Bank Delen would like to do more acquisitions in the Benelux, says its CEO in an interview with Investment Officer. ‘The Luxembourg market is difficult though, because of the fiscal differences. So we would need to buy a local Luxembourg player with local clients. There are not many of those.’
The integration of Bank Delen’s recent acquisitions in the Netherlands is going smoothly, says Havaux. ‘The customers of Nobel Vermogensbeheer [which Delen acquired in 2019] have all moved to our funds.’
‘By the way, we would like to do additional acquisitions, but only if we find people with the same conviction as ourselves. The more this deviates, the more difficult it becomes to integrate operations. By the way, working with the Dutch is a blessing: they are open and direct and know what they want. The UK has been more difficult, partly due to a difference in fund taxation. Luxembourg has also been a lot more difficult, also because of the fiscal aspect. You always have to prove the origin of the capital. Actually, we would need to buy a Luxembourg player with Luxembourg customers. There are not that many of those, and then you still have to do the AML and KYC work.’
Extreme year
The banker with more than 35 years of experience told us he has had ‘an extreme year. I have hardly ever seen anything like this. This is yet another confirmation that market timing does not work. So many people thought they simply could put their money back to work in the summer after they had sold everything in the spring correction. The lion’s share of returns is made in only a few days in the year. Fortunately, as many as 99% of our clients remained invested. This is also thanks to the efforts of our relationship managers, but it’s really only possible if they have invested according to the right risk profile.’
After good periods on the stock market [like the past few months] you get a lot of new, risk-prone clients. People have to pay attention to that. I remember an 80-year old client who had a loss of 50% on his portfolio in 2008. He had a lot of knowledge and managed everything himself - and until then with a good result. But he became afraid of losing his standard of living and sold everything. That turned out to be a big mistake. In fact, he had invested too much in stocks compared than he could stomach. I learned a big lesson from that.’
Performance
Havaux is satisfied with the bank’s year-to-date returns. ‘Our equity portfolio today (17 November) has gained 7.4% since the start of this year. An average, balanced portfolio (with approximately 50% equities) stands at +3.8%. We owe this to overweighting technology, underweighting banks, and overweighting renewable energy. We have 250 companies in our equity section and 500 different names in the bond section. We are strongly committed to forward-looking investment themes, but we are very careful with strong convictions on individual companies.’
Bank Delen is strongly committed to profile funds. Why is that?
Havaux: ‘Tell me what’s better about customised management for 30,000 clients, i.e. 30,000 different portfolios? I wouldn’t know. Who is going to check that on a daily basis? You have to calculate the effective cost price, which is very high. I do not understand why there is a reluctance to introduce centralised management. It’s a flexible way of management, and a client can get in and out quickly, but can also switch to a different investment profile without any costs. This efficiency is desperately needed today because regulations are pushing us towards more flexibility. Services and management are becoming increasingly complex. Next year, for example, there will be a reporting directive on the European ‘Green Deal’, and we will ask clients about the importance they attach to sustainability. Simplicity is therefore a solution in the light of increasingly complex regulatory issues. And I have invested all my own capital in these funds. Doesn’t that tell you enough? I eat my own cooking.
What distinguishes you from other private banks in 2020?
Havaux: ‘We have been calling all clients since March. Within a month and a half they had all had contact with their relationship manager. Above all, we reassured them and urged them not to engage in panic-selling. Of course, daily practice has changed: no events or visits. But we did a lot of small-scale, personal webinars and our inflows have remained at the same level. Client satisfaction remains largely linked to personal contacts.
We also want clients to know exactly what’s in their portfolio. During a typical conversation twenty years ago, there was talk about what had been bought and sold. But sometimes the client went outside without knowing how many stocks were in their portfolio! That really is no longer possible now. I remind the managers that they have to work like a family office. That requires a certain change in mentality, but it is essential. Towards next year, the Delen Family Services will become even more important. It must become the main activity of each manager and will also bind the client to the bank. It’s a titanic job, but it pays off very well in the long run.
What role does sustainability play at Bank Delen?
Havaux: ‘We work in a very consistent way. First, our responsible investment overlay is applied to all assets. You cannot go to the client with just one fund that is very green representing 5% of assets, while the other 95% would not be sustainable. That is not credible. All our profile funds therefore meet strict sustainability criteria. First, we eliminate controversial or unsustainable activities, such as weapons and tobacco. Secondly, on the basis of input from Sustainalytics, we integrate ESG parameters. Third, we enter into dialogue with companies via the specialist consultant Hermes EOS. This also gives us the necessary input to exercise our voting rights. In this way we have a positive impact on the sustainability policy of the companies in which we invest. It is a pragmatic approach, with which we invest €24 billion in sustainable assets.
Finally, how do you look at the future?
Of course, we stick to our business model. Interest rates are going to remain very low, and the biggest risk now is in cash. Today there is little inflation, but that could change one day. People sometimes overestimate their own risk profile and think they are very dynamic. We have a role to play in this. Bonds yield nothing, but they are the lead in the sailboat’s keel. They set the boat straight again at the right moment.