e-fundresearch: Mr Andrew Dykes you are the fund manager of the Berenberg Sustainable European Small and Mid Cap Fund. Since when are your responsible for the fund management?
Dykes: Inception Dec 2007.
e-fundresearch: Which benchmark do you adhere to?
Dykes: DJ Euro Stoxx TM Small.
e-fundresearch: Are you also responsible for other funds at the moment?
Dykes: Co manager of the Berenberg European Small and Mid Cap Fund and the Vontobel European Small and Mid Cap Fund.
e-fundresearch: What is the total volume that you manage in all your funds?
Dykes: €170m in European small and mid caps
e-fundresearch: Regarding the performance: which performance did you achieve since the beginning of the year and in the years 2003-2008? Absolutely and relatively to the relevant benchmark?
e-fundresearch: How content are you with your own performance in the last years and this year?
Dykes: With the exception of the second half, and particularly last quarter of 2008, I have been very pleased with the performance of the funds that I have been involved in managing. The Berenberg European Small and Mid Cap Fund ranked 9/96 out of the peer group (Source Feri) over 3 years to June 2008. In addition the fund managers David Houston, Jimmy Burns and myself have been recognised by a range of rating agencies, including Citywire across seven European markets.
With regard to the Berenberg Sustainable European Small and Mid Cap Fund the first half of 2008 was strong, with the fund 3.2% ahead of the benchmark index in relative terms. However the second half of the year saw this reverse as the fund suffered during the extraordinary economic and stockmarket events. The main reason for this was due to the fund’s high exposure to small-cap companies relative to an index dominated by mid-cap companies. The small-cap companies saw more pressure from low liquidity issues resulting in distressed selling.
The relative performance in 2009 is starting to recover already with the fund up 7.9% against the index up 1.6% at the end of January. The distressed selling of small-caps has abated and I believe that when investors start to look at the fundamentally cheap valuations to be found in the small cap universe many of the share prices will move up significantly.
e-fundresearch: How are you able to deliver added value for your investors with your performance?
Dykes: Disciplined bottom up stock picking process carried out by an experienced team. With a focus on sectors where we have a deep knowledge of the industries and where European companies often dominate globally.
e-fundresearch: How long have you been a fund manager already?
Dykes: Over 11 years.
e-fundresearch: What were your biggest successes and your biggest disappointments in your career as fund manager?
Dykes: Successes – Industry recognition, with top ratings and awards, for the performance of the Berenberg European Small and Mid Cap Fund to June 2008. Helping to refine and develop the conservative and disciplined Berenberg investment process.
Disappointments – Giving back the strong outperformance in both the Berenberg Funds in the second half of 2008.
e-fundresearch: What kind of capital market situation do we have at the moment? How do you act in this environment?
Dykes: Long term fundamental valuations in the small-cap end of the market have been replaced by technical stock market issues. These technical factors peaked in the last weeks of 2008 when many funds seemed prepared to sell certain smaller company holdings at any price.
The downside of this was that our performance record suffered in the last quarter of 2008. The upside though is that at Berenberg we focus on making long term investment decisions, so the opportunity to buy market leading companies at extremely cheap valuations should help the funds deliver very strong returns when some confidence returns to the market.
e-fundresearch: What are the special challenges in this environment?
Dykes: The time horizon of many investors has shortened to weeks and their focus is trying to work out what other investors are doing. The best investment decisions are normally contrarian and made with a time horizon measured in years. At the moment it is important to keep your confidence to make the contrarian investment decisions for the long term.
e-fundresearch: What objectives do you have till the end of the year and in the mid term for the upcoming 3 to 5 years?
Dykes: To maintain the turnaround of the poor second half 2008 performance of the fund and to continue searching for smaller companies whose products and services can deliver a more sustainable economic development. Often these companies dominate small, but very interesting, niches and are often overlooked by mainstream investors. For example, it is possible to invest in the renewable energy sector without having to pay high multiples for positive cashflows which are still a few years away.
e-fundresearch: Do you model yourself on someone? Any ideals?
Dykes: No one in particular. But if I could stock pick like Warren Buffett and carve a racing ski like Bode Miller I would be very happy!
e-fundresearch: What motivates you in your job?
Dykes: As a fund manager researching a large universe of smaller European companies to build a well diversified portfolio - every day offers up some new and interesting insights. It is a privilege to be in a job that involves meeting successful companies and managements from all parts of Europe.
e-fundresearch: What else do you want to achieve or do you have any further aims as a fund manager?
Dykes: To continue to build a successful long term investment record that investors in the fund will benefit from. And to show that investing with a sustainable overlay is both good for investment returns and for the planet.
e-fundresearch: What other profession would you have taken interest in, apart from becoming a fund manager?
Dykes: After university I worked as a guide in the Alps and in Africa. There have been some days in the market recently when I wish I was still working in the great outdoors! I hope that by running this Sustainable Fund, which tries to encourage the companies we meet to think about their impact on the environment (and only investing in companies that do care), that the fund can make a difference in preserving our natural habitat for future generations.
e-fundresearch: Thank you for the interview!
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