Summit Funds Focus: Aberdeen, targeting Europe, outlines its golden rules for investing
The fundamentals of investing remain the same whatever the asset class or geography, according to Aberdeen Asset Managers presenting at InvestmentEurope’s pan-European summit in Lausanne.
Speaking to fund selectors from across the region, senior investment manager Ben Ritchie said the 16-strong team at Aberdeen focused relentlessly on quality, value and price, running high conviction portfolios across its range of equity funds.
The firm also runs fixed income products but is best known for its equity offerings, notably those run by manager Hugh Young, who over 20 years has built up $100bn in assets under management from his base in Singapore.
Ritchie said the firm is now targeting Europe. “We want to build a franchise here that is as successful as our franchise in other parts of the world.”
Among the “golden rules” now promoted by the firm are:
– The treatment of minority shareholders says a lot about the quality of management in any company, and how a firm has treated stakeholders in the past is a reliable indication of how they will do so in future
– The asset management business is not just about assets; it is about people as well. People have to be both incentivised and when necessary, constrained. The nest managements take difficult decisions when they have to, and maintain a long term view
– Investors should be wary of the over-ambitious company, or CEO. Ritchie said “trophy strategies” are those which indulge in high profile M&A, who focus exclusively on sales, are free to use leverage and tend to disregard value
– A firm’s balance sheet strength is critical, not only for the good times, to be able to take advantage of opportunities, but in the bad times, to see it through the investment cycle
– Investors must understand what they are buying. Ritchie pointed to the “attraction of complexity” to some, who equate that with sophistication and success. “You need to strip that back, to focus on strength from simplicity.”
– Rely mainly on your own research – don’t outsource and then complain when the outcome was not as expected. It may be more costly initially, but “when times are difficult you know what is happening in the business”.
– Think long term. That now means different things to different people, but the focus should on outcomes. “Get the inputs right. Performance is an output of process.”
– Benchmarks are measuring devices, not portfolio construction tools! “The benchmark is not the start point of an investment process, it is the end point.”
– Take advantage of irrational behaviour in the market. It still operates on the old drivers of fear and greed, there are opportunities thrown up more often than you think.
Aberdeen’s Global II – Euro Corp Bond EUR Z2 Acc is this year’s winner of the InvestmentEurope Corporate Bond Fund of the Year award
For full details on the InvestmentEurope Fund Manager of the Year Awards, including details about the methodology and categories, visit: http://events.investmenteurope.net/awards