funds in this article
BAt Allianz, Matthias Born established his reputation as a luminary for European growth stocks. He has been managing portfolios with this focus for the private bank Berenberg since 2017 and is once again convincing with his investment results. The fund editors of Euro am Sonntag and the sister publications Euro and Börse Online therefore awarded Born the title “Fund Manager of the Year 2022”.
euros on Sunday: Mr Born, the global political and economic situation has changed radically since February 24th. What do you have or do you want to change in your portfolios?
Matthew Born: It was always wrong to act hectically in such phases. Historical comparisons support this, even if it can remain volatile in the short term. Accordingly, I haven’t changed anything fundamental in my funds because I continue to believe in long-term investing and in the underlying structural growth trends. We also had no direct exposure to Russia. There are some sales exposures in the low single digits, but these are almost negligible in the overall context. We have checked the dependencies on certain raw materials and feel that we are in a robust position in this regard. We have few energy and resource-intensive sectors in our portfolio.
With higher inflation and weaker growth, how can quality growth stocks fare?
First of all, it must be said that the environment you describe, i.e. the so-called stagflation, is of course anything but positive for the general stock market. However, it remains to be seen whether this negative scenario will also occur. What is certain is that in an inflationary environment, those companies that can pass higher costs on to customers, i.e. benefit from pricing power, stand out positively. In addition, as economic growth slows, the stock market should reward those companies that can grow structurally and independently of the economy with a relatively higher valuation. In other words, quality growth stocks should do well in such an environment, at least in relative terms.
Which market segments will you particularly focus on in 2022? And what do you prefer to keep your hands off?
Recently, there has been a lot of discussion on the market about stocks from so-called value sectors, such as banking and energy stocks, as well as other purely cyclical areas. We remain skeptical about these sectors as we see no sign of a sustained reversal of the structural headwinds of recent years. What we see as a short-term and, above all, cyclically driven recovery of these stocks is also already reflected in the valuations and is therefore no longer attractive. Instead, we see opportunities in some growth stocks whose valuations have taken a beating recently. Here we will strike selectively.
What are the virtues of a good fund manager?
I think experience plays a big role. You should have gone through a few cycles by now. And by that I mean not only economic cycles, but also cycles in the portfolio. It’s important to also manage periods of underperformance well. You have to learn that too.
How important is teamwork in fund management?
Very important. Even though it’s me who gets a nice title now, I couldn’t have achieved this feat on my own. In recent years we have built up a great team at Berenberg. And especially in market phases like this, it’s important that I don’t stand there alone and worry, but that we as a team discuss controversially or strengthen our views.
That sounds like a confident team player…
Back when I was at Allianz Global Investors, I helped build two teams: the small-cap team and the growth-stock team. I did that again at Berenberg. And I’m pleased that the team here harmonizes well, represents the same investment style, but still has the ability to criticize each other from time to time. We practically started from scratch here four years ago. If you build something like this together, it welds you together.
How long have you been dealing with growth companies?
For over 20 years. In 2001 I started to manage dit Growth Germany (dit: Deutscher Investment Trust; editor’s note), as well as small-cap portfolios. Well, I’ve known about these types of stocks for a long time.
How does working at Berenberg differ from that at your previous employer?
I really enjoy my current job. But I wouldn’t have stayed at Allianz for 16 years if it hadn’t worked out. Everything has its time. I think there are advantages to seeing both worlds. Because I know how it works differently. Basically, as a small provider, we already have the advantage that we can act very efficiently and that we have a clear focus on one investment style and few portfolios.
And the disadvantages?
In the end, the decisive disadvantage is certainly the lower sales power. That’s a huge advantage for the big houses: the brands are well-known and the sales channels have been expanded. We don’t have all that to that extent. It is more challenging for us to acquire new investment capital.
You have to impress with pure performance.
In the end, the big providers have to, too. But of course you have a certain financial background noise there due to the attached sales channels.
What will happen next in asset management at Berenberg?
We don’t want to over-diversify, but continue to build on the areas where we feel strong. On the one hand, there is the equities area for which I am responsible. In addition, there is also the multi-asset area. We have also built up strong expertise there over the past few years and have achieved good results. Germany is a big multi-asset market and we are still very small in this area. So there is a lot of potential to grow there.
Don’t you want to add any new topics at all?
We’re already expanding at certain points. For example, we recently launched a fund that invests in international micro caps. You won’t find that with other providers. We are aiming for a mix – on the one hand very innovative products, on the other hand a series of blockbusters with which money can be acquired.
Where do you still lack competence?
Where we still have a white spot in the equity sector are emerging markets. We think about being present here with a product.
Are you satisfied with the growth of asset management so far?
Absolutely, if you consider that we started in 2017 with a single equity fund with an investment capital of 50 million euros. That was the Berenberg Aktien Mittelstand. Today we manage around eight billion euros in equities alone. On the fund side, there is also a billion euros in multi-asset portfolios and around 1.2 billion euros in bond funds.
Which market phases do you remember particularly well?
The financial crisis is certainly a formative event for everyone who works in our industry. I also found the time of the new market and the tech bubble to be very instructive. This phase certainly had a decisive influence on my investment approach. I’ve found that business models that have only been around for two years and that won’t make a profit in five years’ time are not for me. I prefer to focus on already profitable companies when picking stocks.
An important insight…
The tech bubble period also helped me get a sense of which strategies are sustainable when talking to management teams. In any case, I learned a lot back then in terms of statements and promises made by managers, but also in terms of the different types of business models.
How important is sustainability for Berenberg?
We implement the topic in such a way that it fits our approach and that we don’t have to bend over backwards. We are fortunate that a quality growth approach harmonises very well with ESG criteria. In recent years, we have not only set up asset management, but also an ESG office with three people. And when you develop that together and stand behind the approach, there is much less friction later on between the portfolio managers and the ESG team. The second point is that our portfolio managers also have to do the ESG analysis themselves for the companies in which they invest. Of course, they are then supported by the experts of the ESG team.
How much do you rely on ratings from ESG data providers?
We believe that you cannot invest based on ratings alone. The rating providers are certainly a useful source of data. But you always have to look at the background. For example, there are companies that do not have enough resources to carry out extensive reporting. This is often the case in small caps. In other words, if I were to invest purely based on ratings, I would end up with a portfolio with very few small caps.
Are there any thoughts of putting sustainability more prominently in the shop window when choosing a company?
No. We’ve avoided it up until now because we said we’ve always done it that way. If the Berenberg European Focus Fund suddenly had “Sustainability” in its name, that would suggest to the investor: Now it’s sustainable, now it’s doing something different. But that’s not the case, so that would be misleading.
His funds:
quality and growth
With the Berenberg European Focus and the Berenberg Eurozone Focus, Matthias Born manages two portfolios that contain European quality growth stocks. The latter fund focuses only on the countries of the euro zone. Born and his team value steady profit growth. Your investment horizon is three to five years.
CV:
The European champion
Matthias Born (47) has been chief investment strategist for shares at the private bank Berenberg since 2017. He studied business administration in Würzburg. In 2001 he went to Allianz Global Investors, where he initially managed an equity fund for German growth stocks and portfolios for European small caps. He also managed the classic Concentra equity fund for many years.
Image sources: Markus Hintzen/Finanzen Verlag
ttn-28