by Jrg Billina, Euro on Sunday
In 2007 he founded together with Henry Muhle Gan public company. In 2019, they were both voted Fund Manager of the Year as a team by Finanz Verlag for the first time. Your Acatis Gan designed as a flexible mixed fund value event follows a value strategy based on Warren Buffett. In addition, the two professionals use opportunities that result from company-specific occurrences and events.
uro on Sunday: Mr. Rathausky, the US stock markets have lost massively since the beginning of the year. What’s pulling prices down?
Uwe Rathausky: Equities have long been considered the only alternative. In view of a global bond market in which up to 30 percent of all outstanding securities were listed with negative interest rates, this assessment was entirely understandable. But now inflation is skyrocketing and interest rates are coming back. This has really messed up the market and deflated some speculative bubbles.
What drives inflation?
World trade, which has functioned for decades, is currently in chaos. Shortages of raw materials, goods, food and the energy crisis are fueling inflation. This is mainly due to the strict lockdown measures in China and the war in Ukraine.
Also the narrow one US job market causes price pressure?
Yes, new positions are being created, but they are difficult to fill. On the one hand, because many Americans do not want to return to the labor market due to lavish fiscal support during the corona pandemic, on the other hand, because there are declines in immigration and labor mobility.
Have a large part of the negative factors on the US markets already been priced in?
That depends on further developments. In any case, the personal checks for US citizens will eventually be issued and China will begin to end the lockdown measures. The easing is taking place against the background of massive economic damage: real estate sales, industrial production and retail sales have collapsed in China at a rate not seen in decades. The unemployment rate is skyrocketing.
Beijing must take countermeasures?
Yes, and that should be good for world trade. So there are signs of relaxation here at first. The bottom line is that globalization is picking up speed again. Anything going the other way is bad, pushes prices further and weighs on the stock market.
In your opinion, is the US economy threatened with stagflation or even a recession?
The risk is there, but making a forecast here would be pure speculation. In any case, Europe seems to me to be economically much more vulnerable than the USA. The US is a beneficiary of the European energy crisis. They cover their energy requirements at a fraction of our costs, and their liquid gas is becoming an export hit.
And how do you assess the development in China?
The West Siberian gas pipelines are currently being converted to China and India. According to experts, it will take three years and about the same amount of time until we have finished building our liquid gas terminals in Germany. As a result, the big liquid gas importers China and India are likely to rely on cheap Russian gas in the future and we in Europe will buy expensive American liquid gas instead. Apart from Europe, I don’t see any losers in this castling.
Against this background, what changes have you made in the Acatis Gan Value Event Fund in recent months?
No essentials. After the good stock market year 2021, we were comparatively conservative at the turn of the year with 68 percent in equities and 32 percent in liquidity and short-dated money market replacement bonds in US dollars and Norwegian kroner. We then used the sell-off phases on the stock exchanges in the last few months to slightly increase our share quota from time to time in an anti-cyclical manner. It is currently 72 percent.
But your cash quota is still high?
The pure cash ratio is less than five percent. But in combination with short-dated money market replacement bonds, some of which bring us returns of two percent per year, it is just under 28 percent. It gives us enough flexibility to be able to react actively to what is happening on the market. So we continue to keep quite a bit of powder dry.
Has the geographical focus of the portfolio also changed?
no Even before the Ukraine crisis, we had not invested in companies from Eastern Europe or Russia, and we had also avoided companies that were at considerable risk with investments and company holdings in these countries. In addition, the energy price shock, which is now hitting many sectors very hard, hardly affects us because we are not invested in capital-intensive industrial companies such as chemical groups and mechanical engineering companies.
Which titles are you interested in?
We continue to focus primarily on technology heavyweights from the USA, such as Apple, Microsoft, Alphabet, Amazon and Salesforce. Although these have also had to cope with significant price falls in recent weeks, they have excellent prospects and are now valued very favorably.
In your view, are these values?
Absolutely. Alphabet, for example, should generate around $300 billion in free cash flow over the next three years alone, and invest about half of that in buying back its own stock. With a debt-free market valuation of just $1,500 billion and a P/E of under 20, we see a lot of value. And enough growth through the business opportunities.
Where can you find attractive titles on the bond market?
Still not across the board. For us, the risks continue to outweigh the risks, especially in the case of bonds with long maturities. But we are glad that we can strike again with short-dated bonds.
The rate of inflation in the euro zone and Germany has risen to record highs. How much must or can the European Central Bank raise interest rates?
After the interest rate increases in the USA and the high inflation rates in the EU, a correction in the European monetary policy necessary. Interest rate hikes in the US are putting upward pressure on the US dollar against the euro, and this is adding to inflationary pressures in Europe. The ECB should counteract this and also control inflation expectations. It also needs to regain credibility after its failed inflation forecast.
How high can interest rates rise?
A rise in interest rates to two percent over time would not be a drama, neither for the indebted southern states nor for the European stock markets. Some things have already been anticipated in the stock market prices.
How well does your investment strategy match the current stock market situation?
The value and event approach of Gan Aktiengesellschaft has stood the test of time through all the ups and downs. That is why the current stock market situation is nothing unusual for our investment strategy.
Flexible combination:Equities currently account for almost 72 percent of funds, and bonds for 24 percent. Since it was launched in December 2008, the fund has returned an average of 7.8 percent per year.
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