Ahead of the annual Sauren Golden Awards in Frankfurt, Citywire sat down with renowned German fund selector and founder of Sauren Fonds Service AG, Eckhard Sauren.
In this interview, we sought to find out how he is positioning himself and an increasing number of fund managers outside of Germany are being selected for one of the most prestigious fund manager awards in the industry.
Mr Sauren, has it got more difficult to find good investment funds today?
It’s not becoming more difficult to find good investment funds but the market environment is making it more trying to find good defensive strategies. In the equity space, there are enough alpha and investment ideas in order to get good returns, even if stocks do not see exceptional but rather normal performance.
With fixed income and conservative mixed asset strategies, you really have to look more closely. In the last 30 years – and since the start of this year – conservative bond strategies had a lot of support, which isn’t going to be the case in the future.
How can investors protect themselves from rising interest rates? Is absolute return really the answer?
In the last three years and with even more emphasis in the last few months, we have really intensified our research in defensive area. This is in order to find those strategies that still are able to generate some alpha.
These include macro-orientated strategies and classical absolute return strategies and in essence have shown that they are able to perform regardless of market conditions.
Can you give us some examples?
In the absolute return area, we find the fund manager duo at Astellon Capital in London very good. We also like still like the Golden Award Winner from last year, Ben Wallace at Henderson. Lilian Co from LBN Advisors, who takes a little more risk in the portfolio, also belongs to the outstanding bracket in this area.
Does that mean that the age of buy-and-hold in bond strategies has past?
With a buy-and-hold strategy you won’t have any joy in the coming years. If you orientate yourself around an index you’ll have no chance when the interest rates and even if they stay where they are at their low levels.
The majority of the fund managers that feature in your analysis come from outside of Germany. Are there too few quality fund managers left to be found in Germany?
It is possible to find good fund managers in Germany but the markets in the UK and US are just generally a lot more wide spread. If you on the lookout without home-bias for good investment ideas, then you often end up looking at foreign investment companies. Finding new investment ideas is just simply easier abroad than in Germany.
Is the industry crumbling in Germany?
I wouldn’t like to interpret it like that. The fact, that this year, more fund managers from Australia, USA and Japan are taking part, is a sign that due to the wide range of possibilities, we do find more investment ideas outside of Germany. That said, we do still continue to find good ideas within Germany.
You and your team are known for uncovering the ‘rising stars’ in Germany that are still yet to be discovered. Do you sell funds when they get too big – even if the performance is still good?
Yes, that is a part of our process. We look for similar strategies with a smaller volume, that as such have more alpha potential. The question that needs to be asked is, how much alpha is still to be found in these funds? If we think the fund manager can be trusted with a larger volume, then we keep the fund.
Which funds did you sell this year due to their size?
With both funds we were convinced with the quality of the managers. The fund sizes – that both lie north of €20 billion – mean that it makes less sense for us, especially when you have attractive alternatives such as the Jupiter Dynamic fund or the StarCapital Argos fund.
Your philosophy is: we don’t invest in fund managers, we invest in funds. How can you be sure that the fund manager and not someone else is making the important decisions?
It’s an important issue. It requires finding out how important the people are around the fund manager. It’s also different from manager to manager but most of the time, it’s the manager at the helm. We ask exactly who has the last say and also how the bonus system works.
These are all ways that mean we can quickly find out, how relevant the fund manager is for the fund. It can be a duo but for us, the most important thing to know is who exactly is responsible – otherwise we simply don’t invest.
The live streaming of the Sauren Golden Awards can be watched on the Citywire Global and Citywire Deutschland channels starting at 21:00 CET. This link will become live from 18:00 CET.