Knut Gezelius is our Fund Manager of the Month. He is the Lead Portfolio Manager of the equity fund SKAGEN Global since November 2014. Knut joined SKAGEN in May 2014 from Goldman Sachs Asset Management in London where he was an Executive Director in the Global Equity team. Previously, he held the positions of Senior Lead Analyst at Entergy Corporation in Houston and Senior Consultant at Applied Value Group in Boston. He completed his military service at the Swedish Defense Language Institute (Tolkskolan) and subsequently worked at the Embassy of Sweden in Moscow. Knut holds an MBA from INSEAD and dual BSc. & MSc. degrees in Nuclear Engineering from the Massachusetts Institute of Technology (MIT). He is a CFA charterholder.
When and how did you start your career in the financial industry? Did you have any other vocation?
The world of investing weaves together knowledge ranging from science and economics to finance and psychology. This multi-facetted career has always appealed to me and essentially every previous job has been a stepping stone toward a lead portfolio management role. Joining the global equity team at Goldman Sachs Asset Management in 2010 accelerated the learning curve. However, I have had other jobs outside of finance previously and clearly those positions also contributed to shaping my thinking around investments. During my studies at MIT, I worked part-time as a federally licensed nuclear reactor operator. Later, I worked with strategic planning at the US energy and power behemoth Energy Corporation in Houston and I also did a stint in management consulting.
What’s your biggest challenge as a portfolio manager?
The biggest challenge for long-term investors like ourselves is that the market inevitably evolves over time. Fundamentals shift, market dynamics change and competition improves. Complacency around any of these aspects is a big danger to every portfolio manager.
What sustains your drive within the industry?
Intellectual curiosity, passion to perform, opportunity to interact with many highly talented individuals. Additionally, I am both humbled by and grateful for the trust conferred on us by our clients to manage their long-term savings. This responsibility feels like an enormous privilege every day.
What has been the most extraordinary thing you have seen in markets? How do you see the next steps regarding the second wave of COVID-19?
The oil price turning negative in April was an absolutely extraordinary market event. It also showed that considering unthinkable events to stress test a portfolio is a worthwhile activity. Predicting how the COVID-19 pandemic will unfold is not within our skill set, but we believe that the SKAGEN Global portfolio is positioned for resilience in a wide variety of scenarios.
Which assets do you think will perform best in Q3 2020 considering the current market situations? Which assets are performing well under stress scenarios?
We openly confess that forecasting short-term market movements is beyond our ability, so we choose to concentrate our efforts on the long end of the equity yield curve several years out where the field is less crowded. On a mid-to-long-term view, we remain optimistic about the opportunity for our portfolio companies to deliver attractive returns to shareholders.
What are you telling clients and others troubled about the current economic climate?
We consistently emphasize to our clients the importance of taking a long-term view and seeing through the short-term noise and gloomy media headlines that typically instill fear and incite excessive trading, both of which tend to erode total return over time for many investors. The saying “There is always something to worry about” is a timeless truth and we cannot think of a single time period when there was no trouble anywhere in the world.
What key principles drive your investment processes and why?
In broad terms, we follow three key principles. First, we seek to invest in companies that enjoy favorable fundamentals. The odds of identifying attractive long-term investments in industries facing structural decline are usually not good, so why give yourself a handicap? We aim to follow the legendary investor Charlie Munger’s advice to “Fish where the fish are”. Second, we follow an applied value investment approach that looks beyond outdated accounting-based valuation multiples such as price-to-book to determine whether a stock is genuinely undervalued. We are not afraid of taking an unconventional approach if that is where the logic and reasoning take us. In fact, doing like everyone else is likely to generate only average results, so we strive hard to remain independent thinkers. Third, in our portfolio construction process we constantly evaluate risk factors and psychological biases. We try hard to be ruthless capital allocators in that every position has to earn its spot in the portfolio based on its forward-looking risk-reward profile. Simply put, we build the portfolio bottom-up based on meritocracy, there are no sacred cows.
What differentiates your fund from others, and how does this differentiation bring value to customers?
Differentiating aspects of our fund come in three dimensions. First, we have a uniqueunconstrained investment mandate that allows us to seek out companies in virtually any country, sector or size. This broad mandate provides us with a large opportunity set that may not be available in its entirety to other managers who often are shackled to a specific style, size or geography box. Second, we have a truly multi-year investment horizon that goes far beyond the myopic quarterly estimates that are common elsewhere in the investment industry. The true impact of non-linear optionality is rarely visible in near-term forecasts, so one needs to look much further out in time to capture the full compounding effect. Third, we obsess about investing in companies where the management teams are well aligned with shareholders and have demonstrated exceptional capital allocation skills. Effectively, clients in our fund end up partnering with some of the best management teams in the world.
