Manager to watch: Carnegie
Solid performance, a distinctive investment process and a high level of information are key to the approach adopted by Nordic firm Carnegie Asset Management (CAM). Carnegie’s focus on long-term value in concentrated portfolios has produced some excellent results over the past 17 years, helped by the long-term stability of the investment team. The group manages a selection of funds, with an internationally marketed range available out of Luxembourg. Assets under management total around E6bn.
Fund managers at Carnegie take the long view. They work on the assumption that there are many “impatient” investors in the market, encouraged by the widespread practice of measuring performance over too short a time span. This favours the patient, long-term investor.
CAM believes it is important to apply a model for evaluating the constant and large global flow of information. Its own model is based on a number of long-term global trends, which strongly influence investment decisions. Matthias Wiegand, head of international client relations at CAM’s Copenhagen headquarters, says: “Our experience shows that a lack of identification of long-term trends often results in completely incorrect investment decisions. Time works in favour of investments in an excellent individual stock or sector, yet time works against investments in an average stock or sector.”
Fund managers are encouraged to concentrate on a few key long term holdings. Wiegand explains: “It is better to know a limited number of securities in depth than to try to decrease the risk by investing in a wide range of securities. Thus, we invest in only 20-30 carefully selected companies for the equity portfolios while the bond portfolios tend to contain five to 15 bonds each. A portfolio of 20-30 stocks provides a sufficiently high theoretical risk diversification.”
Trend-based stock picking, which has been a key component in the long-term creation of value achieved by the investors in the Carnegie WorldWide/Global Equities mutual fund over the past 13 years. CAM sees this as one of the main reasons for its success. “In order to outperform our competitors we need to invest differently and we believe our methodology is stock picking in its purest form,” Weigand says.
The performance numbers certainly support the Carmegie philosophy. The Luxembourg-registered Carnegie Global Healthcare fund, for example, has shown the best performance of any fund in its pharmaceutical peer group both in Europe and the US (based on Micropal and Morningstar five-year performance statistics as of end-2003 ).
CAM also runs a hedge fund, The Carnegie WorldWide Long/Short Fund, which aims to generate high returns, and, over time, exhibit low correlation to the global equity markets. The fund employs two different approaches in selecting its investments: a balanced approach and a more opportunistic approach. The mix between balanced and opportunistic positions may vary considerably and is governed by the house view of the market risk and buy and sell opportunities.
According to Weigand, Carnegie’s key strength is that it is a small but solid team with a distinctive process: “Since our entire organisation is so focused on one unified approach, the team is especially motivated to think creatively to generate investment ideas which outperform in the long term. This creates a very positive and pro-active environment which has resulted in our extremely low employee turnover.”