Investments in the future: Successful European family businesses

“CONREN – Generations Family Business Equity is based on the conviction that family businesses are the better investments. We would like to participate in this success of entrepreneurial families in the long term. The macroeconomic CONREN thinking and the CONREN portfolio management know-how flow into the yield optimization and as part of the risk management. It is suitable for long-term investors who want to take on increased equity risks in favor of higher earnings potential.”Andreas Lesniewiczco-fund manager CONREN – Generations Family Business Equity .

We co-invest with these entrepreneurial families with a long-term investment horizon. We are convinced that family businesses are better investments. As part of a internal CONREN study, do we have 900 listed family companies, analyzed their key figures and price developments very precisely over the last 12 years. The evaluation of different portfolios over different market phases forms the basis of our rules for portfolio construction and the investment process. Once again, the prerequisite for success, and in this portfolio in particular, is implementation discipline.

The fund is an actively managed equity fund investing in listed family businesses in Europe. The aim is a well diversified but powerful portfolio of family businesses in Europe (~40 stocks). The fund is managed with calm and low portfolio turnover with the aim of giving family entrepreneurs time to seize opportunities and solve problems. It is long-term, i.e. oriented over the cycle. The investment process can be described as rule-based with discretionary fine-tuning.

Typical strengths of family businesses:

  • They usually are innovativeproduct and research & development driven
  • You excel balance sheet strength out – you often work for your grandchildren.
  • stable leadership they have fewer management changes than other companies
  • You look at the expense (it’s your own money)
  • You are able to act quick, unbureaucratic decisions meet

In addition, entrepreneurs know their market, their customers – they often grew up with the company. They have a feel for business in their industry. In addition, they are independent and flexible in thinking and acting.
We summarize these strengths in our internal CONREN Family Business Strength Score together. This flows into the selection of individual stocks and portfolio construction.

Our macroeconomic thinking and our portfolio management know-how flow into yield optimization and as part of risk management. The CONREN world view is implemented in the in-house M3-Approach summarized: macro, micro and market dynamics analysis. From the fundamental analysis of how the capital markets should work (macro, micro) and the in-depth examination of the current dynamics of how the markets are actually behaving, the market assessment is formed. The following are firmly anchored in the DNA of the CONREN approach: a long-term orientation, risk-aware and diversified portfolios. There is no benchmark or reporting date consideration. Patience and implementation discipline are the prerequisites for daily work in the CONREN team.

It is suitable for long-term oriented investors who want to take on increased equity risks in favor of higher earnings potential. With a concentration on medium-sized companies (supplemented with smaller companies), the portfolio can also lose more than the overall market (Stoxx Europe 600) in market crises.

risk management

For us as an active investment manager, risk management is not a separate activity, but is integral part of portfolio construction. Like entrepreneurs, we manage risks where they are taken and not purely mathematically, downstream. The basis is a broadly diversified portfolio with approx. 40 stocks: different countries (headquarters and sales), industries, company sizes, investment themes and so on. That comes with that CONREN macro overlay.

A special feature of this portfolio are the special risks of family businesses. The decisive influence of a few people/a family is usually a strength – but this strength can also become a weakness. So we have the qualitative one CONREN Family Risk Score developed. In this we look at, for example, the risk of family conflicts or the succession plan. The assessment of the future viability of business models in these times of rapid change is of central importance.

In connection with any performance fee, the sub-fund is based on the BENCHMARK MSCI Europe Net Total Return Index (Euro). The sub-fund’s investment universe is not limited to the constituents of the index. The index can therefore deviate significantly from the performance of the sub-fund.

You can find a video statement on the fund here.