Old school New England 92 - Scanorama

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SPECIAL ADVERTISING SUPPLEMENT FROM INVESTMENT MANAGER SKAGEN FUNDS
So while, yes, Warrington had faced
down West African warlords, it was
his ability to create confidence and
trust in the people around him which
recommended him to Westbø. “Maths
and econometrics are important,” says
Westbø. “But they are only tools. Being
able to use those tools is defined by the
type of person you are. In the end, you
need to understand the clients whose
needs you are trying to meet. And that
comes from the character of a person,
and their understanding of people.”
He is keen, he says, to make sure that
the firm is not staffed only by business
school graduates. Rather, it is staffed
by a diverse group of generalists, who
do not gravitate towards financial
groupthink. “That has always been a
cornerstone of the company. All of the
founders, and all of the employees,
understand that the world is defined by
people.”
KRISTIAN FALNES
If that sounds woolly, it shouldn’t. The
success of the “3U’s” and the firm’s
focus on client relationships, speaks
for itself. SKAGEN’s €4.7bn SKAGEN
Kon-Tiki emerging markets fund has returned
16.9 per cent a year since it was
launched in 2002, outperforming the
benchmark MSCI EM Index every year
since inception. SKAGEN Vekst, a €1bn
Norwegian-based fund, has returned
14.8 per cent since its 1993 inception,
while the €3.8bn SKAGEN Global has
made 14.9 per cent a year since launch
in 1997.
Each of SKAGEN’s three equity funds
are independently ranked as amongst
the best in the world by agencies such
as Standard & Poor’s, Morningstar
and Wassum. And as Harald Espedal,
chief executive and investment director
points out, with no target for client
acquisition, SKAGEN can grow at a pace
with which everyone is comfortable.
Gazprom – the “3U’s” in action
SKAGEN, he says, is not a firm of asset
gatherers. The company’s primary goal
is to deliver best risk adjusted returns to
its clients.
Clients, who have bought into the
company philosophy, trust that their
portfolio managers are making good
investment decisions, and portfolio
managers like to think that their clients
are going to stick around. Managing
large amounts of in and outflows from
nervous and jumpy clients is disruptive
for the portfolio managers and detracts
from the considered stock picking and
long-term investment for which SKAGEN
is famed.
That means the portfolio managers can
carry on doing the thing they are best
at: being contrarians.
Kristian Falnes, portfolio manager of SKAGEN Global, explains why Gazprom is a good business case
“All of our three equity funds have a large holding in the
world’s largest gas producer, Russian Gazprom, and this
company demonstrates elements of all of our “3U’s”.
Gazprom is clearly unpopular - it is perceived as
having bad corporate governance and the dividend yield
is low as the company has little free cashflow because
it is in the middle of an investment spree. Although the
company is not under-researched, we feel that it is badly
researched and misunderstood.
Gazprom’s price relative to its expected earnings
is low (P/E of 3.5) and it is sitting on vast resources
so it is clearly not overvalued. It also has good
A stong balance sheet
and good cashflow
suggest underlying
strength
fundamentals including a really strong balance sheet
and good operating cashflow.
We also believe that there are triggers which will release
value for our clients in the future. For example, Russia is
looking for inward investment, and we hear from Moscow
that corporate governance is at the top of the agenda. We
also feel that the continued liberalisation of the Russian
gas market and the possibility of further discoveries and
development of Russia’s huge gas reserves makes the
company an attractive investment.”
Source: Gazprom