The past ten years have been turbulent: The US real estate crisis turned into a sovereign debt and euro crisis. The crises resulted in a "world without interest". A world in which flexibility is more essential than ever.
The Flossbach von Storch SICAV - Multiple Opportunities fund is now ten years old. Ten years that packed more than a few punches. The crisis of the industrialised countries was our constant companion. Never before in history has central bank policy been so relaxed, interest rates so low. If anyone had claimed ten years ago that banks would eventually demand negative interest on deposits, people would have laughed at them. Negative interest rates? This has not happened in 5,000 years (for as long as records have existed!). But now they are here.
In this environment, assets should be invested in a robust way. So robustly that they can survive crises largely unscathed – and achieve sufficient returns during quiet times. This is the approach of the Flossbach von Storch SICAV - Multiple Opportunities fund.
The fund's 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 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 be significantly 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.
Have you considered closing the fund because of its size?
No, we have not. For the reasons mentioned above.
Which keywords best describe the fund?
Quality. Patience. Trust.
Thank you 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.