e-fundresearch.com: Similar to Warren Buffet’s investment philosophy you are not investing in business models that are overly complex or unpredictable – which sectors/business models are mostly affected by this “exclusion criterion”?
Cyrill Marquaire: We tend to avoid sectors in which we deem we do not have the necessary expertise and prefer to leave that to other funds. This includes financials, oil, metals and mining. For the latter for instance, those sectors are driven by commodity prices and we feel we have no capability to predict them. Because of that, we are aware that we can suffer (or benefit) from sector rotations in the short run. But over a three year period, we do not see that as an issue, as we think the performance of the fund will rely on the 30 to 40 stocks in the portfolio, regardless of their sectors.
e-fundresearch.com: From an asset allocator’s view: By what means does the LOF-Europe High Conviction qualify as a core position for European equities?
Cyrill Marquaire: As we said, we run a strategy sitting in three different buckets. As those three categories are uncorrelated, we think we can meet different market conditions and ensure decent relative returns in bull or bear markets.
e-fundresearch.com: After an approximately five year long bull market investors are increasingly becoming worried about the valuation level in Europe – what is your expectation regarding the duration of the current bull market and (on a relative basis) how would your investment strategy behave in a bear market regime?
Cyrill Marquaire: Once again, we are stock pickers and do not invest with a strong view on the macro-environment. What we focus on is investing in companies that will outperform regardless of the medium to long term. However, with the expansion of multiples observed these past few years, it is true that investment opportunities have become more scarce even though they still appear on a regular basis.
Now, when it comes to market crashes, as a rule our fund tends to outperform. It has been especially true in 2011, when we posted an absolute positive performance in a market down 8%. But recently again, we strongly outperformed during the first half of October, which saw a massive market dislocation.
e-fundresearch.com: Thanks for the interview!
