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10 years of steady performance – what is the formula for success?

Since the 1990s, Europe has found itself in a low-interest phase with interest rates decreasing even further during the global financial and economic crisis of 2008. Only now are they beginning to rise again with a very moderate increase. However, it is unlikely that they will reach their former heights – at least in the near future. Investors nevertheless want to generate positive returns. How can this be achieved? 

One answer is provided by Olgerd Eichler, fund manager at MainFirst. Eichler manages, among others, the MainFirst Top European Ideas Fund, which is currently celebrating its 10th anniversary. During this time, it has achieved consistent performance without significant setbacks. At present, Eichler expects the economic recovery that began in 2012 with the defensive stocks to continue in 2017, above all with cyclicals. This catch-up effect was already apparent in the second half of 2016, when sectors such as the automotive industry demonstrated good performance. Nonetheless, the skillful selection of high-growth companies is essential, as not all companies develop equally.

That is why Eichler and his team conduct targeted stock picking. The aim is to identify companies with high growth potential – ‘young SAPs’, so to speak – and to invest in these over the long term. This holds regardless of sector, country and market capitalisation, purely on the basis of the expected performance of the respective company. The basic requirements for the successful implementation of this approach are extensive experience, disciplined and detailed analysis, rigorous selection procedures, and excellent knowledge of the markets and sectors.

Indeed, before the team includes a company in the portfolio, it must undergo a root and branch review – or rather, a review of balance sheets and profitability. Other important criteria are the quality of management, planned further developments, strategic objectives, growth projections and the general market situation. This information is drawn not only from reports, but also validated in direct discussions with the management.

A stock is included in the portfolio only when the fund management team is convinced that there is a high performance potential, in some cases even more than 100 percent. These ‘high-flyers’ are acquired for the long term to enable the full potential of their performance to be properly tapped.

In the ten years since its launch, this strategy of the MainFirst Top European Ideas Fund has led it to outperform the benchmark by a total of 70 percent, despite numerous challenges such as the aforementioned global financial and economic crisis in 2008 or the EU debt crisis, and has achieved an accumulated performance of 101 percent (as of: 31.05.2017, share class C, ISIN: LU0308864965, performance of the benchmark STOXX EUROPE 600: 31%).