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Letter from our CEO - Q1 2016

USPs, Convictions and Hidden Champions

 

Recently, I was asked what Mirabaud Asset Management’s Unique Selling Point was. The temptation to answer “experienced teams, robust processes, first-rate risk management” was strong. These are, however, not unique selling points, they rather point to an absence of deal-breakers: few investors would view inexperienced teams or weak processes as a compelling reason to invest. Even our risk management, which has been recently highlighted by an international consultant as being absolutely first-tier, would not compensate a lack of USPs.

I volunteered instead that whether or not we are unique is not as important as what makes us who we are, which is the following package of attributes: first, we are constantly ensuring that what we do and how we do it is relevant to investors. This hails back to the origins of Mirabaud Asset Management, which historically provided relevant investment solutions to our wealth management colleagues and their clients (families, entrepreneurs and other "real" end clients) and recently has been providing them to many of the most prominent institutional investors in the world. We believe that when we offer a product, it has to bring clear added value to our clients.

Second, we follow our convictions when choosing what we wish to offer our investors, what we offer the teams we hire and how we support them in setting up compelling investment proposals. A manager who joined recently, and whom we shall mention further on, asked our risk manager what the maximum active share he could have was. He was comforted in his choice of having joined the right house when the answer was that there is no limit, as we want him to follow his convictions instead of benchmark hugging. We are an active manager, are proud of this and keep our active management promises, being benchmark agnostic, pragmatic and passionate investors, to remain relevant to our clients.

Finally, our history as part of a soon-to-be 200 year old financial group, come 2019, means that values of respect, trust and long-term vision are at the heart of how we do business. This, coupled with our history as one of the first hedge fund investors in the world back in the early 1970s, also shows how we have been following our convictions for the benefit of our clients. Navigating several financial or economic crises over the two last centuries has not only tested and reinforced our passion for investment and our people skills, it has also taught us that to be a compelling investor, you must not only be talented, you must also show responsibility and humility.

The high conviction approach is exemplified with the hiring in recent years of a number of teams where we are convinced that their investment universe, their investment approach and philosophy, and their own skills and experience make sense and are both relevant and compelling for clients’ portfolios. With this approach, we had our first fixed income teams join us in London and Paris, as well as an Emerging Market Equity team, a Global Equity team and, most recently, a European Small and Mid cap team. These teams have formed the second floor of our house, more regional and global, while we continue to build and strengthen our first floor of domestic equities (Swiss, Spanish, UK and French), multi-assets strategies and funds of hedge funds.

Each of these teams brought with them something unique in their asset class, their process, their way of identifying opportunities, leveraging inefficiencies and protecting portfolios. As a case in point, when we spoke with Ken Nicholson from the European Small and Mid Caps team, he told us of his passion for what he calls “hidden champions”: small and mid sized companies that are active in highly profitable niche markets with little competition, who are able to grow organically year on year and who are refining the operations of their company to further increase efficiency. It so happens that 80% of such companies are based in Europe and, as they are small and mid sized companies, are not well covered by analysts. Such a company may typically be covered by two or three analysts, whereas large and mega cap companies will be covered by over twenty; this lack of coverage increases the potential for pricing inefficiencies and for avoiding group think. A stock picker such as Ken, who genuinely adores analyzing and meeting companies, and understanding how they operate, cannot be anything but excited when looking at the European Small and Mid Cap markets. When we suggested he join us and we give him the freedom to follow his convictions, we saw the meeting of numerous positive factors: a truly compelling investment case for European Small and Mid Cap equities, a relevant no-nonsense approach, a passionate investor and truly active bottom up manager – joined by an equally passionate analyst, Trevor Fitzgerald. We would provide a relevant open framework for the investments with best-in-class operations and risk management, and a strong active investment house culture.

This has led to a high-conviction active portfolio in a niche sector where few funds exist, where high market inefficiencies exist and companies are strong and stable. As their businesses are generally less affected by macro events and competition, investors would expect stable compounding returns over time with probably less volatility than the large and mega cap counterparts. This makes the two funds managed by Ken and Trevor (a Pan European and a Europe ex UK small and mid caps fund) an ideal complement to existing European large and mega cap investments, which will no doubt bring alpha and superior risk adjusted performance to your portfolio.

This is what we mean by relevant, high conviction, active management. We do not know if this makes us unique, but it makes us who we are.

 

Lionel Aeschlimann

CEO Mirabaud Asset Management