The fund that was born just over three years ago with the savings of its advisers has become a top sales with almost 100 million euros of assets. Algar Global Fund, Renta 4 Manager and piloted by Jean-Claude Felguera and Walter Scherk, has gained an annualized 14.8% in the last three years and in 2018 it remains despite the volatility and falls in Europe: the Ibex yields more of 7%. In 2017 it was one of the best Spanish funds with an increase of 27.1%.
On the verge of launching it in Luxembourg, Felguera and Scherk, both training engineers, explain what their investment philosophy is and how they face market instability. In his team they also have Beatriz Paredes Camuñas and Juan Perea, former president of Terra.
The fund barely moves this year …
Jean-Claude Felguera (J.C.F.): The year is being complicated, with strong volatility. The good news is that we have resisted the oscillations with very low volatility, we do not lose money and we extracted more than eight percentage points from the Ibex; In addition, we have a lot of liquidity to take advantage of opportunities, which are many despite the one that is falling.
Where are those opportunities?
J.C.F: In many values of the Euro Stoxx 50 we get a purchase, but this is not the time for big bets. We have modified our system so that the highest weight in the portfolio of a single value is 4%, when before it reached 8%. If a bet goes bad it can be a real disaster …
How has Algar riddled all the earthquakes since the summer?
J.C.F: We have modulated the beta [la sensibilidad del fondo al movimiento del mercado] since the summer and now we have a very protected and responsive fund. Our philosophy is to use the alpha [la rentabilidad generada al margen del mercado] to reduce the general beta. That is, we reduce market risk with what we earn outside of it. The objective is to achieve 12.5% annual long-term regardless of what the indexes do and with minimum volatility.
Why is it more protected?
J.C.F: The level of risk of the small values has been lowered. Only 15% are in firms that are worth less than 1,000 million and 5% in less than 500. At present, the danger of small caps is growing. However, sometimes the bull will catch us.
What values have been incorporated into the portfolio?
Walter Scherk (W.S.) Interestingly, the paper industry surprises for good. China and other emerging countries will shoot the demand. The sector will benefit, for example, from the increase in consumption of toilet paper in the whole planet, from electronic commerce and from the restrictions on the use of plastic. It will boost the entire sector, especially the pulp manufacturers. The effect is already moving to prices. We bought Ence and the lusa Altri.
Any other megatrend?
J.C.F: Video games, especially companies focused on the community of players. We have invested in the Chinese YY and the French Focus Home. We are also looking at companies that develop networks to transport data and that reduce telecommunications investments. Among these stands out also the French Ateme.
Italy has wreaked havoc this week. Will there be more problems?
J.C.F: After what happened in Greece in July 2015 and after verifying that Alexis Tsipras has become almost an example of orthodoxy, I have no doubt that Italy will do what Europe commands. Point. It is that I do not contemplate another scenario. In fact, we have entered the Italian financial sector through Unicredit and Intesa.
And in the Spanish banking?
J.C.F: No, they offer returns on equity (ROE) far removed from our expectations. They promise, they do not even give it now, around 9%, and this is way below what we are looking for.
What will happen to the brexit?
J.C.F: We are very worried. If finally there is no agreement or there is a bad one the situation will continue to deteriorate. The pound will continue to fall and its economic situation will worsen. A hard brexit would be bad for everyone, also for the European Union, but they have much more to lose than us.
Trump's trade war is another threat …
J.C.F: The resolution of the North American Free Trade Agreement between the United States, Mexico and Canada preserves the current status quo. But I think Trump will be more belligerent with the EU, almost as much as with China and that can take its toll on many export industries.
And besides, in Spain there is the Catalan issue …
W.S .: The situation is not going to be resolved in the short term, it is very tense, but from here [Walter Scherk vive en Barcelona] it looks different. No one is thinking about breaking through the wild. The economic impact is also very slight, with a remarkable rate of growth. It is true that it is slower; we can say that before it was red hot and now we go to the trantran.