continued the theme of equity investing by making the case for next generation value investing. He argued that traditional value metrics such as price to book or price to earnings ratios have become commoditised. “You can now buy it through an ETF, as an active investor we have to deliver idiosyncratic performance” he stressed. “Think about EBITDA forecasts as a private equity investor would do. You don’t just buy shares but the entire company” he advocated.

First State’s head of Global Emerging Market Debt Helene Williamson moved the debate to Emerging Market Debt, an area which recently caught renewed investor interest. Consequently, she expressed a cautiously optimistic outlook. “China’s rebalancing is just beginning, I don’t think we will see a hard landing, just growth going down slowly” she argued.

The first day was rounded up by a three course dinner of the glamorous Atrium at Bayerischer Hof, followed by a keynote speech by Patrick van Veen, social behaviour expert and founder of Apemanagement. Van Veen illustrated how social interactions between apes can offer crucial insights into behavioural patterns found in the corporate world.

The second day kicked off with Edmond de Rothschild Asset Management (EdRAM)’s senior portfolio manager Jean-Jaques Durand outlining opportunities in emerging market debt. Durand argued while a lot of regulatory attention had been shifted to asset managers, rating agencies had remained virtually untouched, which, according to him, led to arbitrary ratings of emerging market bonds. As a contrarian, he flagged up opportunities in Turkish and Venezuelan bonds.

Jersey-based Lord Abbett continued the fixed income theme with Steven Rocco, partner and portfolio manager discussing investment opportunities in the high yield energy market. Presenting a bullish outlook on commodities, Rocco argued  that the recent volatility in the energy market had created a lot of investment opportunities, since the beginning of the year, he increased his exposure to the sector by 2.8%.

Ian Heslop, head of Global Equities at Old Mutual Global Investors turned the debate to US equities, discussing the possible impact of further US rate rises as well as the rotation from growth to value stocks. Aiming to identify value in US stocks, his fund is currently most overweight on IT and Materials, whilst being underweight on Financials, Industrials and Consumer Discretionary.

Chris Childs, director multi-strategy at BMO Global Asset Management addressed volatility concerns by presenting his market neutral equity stragy. Using long/short investing techniques, the strategy aims to combine value, size, momentum, low volatility and growth at a reasonable price styles. Launched in April this year, the fund aims to reduce volatility to 6%.

Miles Bradshaw, head of Global Aggregated Fixed Income at Amundi turned the debate back to bonds, he presented a total return approach to fixed income investing. Bradshaw highlighted how the Amundi Global Aggregate Strategy selects new investment opportunity with the aim of increasing the portfolios Sharpe ratio whilst offering better risk adjusted returns and / or low correlation to the existing portfolio.

John Otis, institutional portfolio manager, and Ian Sunder, president at US asset manager Brandes concluded the event by highlighting opportunities in their European Value Fund. Otis argued that as markets are not always efficient, the price paid for a specific asset will have a significant impact on long term results. “Being contrarian requires patience” he stressed. Sunder argued that investor preference of growth over value had created opportunities: “Price relative to value is the single most important determinant of returns” Sunder concluded.

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