The past few years have been turbulent: the US real-estate crisis turned into a national debt crisis and euro crisis. Then came the Coronavirus, the war in Ukraine and inflation. Today we live in a world of negative real interest rates. This calls for flexibility.
Starting in 2001, we developed our investment strategy in response to the bursting of the technology bubble. After we launched the Fund in 2007, crises were our constant companions. Today, the debts of industrialised countries are at record levels. Inflation far exceeds interest rates. Never before in the history of post-war Europe has the real interest rate been so low. Many economic laws have lost their validity. However, there is no doubt that the central banks will (have to) keep their interest rates lower than inflation for a long time to come.
In a fragile environment, assets should be robustly positioned. So robust that they can survive crises largely unscathed ‒ but still be able to generate adequate returns in calm times. This is precisely the aim of Flossbach von Storch SICAV - Multiple Opportunities.
The Fund management invests in several asset classes and can quickly adapt the Fund to the market environment: when opportunities are good, the portfolio's orientation can be offensive. Should the situation require it, however, the positioning can be adjusted flexibly.
We invest globally and focus on quality companies with attractive business models and solid balance sheets. Carefully selected, they are highly likely to generate sustainable returns in the future. In every purchase decision, the rewards must be greater than the risks.
The Flossbach von Storch SICAV - Multiple Opportunities has grown significantly in recent years. In our interview, fund manager Dr Bert Flossbach discusses the past, the present and the outlook for the popular multi-asset fund.
Overall, Flossbach von Storch now manages more than EUR 16 billion in the Multiple Opportunities strategy. Has the success surprised you?
Bert Flossbach: In terms of performance – no. However, I did not expect so many investors to be interested in the fund over the years and to put their trust in us. A big thank you for that!
Are you still invested in the fund yourself?
Of course! And Kurt von Storch too. And many employees, relatives, friends, neighbours and acquaintances. Wealthy families and retirement savers alike. This is a huge responsibility, regardless of whether someone invests EUR one million or pays EUR 50 per month into a savings plan. We are very aware of this responsibility.
How would you describe your investment strategy?
Active and commercial. The decisive factor is always the opportunity-risk ratio of an investment.
What can investors expect from the fund?
We don't make any promises we can't keep. Our aim is to generate long-term attractive returns for our investors to help them meet their financial goals and aspirations. This is what we want to be judged on. Incidentally, this aim is the same as it was ten years ago...
Isn't it much too difficult to find attractive investments now, with such a large fund?
No, it's not difficult. The investment universe is huge. The market capitalisation of listed shares worldwide is around USD 80 trillion. And the bond market is valued at more than USD 150 trillion. For a fund like the so called MOF, there are more than enough potentially attractive and liquid assets in this universe. Despite the growth of the fund, nothing has changed in terms of flexibility, which has always characterised our investment strategy and therefore the approach taken for the fund.
So its size has no disadvantages?
None that are particularly detrimental. On the contrary: They are far outweighed by the benefits. As one of the largest equity investors in Europe today, we have direct access to virtually all CEOs and CFOs of the companies in which we invest. So we can get an idea of the quality, strategy and credibility of the company's management. Ultimately, it is management that determines the value of a business over the long term. The board bears the responsibility for the corporate culture and its long-term strategy. This deep insight is a great advantage which helps us to accurately assess the opportunities and risks. The fund size also gives us new opportunities which were not previously available.
The fund has always held up well during stock market crashes. Could you react just as flexibly today as in 2008, for example?
We could. By hedging with liquid futures, for example. This is more about the occasion than the size of the fund. If we hedge on a large scale, we have to have very good reasons for doing so. Hedging costs money and reduces long-term returns – so it should not be an end in itself. This is one of the reasons why we have operated minor position hedges at most in recent years and thus participated in the stock market upswing to a sufficient degree.
Are there any considerations to close the Fund because of its size?
No, there aren't, for the reasons mentioned previously.
The Fund has always held up particularly well when the stock market has crashed, for example during the financial crisis of 2008, but also during the Coronavirus crisis of 2020, when the fund assets already totalled more than EUR 30 billion. What worked well and what was difficult?
