Looney: I have managed KBC equity theme funds for 8 years. I am responsible for the buyback funds since October 2009.
e-fundresearch: Which benchmark do you adhere to?
Looney: MSCI benchmarks for both funds. The benchmark for KBC Equity Fund Buyback America is MSCI USA Index and the benchmark for KBC Equity Fund Buyback Europe is MSCI Europe Index.
e-fundresearch: Are you also responsible for other funds at the moment?
Looney: I also manage two other theme funds; KBC Equity Fund Global Leaders and KBC Equity Fund Fallen Angels.
e-fundresearch: What is the total volume that you manage in all your funds?
Looney: The total assets under management of our equity team in Dublin is over €4 billion.
e-fundresearch: Regarding the performance: which performance did you achieve since the beginning of the year and in the years 2006-2010? Absolutely and relatively to the relevant benchmark?
Looney: KBC Equity Fund Buyback America has started the year 2011 on a positive note with the fund performing well on an absolute and relative basis. While KBC Equity Fund Buyback Europe is also performing positively on an absolute basis, it is slightly behind the benchmark return since the beginning of the year.
e-fundresearch: How content are you with your own performance in the last years and this year?
Looney: In relation to the Buyback America fund, the theme underperformed the benchmark over the year 2010; however I was extremely pleased with the performance of the theme over the previous two years. The theme proved resilient in the US over the years 2008 and 2009 in differing market conditions.
Performance of the Buyback Europe fund has tended to be a bit closer to the benchmark over the last few years with the exception of the year 2006 which was a great year for the fund. Buyback activity was curtailed aggressively over the last few years, particularly in Europe where companies were conserving cash and in some cases raising capital due to prevailing economic conditions.
e-fundresearch: How are you able to deliver added value for your investors with your performance?
Looney: The investment process of the buyback theme funds is based on academic research underpinning the thesis of buyback investing. Academic research has shown that companies that buyback their own shares for valuation reasons tend to outperform their peers over a 3-4 years period. This research also demonstrated that the outperformance was even more positive when you make a distinction based on price-to-book. The reason is that the repurchase motive of low price-to-book stocks is most likely to be undervaluation while “glamour” (high price-to-book) stocks tend to re-purchase for other reasons such as EPS dilution.
All stocks within our universe are therefore screened on a price-to-book basis within their industry groups. The two lowest quintiles of price-to-book are then examined for recent buyback activity/announcements. Any candidates at this stage showing these characteristics are screened for the reason behind the buyback. A stock will only be considered for the portfolio if the company are buying the stock back for shareholder value reasons and must be prepared to cancel the stock once it is bought back. This can usually be established through direct contact with the Investor Relations department of the company if it has not been covered in the company’s buyback announcement. If a stock satisfies all these criteria, it is bought for the fund.
Academic research also tells us that stocks that are bought and held for 3-4 years from the announcement date of the buyback outperform the broad market over this period. This is our investment horizon and so we aim to buy and hold each stock for a 3-4 year period. However, stocks may be sold prior to this if they are not following through on their commitment to buy back and cancel stock. This can be established by screening the companies in the portfolio to ensure that the number of shares outstanding is being reduced.
e-fundresearch: How long have you been a fund manager already?
Looney: I have been a fund manager for 8 years and I have been in my current position as head of equities since March 2009.
e-fundresearch: What were your biggest successes and your biggest disappointments in your career as fund manager?
Looney: My biggest success in my career as a fund manager was my appointment as head of equity funds. This has given me exposure to an even wider variety of investment processes and the opportunity to benefit from the differing views of the investment team.
I see my role as fund manager as a long-term learning process and find that I have gained even more insight from what could be deemed disappointments. As a result, it has been a thoroughly rewarding experience.
e-fundresearch: What kind of capital market situation do we have at the moment? How do you act in this environment?
Looney: Buyback activity has been soaring in the US over the last year while activity is lagging slightly in Europe. For those companies that are buying back and cancelling those shares, the signals are strong. Companies are signalling to the market that they feel their share price is undervalued and they are in good health.
The buyback funds aims at industry group neutrality to ensure that the buyback theme is played as purely as possible and to keep the fund from following specific industries or sectors based on momentum and trends. The recent increase in buyback activity provides the opportunity to expand the universes for both funds.
e-fundresearch: What are the special challenges in this environment?
Looney: With recent buyback announcements growing to such a high level in the current environment, the main challenge is to ensure that I find those companies that are committed to cancelling shares and returning value to shareholders.
e-fundresearch: What objectives do you have till the end of the year and in the mid term for the upcoming 3 to 5 years?
Looney: My objective continues to be the delivery of solid performance for investors. As head of an equity team that specialises in theme funds, I am constantly striving to improve the investment processes of all of the funds under management as well as to find new opportunities and ideas.
e-fundresearch: Do you model yourself on someone? Any ideals?
Looney: While there are many legendary investors that I admire and have inspired me in my career so far, I feel that I would not be in the position that I am today without the strong work ethic and passion and interest in world economics and events that I experienced growing up with my parents.
e-fundresearch: What motivates you in your job?
Looney: I am extremely motivated by my role which constantly challenges me in the ever changing environment that is financial markets. I also find working with a highly skilled team an additional motivator.
e-fundresearch: What else do you want to achieve or do you have any further aims as a fund manager?
Looney: I am always looking to broaden my experience and expertise in fund management and would hope to expand the range of theme funds that we offer, but I’m happy to say that I thoroughly enjoy my role as head of equities.
e-fundresearch: What other profession would you have taken interest in, apart from becoming a fund manager?
Looney: During my summers in school and university, I worked as a lifeguard in Ireland and the US. I always look back on these times with fond memories. If I hadn’t become a fund manager, I’d like to think that I’d be working on a beach somewhere.
e-fundresearch: Thank you for the interview!