Friday 22/03/2019

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Second consecutive win of the De Tijd/L’Echo Super Award!

CIO Fixed Income DPAM

On March 12th, the Belgian financial dailies De Tijd/L’Echo again organized the Fund Awards. For the second consecutive year, Degroof Petercam has received the coveted ‘Super Award’. This is the Award that is granted to the asset manager with the best performing equity and fixed income funds over a 5-year period. Consistent performance is the major criterion in the equation, accounting for 40% of the overall score. The three other criteria, each with a 20% weighting, are 5-year returns, performance during bear markets and the risk-adjusted performance over 5 years.

Time for an interview with Peter De Coensel (CIO Fixed Income), Guy Lerminiaux (CIO Fundamental equity) and Alexander Roose (Head of International Equity Management).

Q: What are the main reasons for Degroof Petercam receiving this Award?

Peter: Our managers and analysts work and manage based on their own insights and convictions. We avoid ‘noise’ on the markets. Many international investment banks reinforce popular narratives. The consequence is that many managers allow ‘consensus pressure’ to become a factor in their fund management decisions. We do not work with investment committees because they lead to sub-optimal results. Fund managers, responsible for a specific expertise, are fully accountable for their decisions. Our investment decisions are based on convictions and ‘skin in the game’, to quote Nassim Nicholas Taleb. Our compensation schemes, for managers as well as buy-side analysts, take this into account.
Guy: Indeed, at Degroof Petercam we work with our own in-house teams of equity and credit analysts. The fund managers work as independent investors in the short, medium and long term. In addition to purely financial and corporate criteria, it is important to mention that we also take into account ESG (Environmental, Social, Governance) criteria when selecting equities and bonds.

Q: What distinguishes the management know-how of Degroof Petercam of the competition?

Peter: Degroof Petercam is an active manager, which has gained in-depth knowledge about financial markets and risk management. We are also a sustainable manager, which selects investment based on sustainable criteria and a sustainable product range. We have a strong learning curve which dates back to 2002. Finally, we are research-based, as already explained earlier. We have always continued to invest in research capabilities, and this is now paying off.

Q: Bond yields are very low, how can you still make returns with fixed income funds?

Peter: We aim to be fully invested at all times. We do not only focus on absolute interest rate levels and credit risk premia (credit spreads), but actively play the yield curves and corporate bond curves in our strategies. We aim for optimal portfolio construction, whereby our exposure to interest rates, credit spreads and currencies is aligned with various market scenario’s. Fully profiting from our base case scenario’s across bond expertises is our objective. Preparedness to face risk scenario’s is essential.
Fixed income investments require a position in any portfolio. Expected bond returns are currently at attractive levels. People should know that the potential range of bond investments is very large: not only OECD government bonds, but also corporate bonds, high yield, emerging market debt…

Q: What is your DNA in equity investing?

Guy/Alexander: We start from the hypothesis that equity markets are not efficient at all times. This enables us to find companies which stand out from the crowd and which have very good characteristics in terms of management quality, business model, product offering, etc. Often we find these companies in the mid to small cap segment. This has historically enabled us to outperform.
We also have thematic equity funds which play certain themes of the future, like nanotechnology, robotics, sustainable solutions to climate change, sustainable food trends, etc. These funds become increasingly popular and often have substantial exposure to emerging markets as well.

Q: Tell me about sustainability, a hot topic these days. What is DPAM’s philosophy?

Alexander: We have three commitments in terms of sustainability. Firstly, to uphold fundamental rights, secondly to be a responsible stakeholder and thirdly to foster best practices and efforts. Sustainability learning curve goes back to 2002, which enables us to draw on a very rich experience. We are certainly not newcomers in this field.
Sustainability is about assessing ESG risks in each company and sector, and to manage them sensibly. Combined with thorough knowledge of fundamental value drivers, we may generate shareholder value. Sustainability also enables us to capture opportunities on financial markets that regular financial analysis would miss. Indeed, sustainable investing also entails financing companies which may have a positive impact on the environment, society or corporate governance.
In our analytical framework, the UN Global Compact, the UN PRI (which we became signatories of in 2011) and our memberships of local investment forums is very valuable.