e-fundresearch.com: From a V-shaped recovery in Q1 to a summer full of global recessionary fears: What are your personal lessons learned from year-to-date market developments?
Nicolas Walewski: Recent market developments have reinforced our views about the importance of maintaining a long-term perspective when investing in equities. Short term moves are mostly driven by external newsflow and investors emotional biases and rarely have anything to do with the underlying performance of the business. Hence, it is important to keep confident during challenging periods if the conviction on the idea is high.
e-fundresearch.com: How did your strategy manage to perform in this challenging market environment and which particular investment themes have delivered the strongest (worst) performance contribution on a year-to-date perspective?
Nicolas Walewski: The performance of the strategy has been resilient so far this year. The fund has risen 18% year to date in line with its benchmark. Our largest positions (Wirecard, RWE and Puma) have been the strongest contributors on the back of improving business fundamentals, good execution by the management teams and improving investor perceptions. On the contrary, some names exposed to emerging markets and international trade have been hit by the uncertainty about the impact of the US trade policy and poor visibility on various political events.
e-fundresearch.com: How optimistic is your view into the future and what obstacles and challenges should investors be prepared to overcome in the remainder of 2019 and early 2020? To what extent does your current portfolio positioning take those expectations into account?
Nicolas Walewski: Political headwinds are likely to persist into 2020, particularly news related to the trade war, therefore, one should expect volatility to remain high. Having said that we have been living in this environment for a very long time and both central banks and governments seem committed to take actions if required.
Our portfolio is relatively protected against geopolitical events as we focus on selecting companies exposed to consolidating industries, well managed and investing in the future and promoting innovation in their product pipeline.
e-fundresearch.com: Why should investors consider an (increase in) allocation to your asset class and in particular your strategy in the current environment?
Nicolas Walewski: We believe this is an excellent time to start increasing/building exposure to European Equities which have been neglected for a while as a result of the region´s political instability and its exposure to international trade. Recent data shows that the underweight positioning in Europe is at historical highs so we could be near an inflexion point. Most companies are performing relatively well whereas its valuations are increasingly more and more attractive. Within a low interest rate environment, which is likely to continue over the coming years, the equity asset class presents one of the most attractive risk/return profiles.
With regards to Alken´s strategy, we are as confident as ever in the value potential of the current portfolio, which trades well below its intrinsic value. The portfolio is well positioned to benefit from a potential rebalancing from growth to value as the valuation gap between those is at a record high. Our active management approach allows us to select investment ideas where we believe there is a meaningful opportunity and over the long term, we have proven that the team can outperform the market and most of its peer group.
