Independence, an ownership approach, and a high degree of specialisation are key features of fund boutiques. Markus Hill spoke for FONDSBOUTIQUEN.DE with Berndt Maisch, Partner at Tresides Asset Management GmbH, about dividend funds & history, value versus growth, and investor interests. Besides, personal experiences with the topic “Group versus Boutique”, the role of sports and the expansion of personal horizons (“Asia 2030”) were discussed.
Hill: How long have you been dealing with the topic of dividend funds? What are your experiences in this area?
Maisch: With more than 20 years of experience in the field of dividend-based investment strategies, I can certainly count myself among the pioneers in Germany in this originally Anglo-Saxon terrain. As early as 1999 I was involved in the launch of a mutual fund with a dividend focus at my former employer LBBW. Large asset managers such as DWS, AGI, or fund boutiques such as DJE, which are currently on everyone’s lips with their dividend funds, were far from focusing on this topic at the time and mostly played growth stories from the short-lived TMT boom. With the LBBW fund, which I was solely responsible for managing for 14 years, I not only achieved numerous awards for the performance achieved and a fund volume of over EUR 2 billion but above all gained important insights into the topic of “dividend investing”, from which our TRESIDES Dividend & Growth fund now benefits. The years 1999 to 2006 marked a phase of clear outperformance for dividend funds. They were less affected by the bursting technology bubble and from 2003 onwards they even benefited to a greater extent than average from the recovery on the equity market. By contrast, the ensuing financial crisis had a considerable negative impact on many dividend funds and especially on dividend ETFs. This was particularly due to the far too high proportion of financial stocks in the then still young dividend funds and dividend indices. The years 2009 to 2013 then showed a mixed picture. In this phase of economic recovery, classic defensive dividend sectors such as telecommunications and utilities did not perform well, partly because of the often high debt levels of companies. Dividend fund managers with too high a weighting in these sectors therefore only participated below average in the very positive stock market development. The experiences from this long-term learning curve are incorporated into TRESIDES Dividend & Growth. We focus on European equities with reliable dividends, very solid balance sheet quality, and promising growth opportunities, and always keep an eye on a balanced sector mix in our portfolio.
Hill: From a press point of view, dividend funds have been very much in the foreground in recent years, there are a large number of funds in this area. You have just described the long history of the somewhat “boring” dividend funds. What do you do differently in portfolio management?
Maisch: The basis for our stock selection is our research know-how, which has been recognised for years at the renowned Extel Awards as the quality leader in Germany. The stocks we select are then added to the portfolio, not in the form of overweights or underweights, but weighted according to our degree of conviction and the market liquidity of the individual stock. This leads to an above-average active share in the fund compared with our competitors. We are constantly actively looking for new investment ideas and implement them in the portfolio so that the portfolio turnover is also higher compared to other dividend funds. However, the long-term focus of many dividend funds on highly capitalized defensive standard stocks such as Nestle, Novartis, Unilever & Co. Private investors can make such investments as classic buy & hold stocks in their portfolios without the need for active fund management. On the other hand, our additional “Growth Aspect” also allows interesting structural growth themes to be considered. As a thoroughbred European equity fund, the motto “100% shares without hedging” applies, i.e. the investor must be able to live with market fluctuations.
Hill: Which investment style do you pursue – value or growth?
Maisch: That always depends on the respective “value” definition. According to the Morningstar classification, we have a lower value bias than our competitors among dividend funds. If the definition of “value” is aimed at low P/E and CFB industries, then we are underrepresented here, as sectors such as banks, energy stocks, or airlines play a smaller role in our portfolio. In contrast, our focus is more on so-called “quality industries”. By this, we mean sectors that are certainly sensitive to economic cycles, but which have good structural growth prospects. Their representatives must also have first-class balance sheets, generate high free cash flows, and be fundamentally well-positioned. We are also interested in stocks from defensive sectors with growth characteristics within the industry environment, such as Deutsche Telekom with its growth driver T-Mobile US.
Hill: Which investors are most interested in your approach?
Maisch: The focus at TRESIDES is mainly on institutional investors. The high current income from our dividend funds is particularly interesting for foundations, which can use it to finance their foundation projects. But we also see strong interest from pension funds and insurance companies. We have been serving some addresses from these segments as investors for years.
Hill: You originally worked in the banking sector. Why did you choose a fund boutique as your employer? What was your previous experience here?
Maisch: When discussing the topic “group versus boutique” many points naturally come to my mind. The elimination of rigid hierarchies and a large number of internal organizational meetings makes flexible and efficient work in fund management much easier. I also find short paths for exchanging information with colleagues from the fixed income and commodities areas very efficiently. Also, owner-managed asset managers such as TRESIDES require entrepreneurial spirit. The fund managers can actively participate in the strategic positioning of the company. Our financial participation in the company’s capital and direct investment in our fund products underscores our conviction of this strategy. In terms of corporate culture, awareness, assets under management, and performance, we believe TRESIDES is on the right track.
Hill: What other topics do you deal with besides portfolio management? hobbies? Is there an interesting book that you are currently reading?
Maisch: I appreciate a lot of sporting commitment as a balance to the number-driven and nerve-racking capital market day. Cycling marathons such as “Alb Extrem” strengthen your physical condition, soccer strengthens your team spirit and reaction speed, while skiing, in addition to sports, is also a pleasure. I am currently reading “ASIA 2030” by Karl Pilny, as his assessment of the political, economic, and social development of the continent that will decisively shape the world is highly interesting.
Hill: Many thanks for the interview.
FONDSBOUTIQUEN, DIVIDENDEN & STUTTGART (TRESIDES ASSET MANAGEMENT GMBH)