In April this year, Auréus launched the Equities Blue Chips fund. The fund is in Morningstar’s highest rated percentile for sustainable funds. “That is amazing. The fund is not labelled as sustainable, and just this one is in the top percentile,” said Auréus’s Chief Commercial Officer Han Dieperink in an interview with Fondsnieuws, Investment Officer Luxembourg’s sister publication (for whom Dieperink writes regular commentary articles).
The Aureus Blue Chips fund is not sold as a sustainable portfolio. “So there is no greenwashing going on here’, according to Dieperink.
Last month, the fund passed the 50 million euro mark. “Everyone sees that a lot of money goes to sustainable companies and that those shares become more valuable. Because of its sustainable character, this fund benefits from the money flow towards those types of shares. This year, Auréus even won the Refinitiv Lipper Fund group trophy for the best small manager.”
According to Dieperink, the fund’s flying start is due to a combination of his own merits and the expertise of FDA (Financial Services Amsterdam), since Auréus uses this party’s research.
“At the beginning of the century, FDA designed a model portfolio that turned out to be a perfect performer, and it still is. Where the index (a combination of Eurostoxx 600 and the S&P 100) is at 19.3 per cent year to date, the FDA’s model portfolio achieves 25.1 per cent after deducting costs.”
“As an asset manager, you can hire 25 analysts but you can also just hire the research and advice of a party like the FDA,” Dieperink added. “We eventually decided to run that model portfolio as a fund.”
In addition to the Auréus Blue Chip Fund, Auréus also has an individual share strategy with a concentrated portfolio consisting of around 35 names. Unlike the fund, that portfolio also has exposure through funds to Asia, emerging markets and small caps.
“Through the 65 companies in the portfolio, we are convinced that they also have sufficient exposure to Asia and emerging markets, also because Blue Chips often consist of multinationals. In the individual portfolio, we have chosen for exposure to Asia, among others, through funds and trackers.”
Avoid investing in banks in particular
Financials make up 25 percent of the Equities Blue Chips fund’s portfolio, but banks are not included. Investors are better off avoiding these values, according to Dieperink, because “that business model is dead”, according to the Auréus CIO. “The business model of banks has been overtaken by reality.”
“Take Adyen (A Dutch e-commerce company). That company is worth more than all the banks on the Dutch stock exchange. The costs of regulation are now so exorbitant that platform parties like Adyen simply take over. The world is changing too fast for banks to keep up.”
“After the crisis, banks were effectively nationalised. If you work at a bank, you have to follow more rules than the average civil servant. This does not make us happy as investors. Add to that the scenario of long-term negative interest rates and a flat curve, and you know that as a bank you are not going to make any money,” said Dieperink. The share of financials in the portfolio includes parties such as Adyen, London Stock Exchange S&P Global and United Rentals.
“Many investors think they need a position in the banking sector, but I can do just fine without it”, he said. “It could well be that things will change in time, but we prefer to invest in disruptors.”
Invest in price setters
Another 27.5 per cent of the fund consists of technology stocks. The emphasis here is on well-known names such as Apple, Microsoft, Alphabet, Salesforce, Adobe, Accenture and Dutch semiconductor firm ASML. “These kinds of companies can add a lot to ‘disruptive innovation’”. Dieperink said he’s not afraid of corrections.
“This portfolio is growth-oriented. Some say that a party like ASML should have been unloaded already. But anyone who pays attention knows that there is a screaming shortage of chips. You see how many problems those shortages cause in, for example, the automotive industry.”
“ASML’s next batch of machines are likely to cost 500 million euros each. ASML used to have competition from Canon and Nikon, but that too is a thing of the past. They can ask what they want for their products. They can also ask 700 million euros for such a machine, so to speak.”
According to Dieperink, this portfolio is a good compensation for inflation. “Interest rates will remain low for another ten and maybe twenty years. We saw that earlier last century. That is all favourable for equities. That low interest offers an excellent environment for blowing bubbles. But if that is the case now, we are only halfway there. We do not hedge those risks. You have to invest in the good companies, hedging is a nonsense in a portfolio of individual stocks.”
Not afraid of corrections
Bull market corrections are very difficult to predict but, fortunately, they are short-lived, said Dieperink. “Thanks to the buy-the-dip mentality, such corrections are now very modest. For a bear market, a larger, longer-term correction, something has to go wrong with the underlying fundamentals such as the economy, liquidity or valuation, and that is not the case.”
“It could eventually go wrong in terms of valuation. But they are going down fast because of rising profits. Corporate profits are rising faster than share prices, the stock market is getting cheaper by the day. Add to that the long-term low interest rates, and the prices could certainly double”
“At the moment, people are mainly afraid of corrections. It has to go wrong sometime. However, more money has been lost with timing of corrections than with all corrections together. Trying to time something like this is therefore at the expense of the long-term return on shares.”