Asset management is very different now from what it was five years ago. Since the crisis struck Europe, risk appetite has been subdued, which in turn has taken its toll on returns. However, as markets slowly return to form, asset managers are once again emerging as favourites with HNWIs and institutional clients.
Founded in Liechtenstein in 2001, quickly evolved into a successful asset management firm operating across Europe. Since 2004 it has been headquartered in Zurich, and its small but efficient team is committed to delivering a personalised service. Today it is an authorised asset manager in Switzerland regulated under the supervision of the authorities.
A stalwart of the firm’s products is the Triple Fixed Income Opportunity Fund, which benefitted from the slow market and offers phenomenal returns. The increased volatility afflicting the market since 2008 has not been kind to many asset managers playing in Europe, but the firm has persevered with its funds and remained profitable. And while others have struggled to maintain diversified portfolios, Finanz Konzept has strengthened its own funds, and continued to perform solidly. And now that risk appetite is returning to the market, the company is ideally positioned to provide diverse and solid investments for its clients.
It has not all been doom and gloom for fund managers. Low interest rates have meant that borrowing has been cheap, and the stock market has been consistently undervalued. Clever investors and managers have found cheap and efficient ways of keeping their returns up while the market has been down. At Finanz Konzept, managers have been busy investing in bonds and avoiding the liquidity trap that has flooded the market since Basel III was implemented.
For Finanz Konzept, each client’s individual needs are the highest currency, and each portfolio is tailored to measure. But it is the company’s dynamic investment model that attracts discerning clients. Over the years, the experts at Finanz Konzept have become adept at playing the weak European market to the advantage of their clients and have created a variety of asset management products and funds. Lars Oberle, Chairman of the Board of Directors, spoke to Mrassociates about the current investment landscape in Europe, how his company is taking advantage of the economic environment, and about its two successful funds.
How has Europe’s debt crisis affected the business of asset management?
The crisis deeply affected the business of asset management. The behaviour of investors and the pricing of assets are the main factors that affected the business. Investors are seeking returns comparable to those achieved in the last decade. Considering that central banks worldwide are flooding the markets with liquidity to stabilise the markets – which are already under threat of government debt crises in developed economies – it is very difficult to generate acceptable returns with the same or less risk exposure compared to the time before the crisis. So, many asset managers have increased risk taking to meet the needs of investors. Hence, the pricing of assets is skewed and not reflecting the real risk proportions. If another crisis were to occur in the near future, it would have an even bigger impact on the world economy, causing hyperinflation or an extensive economic recession.
How has Finanz Konzept adapted to negotiate these challenges?
Though from the beginning we have had a strategy that is set up under a long-term approach, some adjustments had to be made to manage these challenges. To avoid unjustifiable risks, the investment focus changed in a profound way. New criteria have been also implemented to our valuation process in order to identify the ‘new’ risks better, especially macroeconomic risks.
Do you foresee Europe’s financial climate improving at any time in the near future?
In order for Europe’s financial climate to improve, the real economy has to be improved. As long as there is no catalyst from the economy, an improvement of the financial climate cannot be expected in the near future. In the long run, however, there will be an improvement due to the nature of business cycles. But the potential is limited as the markets are saturated with liquidity from the central banks.
What is Finanz Konzept’s position in the market and how do your services differ to those of your competitors?
Our strategy is based on different approaches; a top-down as well as a bottom-up procedure is pursued. In addition, an investment decision is taken only if relevant factors meet our stringent criteria. Own methods identify undervalued bonds that contribute efficiently to the success of our portfolio. Undervalued bonds benefit from the recovery in the credit quality and thus provide a useful diversification to the traditional bond portfolio. Our clients benefit from independent high-class asset management with a remarkable risk-return profile, which we are continuously improving.
Which countries and asset classes are you invested in, and for what reasons?
The main investment focus is Europe (see Fig. 1). Within Europe, bonds from companies in countries with relatively low government debt are favoured at the moment (see Fig. 2). In general, it depends on different factors during the investment process so that we can’t say that we invest in a particular country. However, the debt of a country is an important factor as a decrease in economic output would affect the companies in these countries most. Due to the expansive monetary policy, the risk-return profiles aren’t generally attractive in comparison to other companies in countries with lower government debt.
Tell us about the investment objectives of the Triple Opportunity Fund
The Triple Opportunity Fixed Income Fund aims to achieve a maximum total return. Although there are no geographic restrictions, the fund invests mainly in European government, corporate and convertible bonds and short-term securities and debt derivatives. A leverage of up to 200 percent of the assets is possible; however, the current leverage depends on market conditions. In this way, the duration can be managed.
The fund is committed to investing in securities that are significantly undervalued, which are identified with our methods and models. The fund seeks a benchmark independently to a target return of between eight and 12 percent yearly on the euro. Therefore, the currency risk is hedged against the euro (see Fig. 3).
How has the fund performed over the past two years?
The Triple Opportunity Fixed Income Fund was issued on May 2011. In 2011, the performance was -3.61 percent, which jumped to 26.58 percent in 2012. Besides a general decrease in euro interest rates in the last year, some recoveries of undervalued bonds contributed to the performance significantly. The fund seeks a yearly volatility of no more than 10 percent. Current data shows that the volatility is within that limit.
Do you have plans to expand to new markets or launch any new products and services in the near future?
We always optimise the methods and models for our funds; innovation is also a main focus in our company. In the near future, we want to offer physical diamonds merged in appropriate portfolios to our clients in addition to the Physical Diamond Fund, which we also manage and optimise. Our clients profit from innovative, independent and professional wealth and asset management.