With a return of 46 per cent year-to-date, the ACATIS Datini Valueflex is on a roll this year. The 10 per cent allocation to cryptos, via an investment in three crypto ETFs and a direct investment in Coinbase, have helped considerably. But at the top is vaccine maker BioNTech, which is responsible for 11 per cent of the return, according to a conversation with fund manager Hendrik Leber (pictured), who called the fund the “chilli pepper of an investment portfolio”.
“Many people can’t take the risk,” he clarified. “It can only serve as a 5 or 10 per cent part of a portfolio.”
At German fund house Acatis, Leber manages several of the total 14 funds available, including Aktien Global, a more traditional value-oriented equity fund. The Datini fund is a strategy where he has more freedom than other funds.
The fund is risky, volatile and not intended for people who lie awake at night, is how asset manager Acatis characterised it. Apart from cryptos, the fund also allocates, for example, to a tailor-made inflation-linked note with a leverage of 1 to 50. Manager Leber also has a preference for companies that are actually still in the concept phase.
Statue
By way of introduction, the fund manager placed a small statue in front of his camera. It turns out to be Francesco di Marco Datini, one of the most successful Italian entrepreneurs from the Middle Ages. Leber recently received the statue from one of his clients, as well as the handwritten letter he is holding in his other hand. “Some people are very grateful to us.”
Leber knows many clients personally. He built the fund in 2008, commissioned by a family of entrepreneurs, but decided right away to get involved himself as well and to recommend it to friends and family members. Soon, their friends followed, etcetera. The fact that word of mouth advertising can take a fund a long way is demonstrated by the growth that followed. The assets under management are approaching 900 million euros, while the fund did not do any promotion until halfway through this year.
One reason for not marketing this particular fund is that Leber feels he then has to justify every investment decision. After all, his approach, philosophy and purchases are different, and he does not use a classic asset allocation or standardised investment approach with the Datini Valueflex fund. Leber: “If I have to justify myself, I can no longer follow my instincts. I want to have complete freedom. I want to be able to sell a share if my feeling is not good after a discussion with the CEO, as was the case with Wirecard. His answers were not precise enough for me.”
“Meanwhile, I also want to be able to buy shares in companies that are still in the experimental phase, but that I believe in”’ he continued. “I want to be able to be one of the first investors in a company, even if it means waiting twenty years for the growth I am counting on.”
Planting seeds
The manager explained that in such a case he starts by planting a small seed: a purchase of half a percentage point to a whole percentage point. The pieces are often illiquid at that point, because such companies have yet to prove themselves to the market. And although Leber agrees that he sometimes gets it wrong, other times it yields success.
One such company that the manager bought in the early stages is the hydrogen company SFC Energy AG near Munich, contribution number 4 to this year’s return.
In any case, hydrogen is a popular theme in the fund; recently, the fund included four hydrogen companies, which represent about 7 percent of the portfolio.
So is biotech, as evidenced by the name with the largest weighting: vaccine maker BioNTech. Leber bought the stock for $15, even before it was announced that it would be supplying the Covid-19 vaccine. Leber started with a small position, wondering if the small company could hold its own with the application of four different technologies. “Then came Covid, and I saw the first images of the antibody response of the vaccine developed by BioNTech and realised: this might be the vaccine we need.”
Leber built the position further when it became clear that the registration of the vaccine would go ahead and even further when it became clear that BioNTech would sell 1 to 2 billion doses. According to his calculations, this provided a profit opportunity of USD 10 billion, while other analysts assumed USD 3 to 5 billion. “The price shot up as expected, so we had to sell some because we reached our limit. As a result, the position accounted for 11 per cent of excess return in 2021. The price is now at $270.”
Cryptos
The second most successful contribution is for the sum of the positions in cryptos: three trackers and a position in Coinbase, together accounting for 10 percent of the fund’s assets. The fund has been investing in cryptos since 2016 and Leber attributes great value to bitcoin in particular. “Bitcoin is good for the criminal world, but also for people who don’t trust central banks, don’t trust the money market. Bitcoin is a separate instrument. I can see it doubling again in no time next year.”
Another look at the fund’s top 10 holdings shows that inflation-linked notes also have an important place.: “The world is full of opportunities, we don’t think in terms of risk,” said Leber. “If we see something that is predictable, promising, we think of a way to invest in it. We expected inflation to come and stay, so we asked Goldman to create an inflation-linked note for us, a call option on long-term inflation. It took six months to make it. ‘Is leverage of 1:50 good for you?’ they asked us. ‘Yes, it is for us. ‘Then we’ll do it.’”
For his views on value investing - since “value” is in the fund’s title - Leber again refers to Datini, to whom he dedicated the fund after reading a book about the entrepreneur. Datini owed his success in part to a bundling of a wide variety of companies.
“We look at future value creation, not whether a company is cheap, Leber said. “Some cheap companies I find old school, I don’t see any value there. Other value companies are not cheap. The value of the companies I invest in is higher in the future than it is today, because a company has something in it that is useful. That is why I prefer to call the fund opportunity-driven. Every opportunity has value in it.”
The diversity of companies at Datini is reflected in the fund by a spread across 15 to 20 different asset classes. About 70 percent of the fund - which consists of about 100 names in total - consists of shares.
Partly thanks to the return in 2021, the fund has an average annual performance of 18.4 per cent since its inception 13 years ago.
The five-year performance is 179 percent (22.8 percent annualised), the five-year volatility 17 per cent. The Sharpe ratio since inception is 1.1 per cent. The fund does not have a benchmark.