Luxembourg is one of the countries with more funds registered in Europe. We have received the report with the funds preferred by European advisors and selectors from Sharing Alpha. On this occasion, we have analysed the best Luxembourg funds according to European advisors and selectors. The funds selected belong to Flossbach von Storch, Lonvia, Schroders and Robeco.
The SharingAlpha initiative gives us the possibility to find out which fund managers and funds are preferred by European advisors and fund selectors. Fund selectors are asked to rate funds according to their expectations based on three parameters (3 P’s):
- The experience and competitive advantage of the fund manager and his team (People)
- The cost of the fund (Price)
- The way the strategy is executed in terms of risk management (Portfolio).
- On this occasion we have chosen to analyse the five Luxembourg funds in this month’s Sharing Alpha table;
Flossbach von Storch-Bond Opportunities
Frank Lipowski, Portfolio Manager FvS Bond Opportunities
Flossbach von Storch-Bond Opportunities is a globally diversified bond fund with an active investment approach, the focus of which is on corporate bonds, government bonds and covered bonds. The fund flexibly utilises opportunities from the entire bond market. In addition to bonds with investment grade quality, the fund manager may also invest in bonds without a rating or those which do not have investment grade quality.
At present foreign currency risks are entered into only to a manageable extent and is limited to a maximum of 15%. Bond selection is carried out as part of a fundamental analysis process.
In a world of still low to negative bond yields Fixed Income doesn`t exist anymore, we now live in a world of Active Income. The good news is that strategic bond investors can still achieve positive returns while benefitting from diversification effects in their portfolios, if they chose a manager who is both really flexible and highly active in implementing the various revenue bricks that the bond markets still offer. Yield p.a. – that a lot of investors still have in focus the most – is just a number that describes the results of a buy and hold strategy. Flexible management of the relevant return drivers within the yield p.a. can leverage that number a lot. In the end it is all about managing value drivers such as credit spread, duration, liquidity (premiums), curve positioning etc. with regards to the particular rate environment. Without forgetting to consider the overall portfolio context for diversification reasons. By the way: Diversification does not mean, that everything is in positive territory at all times!
Currently we face an environment of high uncertainty with regards to the further inflation path, corresponding central bank policy and following interest rate development. This is combined with ultra-low credit spreads. As the risk-reward doesn`t look fair at present we tend to stay cautious with a rather low credit exposure, a global diversified duration positioning, a reasonable cash position and enough patience to wait for better opportunities that will arise for sure. As they have regularly before as well…
Lonvia Avenir Mid-Cap Europe
Cyrille Carrière, founder and CIO at LONVIA Capital
The fund’s investment philosophy is based on identifying, analyzing and selecting business models that reinvest, in a structural way, their net profits in technology, digitization, R&D and innovation, resulting in talent attraction and the internationalization of their revenues very fast. Our team has applied this philosophy in the universe of small and mid caps European companies for more than 23 years.
This philosophy, based on strict fundamental analysis, together with a successful track record, has allowed LONVIA Capital to develop a unique concept called “The virtuous circle of growth”. This concept was developed by Cyrille Carrière, founder and CIO of LONVIA Capital, in 2007, when Cyrille went from analyzing European multicaps and multisectoral companies to finally managing his first investment fund in the Euro zone. The career of this well recognized manager began in 1998 as an analyst where he spent 10 years in this role; It was during this stage that his deeply analytical and technical profile was forged, which has led him to achieve so many successes during the last 14 years.
The virtuous circle of growth expresses the clarity of ideas through which the team manages today: they know exactly the type of companies in which they want to invest in and they focus on those business models that have structural growth characteristics for the coming decades. The constant reinvestment of its net benefits in innovation, digitization and technology provides these companies with very solid barriers of entry that continue growing as the company executes its strategy correctly.
The fund is invested in global leaders who offer a high added value product or service with a positive impact, also, for our society as a whole. As main areas of investment, we highlight the Nordic countries (led by Sweden and Denmark, the latest is the most digitized country in the world), Germany, France, Italy and Switzerland. It is important to note that 50% of the sales (on average) of the companies in the portfolio come from outside Europe. At the level of sectorial composition, our team stands out as general analysts who do not focus on specific sectors. However, knowing the type of companies they want to incorporate into the portfolio, a relevant part of the fund invests in dynamics associated with digitization, medical technology, automation of industries, robotics, artificial intelligence, industry 4.0, among many other growth niches.
