“We should approach everything with both caution and confidence” (Epiket). Value investors in particular are currently experiencing challenging times. Markus Hill spoke on behalf of FONDSBOUTIQUEN.DE with Alex Rauchenstein, CEO of SIA Funds AG, about topics such as “Value versus Growth”, expectation management, the dialogue with family offices, and about investments in commodities. Topics in this context were also two “LIVE events” of this fund boutique (“Natural Resources Day”, Zurich, 17.9.2020, and “Strategic Investing – Thinking and investing like an entrepreneur”, Frankfurt, 24.9.2020). The discussion was rounded off by an anti-stress secret that certain people can also replace reaching for a cell phone or book.
Hill: As in previous years, a lively value versus growth discussion is repeatedly taking place in expert circles. Value investing is investing with staying power – what are the reasons for this in the current market environment?
Rauchenstein: Yes, you say it right. Value Investing is not a 100-meter sprint, but a marathon. In the current situation, it feels like an ultra-marathon. After all, the underperformance of a value-based global strategy has been going on for several years, almost a decade. However, it is interesting to note that with the European share of our portfolio we have been able to outperform the Euro Stoxx 600 by 100% since 2011. In other words, it was almost impossible for a value-oriented, global investor to beat the global index. The situation was different for Europe. In other words – the valuation exaggeration has been taking place primarily in the USA for some time. Now that, in our view, interest rates are unlikely to fall any further and the debt financing of many growth companies has come to a standstill, things are getting exciting. But I and our company can’t predict that it will turn out exactly as it should. Such a forecast would appear to me to be dubious. On the other hand, I continue to invest my children’s money in our Value Fund and not in the NASDAQ.
Hill: Many of your investors are family offices and independent asset managers. How do these investors see value investing, what do you notice during the interviews?
Rauchenstein: Yes, many of our investors come from the family office segment and independent asset managers. Our contacts are often very professional investors with 20 to 30 years of investment experience. All with a clear long-term, entrepreneurial mindset. This fits very well with our investment approach and the view of an entrepreneur. We offer our clients an interesting opportunity to invest in listed stocks with the mindset of a private equity investor for the long term, with daily liquidity.
Hill: A special feature of your firm is the combination of value investing and investment in commodities. How did this combination come about? What arguments speak for this combination?
Rauchenstein: In principle, we are interested in all investment opportunities that present themselves. Because of the greater the selection, the greater the chance of finding something undervalued or “misunderstood”. Now, commodity companies are probably the most cyclical one can imagine – on the other hand, the cycle for most commodity companies lasts 7 to 10 years. If one is now able to correctly assess the cycle in the medium to long term, there are excellent investment opportunities. Many investors find it extremely difficult to correctly value these companies. This is where we close the gap on topics such as long-term thinking, cycles, and company valuation.
Hill: How do you assess the current market situation?
Rauchenstein: The current market situation reminds me and my colleagues very much of the year 2000. Similar to that time, we notice that hardly anyone seems interested in fundamental valuations. Something along the lines of “as long as a company’s sales increase, everything is okay”. However, hardly anyone is currently concerned that turnover does not equal profit. Let’s see how long this will continue. We are monitoring this situation intensively.
Hill: What are you currently working on more intensively? How do you stay in touch with your investors?
Rauchenstein: Covid19 has also somewhat limited our travel activities. Like many addresses in the market, we have reduced direct visits to a minimum. Phone, zoom, Skype – there are currently many ways to stay in dialogue. Just two weeks ago, we took part in the Wiesbaden Investors’ Day. We noticed that after this long communicative “announcement of distance”, many investors are once again enjoying a direct exchange of ideas, face to face. This is of course subject to the usual requirements, such as keeping their distance and wearing a face mask. This year, we will again be holding our event “Think and invest like an entrepreneur” (Strategic Investing) on September 24 in Frankfurt. First of all, thank you for your moderation and your short intro (“fund boutiques”) at the event. One week before, on September 17th, this year’s Natural Resources Day will take place in Zurich. Both events also serve to intensify the dialogue with investors and professionals on topics such as investment styles, asset allocation, and portfolio management in the current market environment. We are particularly looking forward to an unusual topic in Zurich, as the topic of emerging markets is also intensively discussed in Corona times: “Commodities and the development of India” by Chrys Kamber (Picard Angst), Head of Indian Investments.
Hill: If the stock market is not the main focus – how do you clear your head?
Rauchenstein: Investing is my passion and I would do the same if it were only my own money. Covid19 has certainly shown us all once again what the important things in life are. For me, the fastest way to clear my head in a short time is to do the activities with my three boys – a challenge and a joy for every father! By the way, without knowing it, they are 100% invested in our fund. Their investment horizon should be long enough to benefit from it.
Hill: Many thanks for the interview.
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- Commodities, Value Investing, Family Offices and Hugo Stinnes (Interview – Urs Marti, SIA Funds)
5 thoughts on “FUND BOUTIQUES & PRIVATE LABEL FUNDS: Value versus Growth, Commodities, India, Youth and Inner Peace (Interview – Alex Rauchenstein, SIA Funds AG)”
What caught my eye in the interview was the comparison of the current market environment to year 2000: “…hardly anyone seems interested in fundamental valuations. Something along the lines of “as long as a company’s sales increase, everything is okay”. However, hardly anyone is currently concerned that turnover does not equal profit”
So very true and something that is likely to correct in a not too distant future if history is any guide and stable and predictable cashflows again get more attention from the investors.
Nils Schalin / UB Asset Management, Stockholm