ChampionsNews: In 2017 the economy in the Eurozone has grown as much as it was last in 2007 – according to the Eurostat statistical authority. How does the fund SEB EuroCompanies benefit from the growing economy?
Englund: Our teams approach is to look for desirable exposures by systematically forecasting stock returns using company fundamentals and bottom-up market data. Two core values of our investment process are Quality and Value. We therefore strive to buy high quality companies at attractive prices. A growing economy opens up more opportunities for high quality companies to reinvest their earnings in growing their business resulting in increased corporate value creation and heightened stock returns.
ChampionsNews: Which European equities were particularly successful in the portfolio? And why is the focus on financial and consumer goods titles?
Englund: Looking at last year 2017, our best performing stock positions, measured as total contribution to the fund, was Deutsche Lufthansa, rising 158 percent, and Covestro, rising 34 percent. Both offered strong earnings revision momentum throughout the year. No special focus has been given to financial and consumer goods since we do not actively seek sector bets and sector allocation performance should be limited over time. Performance is therefore expected to be achieved from factor allocation. That being said our investment model found more attractive equities in the insurance industry than in the banking industry contributing to the strong performance of the funds exposure to the finance sector.
ChampionsNews: The fund also invests in companies that have a high awareness for sustainability. Why is this so relevant to the fund?
Englund: SEB Investment Management works with a two-tiered approach towards sustainability. Our sustainability funds invest heavily in the very long-term beneficial effects of a more sustainable and better world. It is our belief that companies, which in a structured way, work with sustainability questions, in the long run, will be the drivers of general economic growth in the world. Our base offering, to which EuroCompanies belong, to a larger extent tries to balance the long-term beneficial effects of sustainability and medium term returns by not investing in companies that violate international norms, are involved with controversial weapons or companies whose revenue from extraction of coal exceeds 20 percent.
ChampionsNews: You emphasize on different investment styles such as value, low risk and size. How are these investment styles combined? Which added value can be derived from the combination for the investor? How is the investment style different from other market participants' funds?
Englund: By extensive testing on historical and present data, we have derived a combination of investment styles that we think will balance each other in different market environments and over the long-term offer the best excess return to a given risk.
Author: Lars Englund, SEB
Date of issue: 5/28/2018
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