Schroder ISF Asian Total Return
King Fuei Lee y Robin Parbrook, gestores del fondo
The Schroder International Selection Fund Asian Total Return aims to achieve capital and income growth by investing in the Asia Pacific market. It seeks to outperform the MSCI AC Asia Pacific ex Japan (Net TR) Index by investing in equity securities of leading Asia Pacific companies.
The fund is designed to benefit from upward market movements as well as to contain losses during downward phases through the use of derivatives.
Given the challenges facing Asian markets, we believe this absolute return approach can play an important role in portfolios both now and through the cycle. The incorporation of alternative absolute return strategies enhances the risk-adjusted return profile of our portfolio, making it an attractive product for any type of investor looking to diversify their portfolio by adding a non-traditional source of return to that of Asian markets.
Currently, we remain overweight the technology sector in the Schroder ISF Asian Total Return fund, as we are confident that the secular growth trends that underpin our positive view on Asian technology stocks remain intact. Indeed, they are among the best performers in Asia. We have also increased our exposure to Indonesian banks, but we do not see the outlook for Indian and ASEAN companies as bright, and we remain cautious on the fundamental outlook for Chinese equities.
Schroder ISF Emerging Europe
Rollo Roscow, Emerging Markets Fund Manager, Schroders
There are signs that global Covid-19 cases have peaked, which is good news for the global economy, as restrictions are also starting to ease. In this context, in emerging markets there has been a notable acceleration in the distribution of vaccines, a trend that should continue to improve.
Indeed, in emerging Europe, progress in vaccine delivery, with the exception of Russia, was already remarkable. In Russia, there are concerns about distribution, but the openness of the economy is being maintained and appears to be on the road to recovery. It has also clearly benefited from the rebound in commodity prices.
Another variable with a clear influence on markets is monetary policy, which remains accommodative and whose normalisation should have beneficial effects in 2022 as, while economic growth may decelerate from high levels, it is expected to remain solid. Moreover, the CE3 markets (Czech Republic, Hungary, Poland) and Greece should be the main beneficiaries of the EU recovery fund.
It should be noted that this fund is potentially the first step towards greater mutualisation of debt in the European Union and significantly reduces the short-term macroeconomic risks surrounding many emerging market member countries. As a result, these countries have seen their borrowing costs fall.
The combination of stimulus measures and a return to more normal routines should bring about a recovery in economic activity and lift demand. A reflation of economies tends to favour old economy stocks such as energy and materials, which, together with banks, account for approximately 70% of the MSCI Emerging Markets Europe Index and are the dominant sectors in emerging Europe.
Against this backdrop, the objective of the Schroder ISF Emerging Europe fund is to provide capital growth in excess of the index, net of fees, over three to five years by investing in equities of Central and Eastern European companies. We are positive on these markets and are confident that expectations of a sustained global economic recovery and exit from the pandemic will drive a recovery in emerging European equities, both in absolute terms and relative to other markets.
Robeco Global Consumer Trends
Richard Speetjen y Jack Neele, Fund Managers
It is an actively managed fund. Stock selection is based on fundamental analysis. The fund’s objective is to outperform the index (MSCI All Country World Index -Net Return, EUR-). Per calendar year, profitability in 2020 reached 36.25% compared to 6.65% for its benchmark.
Robeco Global Consumer Trends strategy identifies structural consumer growth trends. The first of these is “consumption digital transformation“. The second is “emerging middle class” growth. The third focuses on the growing importance of “health and well-being.” Within these three trends, fund managers try to select the stocks of the structural winners.
It invests in companies in developed and emerging countries around the world exposed to consumption (such as leading digital platforms, media companies, online travel agencies, manufacturers of luxury products and established consumer brands).
The investment process that we apply is made up of three phases:
Top-down identification of long-term trends from the point of view of consumption. Second, bottom-up selection of companies with high exposure to the selected topics combined with growth potential. Third, careful portfolio construction, in which the size of the positions is based on our level of conviction and risk characteristics.
Central bank actions and low interest rates have driven investment demand for quality, growth companies. Low interest rates have presented a favorable environment for companies with great long-term growth potential. Many of our investments fall into this category, due to its market leadership and sustainable competitive advantage. We believe investors should focus on high-quality businesses with valuable intangible assets, low capital intensity, high margins, and superior returns on equity. We believe that the current above-market valuations for these companies are justified, given the quality of their business models, the high levels of profit growth and the sustainability of their franchises. We continue to maintain a positive outlook for our long-term investments.