Starting in February 2020, the capital markets reacted to the global spread of Covid-19 with violent fluctuations. At the time, we had hedged the equity portion of the portfolio. The consequences and extent of the pandemic were virtually unforeseeable. The challenge, of course, is not to speculate unilaterally on the occurrence of just one scenario ‒ this is where our investment guidelines help us, especially the principle of diversification. In the first half of 2020, our investments in gold and bonds also helped to stabilise performance. Perhaps more importantly, our focus on quality, i.e. on profitable companies with solid balance sheets whose share prices have recovered particularly quickly. Therefore, our investors have lost significantly less than the market during this period.
Which key words best describe the Fund?
Quality. Patience. Trust.
Thank you very much for the interview.
When Flossbach von Storch SICAV - Multiple Opportunities was launched in 2007, the fund was initially intended only for the private assets of the company founders, their families and friends. Today, it has become one of the most popular mutual funds in Germany – and the company founders are still invested in it. A short fund profile.
Never before in history has the policy of the large central banks been so relaxed, and interest rates so low in the industrialised countries. If anyone had claimed ten years ago that banks would eventually demand negative interest on deposit accounts, people would have laughed at them. Negative interest? This has not happened in the past 3,000 years (for as long as records have existed!).
So we are in unexplored territory.
The right selection of different investment forms is therefore much more difficult nowadays than simply comparing account interest. However, financial mathematical models based on historical data and used by many professional investors also have their pitfalls. Just as a map of the North Sea is useless when sailing through the Atlantic, rigid risk models are not suitable when manoeuvring assets safely and profitably through periods of great upheavals. Flexibility is needed.
The Flossbach von Storch - Multiple Opportunities fund management invests in different asset classes. It enjoys a very high degree of freedom which enables the fund to quickly adapt its profile to the market environment. It can take an offensive approach should the situation require it, or a more defensive one if necessary.
The basis for the distribution of the fund's assets is its own independent world view, which currently envisages (further) rising public debt, persistently low interest rates and (only) moderate growth in the global economy.
The attractiveness of single investments is assessed within the context of a thorough corporate or country analysis. The opportunity-risk ratio is decisive for any investment decision. The opportunities must always be significantly greater than the risks. For long-term investment success, it is generally more important to understand the risks than to try to avoid them altogether. There is no investment that offers both short-term security and long-term real capital protection, let alone capital appreciation. The account balance provides the former, the stock investment ensures the latter, to name two examples.
Although the fund price has fluctuated significantly less than average in recent years, we accept price volatility in order to achieve attractive long-term returns – provided that we are convinced of the quality of the respective investment.
We are convinced that a broad portfolio in a low interest rate environment should contain a correspondingly large share of equities. Our focus is on genuine quality stocks – on shares of companies that have a proven business model, grow reliably, are global and have low debt. We consider share purchases to be long-term participation in a company, not short-term speculation. Time is the friend of high-quality equities.
For bonds, we take an active and very opportunistic approach. We wait for investment opportunities – and then exploit them as they arise. Comparatively attractive bond yields can still be achieved in this way.
An important element of our portfolio is gold, which provides insurance against known and unknown risks, in particular the long-term consequences of ultra-loose monetary policy. It is not out of the question that confidence in our paper money system could eventually evaporate if the central bank experiment gets out of hand.
However, we would be very happy if we did not have to make use of this insurance in the future.
This is not an offer to buy or subscribe to securities. The information does not constitute investment advice or other recommendations. The value of any investment may fall or rise, and you may not get back the amount invested. You should consult with your advisor before making any investment.
For the summary of investor rights with additional information regarding legal disputes, please refer to the "Supplementary Information Sheet for Investor Information" document at https://www.fvsinvest.lu/Anlegerrechte. The Management Company may make any country-specific adjustments to the distribution authorisation, including the revocation of distribution regarding its investment funds.
Visit the fund details page of the Flossbach von Storch - Multiple Opportunities R Fund here. There you will find performance data, the portfolio structure and additional detailed fund information.