e-fundresearch: Which benchmark do you adhere to?
Peers: As yet, there is no index which adequately represents the broad water theme which does not involve a disproportionate exposure to utility stocks. For this reason, we set long-term strategic weights for each of the main sectors along the value chain for water as a starting point in the portfolio construction process and build well diversified portfolios around that proprietary framework to capture the strongest growth prospects in each sector. In performance terms, we aim to generate alpha relative to the MSCI World Index.
e-fundresearch: Are you also responsible for other funds at the moment?
Peers: Apart from managing our water portfolios, I also head up the team of portfolio managers and analysts responsible for researching and managing our other environmental strategies which also include Alternative Energy, Climate Change and Agribusiness. We have just launched (July 1st) an innovative new strategy, the Global Environmental Solutions Strategy, which aims to capture the most compelling investment opportunities across the key sectors in energy generation and distribution, energy efficiency, water, waste and agribusiness.
e-fundresearch: What is the total volume that you manage in all your funds?
Peers: The current assets under management in our water strategy amount to € 617.9 million. Total assets in all of our environmental strategies amount to € 1.2 billion.
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?
Peers:
e-fundresearch: How content are you with your own performance in the last years and this year?
Peers: The Water Fund has delivered outperformance against the broad index every year since it was launched in late 2000 with the exception of the last quarter of 2008. Year to date, water stocks have rebounded in line with the market since March and our Water portfolio is outperforming the broad markets and our competitor funds year to date.
e-fundresearch: How are you able to deliver added value for your investors with your performance?
Peers: In the Water fund, we have developed a unique product which gives investors access to one of the most compelling investment stories in capital markets, offering the prospect of strong risk-adjusted returns. Water has defensive growth characteristics but also plays to the prospect of strong investment into water assets through repair and replacement of ageing distribution systems in developed countries and new installation in the developing world, especially in China and India. Regulation of water quality and new technological developments are also key drivers for the water sector, throwing up very interesting opportunities in companies whose products and services are focused on water quality, testing, wastewater remediation and metering.
We have a well-established and resourced specialist team in Dublin managing our water stocks and it is the combination of a tried and tested investment process, and excellent growth prospects for the water sector, that lead to the attractiveness of this fund for investors, in our view.
e-fundresearch: How long have you been a fund manager already?
Peers: I’ve been managing the Water fund for some six years at this stage. Prior to this, I was an analyst working with the fund manager of the environmental strategies.
e-fundresearch: What were your biggest successes and your biggest disappointments in your career as fund manager?
Peers: No professional disappointments yet, thankfully. I would like to have been ahead of the game in terms last year’s melt down in credit markets, but at least I was in good company…
Some of the most interesting times of my career as a portfolio manager have been related to my research on smaller cap companies in the water space, especially in the technology area. We take a very keen interest in new technological developments in our sectors and there have been a number of key innovations, especially in the desalination sector, in recent years which have yielded excellent returns for our fund. We work closely with a panel of environmental scientists who assist us in our research efforts, especially in relation to technological developments and this interaction has proved stimulating as well as rewarding.
e-fundresearch: What kind of capital market situation do we have at the moment? How do you act in this environment?
Peers: We feel 2009 is definitely the toughest year for our sectors in terms of difficult earnings comparisons - 2010 will be significantly better for municipal water & wastewater as stimulus spending kicks in.
Falls of 15% in capital expenditure on water equipment in 2009 will be reversed by a strong bounce back in 2010 and 2011 as restocking kicks in. The main general market issue for us to watch will continue to be infrastructure and funding related – key factors to watch will include the extent to which massive stimulus spending on water, especially in China and the US, becomes evident in order books and the ability of municipals to resume funding of water projects with ease via bond issuance.
e-fundresearch: What are the special challenges in this environment?
Peers: The main challenge remains navigating a thematic strategy with very sound long-term secular drivers through a very volatile environment in broader markets. We remain cautious on low-quality companies that have participated in the recent rally, focusing the portfolio on companies with strong balance sheets, solid business models and recurring revenue streams. In the current environment, businesses with recurring revenues and cash flow, operating and financial leverage and a defensive end-market profile will be the winners in their sectors and this is where we’re placing the emphasis at the current time.
In terms of sectors, we continue to overweight the water utility sector due to its defensive characteristics and compelling valuations, especially in the US and UK.
For the time being, we will maintain an underweight position in the water infrastructure sector and a broadly neutral weight in water technology, as the fundamental demand outlook in these sectors has yet to improve.
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?
Peers: My performance objectives are focused on delivering outperformance for our investors vs. the MSCI World on a rolling three year basis. The water strategy is outperforming so far this year and we are focused on navigating through still volatile markets to make it to year-end ahead of the curve.
e-fundresearch: Do you model yourself on someone? Any ideals?
Peers: I count myself lucky to have worked with many talented and committed colleagues in my years with KBCAM – too many to mention here.
e-fundresearch: What motivates you in your job?
Peers: The challenge of motivating and inspiring a team of terrific colleagues to achieve their best for our clients and ourselves, professionally.
e-fundresearch: What else do you want to achieve or do you have any further aims as a fund manager?
Peers: I believe that investing in water represents a fantastic opportunity for investors and have been called a little obsessive on the issue! My hope and expectation is that the team and I can continue to deliver an excellent product for investors and contribute strongly to KBCAM’s steady growth profile.
e-fundresearch: What other profession would you have taken interest in, apart from becoming a fund manager?
Peers: Maybe an astronaut! Or maybe a professional table tennis player which is another obsession!
e-fundrsesearch: Thank you for the interview!
