Next-Finance: Can you describe the management philosophy of LBPAM Actions Euro Focus Emergent?
Florence Marty and Olivier Hakim: LBPAM Actions Euro Focus Emergent is a thematic fund whose portfolio consists of companies in the euro zone with a significant part of the turnover realized in emerging regions. These values have the governance of the euro area equity and growth in emerging countries where they grow significantly.
What is the geographical and sectoral distribution?
The investment strategy focuses primarily today on FMCG (especially the luxury segment), distribution, automotive and agribusiness. Currently, our assets under management are invested nearly 50% of French assets for which we have the advantage to know well, maintaining close relations with the managements.
The difficult situation in the Euro zone is not to our advantage. However, we try to select assets which are not correlated to their market. This is particularly true for the first Spanish textile group Inditex, owner of the famous brand Zara or the Portuguese group of food distribution, Jerónimo Martins SGPS.
Florence Marty and Olivier Hakim
Don’t you think that European companies driven by economic growth in emerging countries are penalized in the market by the morose context on European stock exchanges?
Of course, the difficult situation that exists in the euro zone is not to our advantage. However, we try to select assets in our portfolio whose performance is the most uncorrelated with respect to their domestic stock market. This is particularly true for the first Spanish textile group Inditex, owner of the famous brand Zara or the Portuguese groups of food distribution, Jerónimo Martins SGPS, both have displayed interesting return, despite a difficult economic environment in their country of origin.
What LBPAM Actions Euro Focus Emergent stands of equity fund investing directly in emerging markets?
Compared to equity fund investing directly in emerging markets, Euro Focus Emergent LBPAM Actions can benefit from the dynamism of emerging countries, while offering to unit holders the opportunity to invest in with a guarantee in terms of visibility regarding corporate governance, but also by avoiding having to incur the high volatility of local currencies.
Florence Marty and Olivier Hakim
There is a very strong domestic competition in emerging markets, leading to a downward pressure on prices and futures profits. What are the competitive advantages of Western companies in which you invest? Barriers to entry into their market are they important?
Certainly, you are right, for some areas, the barriers to entry are not necessarily very high, allowing the easy entry of new competitors. This is not the case in all sectors, and it is far from being the case in the luxury sector for example. It is difficult to imagine for a Chinese or Indian company to compete with brand like Louis Vuitton on the market of leather or Remy Cointreau on liquor.
Do you think the economic growth of emerging countries is sustainable in the coming years, especially in China?
Even if economic growth in emerging countries is due to slow in the coming years, it must be borne in mind that the dynamism of the country is not ready to return to the level of growth in mature economies. Thus, according to our partner GaveKal research in 2015, 30% of the Chinese population will have an income greater than $ 10 000 per year, enough to accelerate the emergence of a middle class in the Middle Kingdom, and thus facilitate its appetite for consumption.
What is the performance and the risk / reward ratio of LBPAM Actions Euro Focus Emergent since its launch and the amount of assets under management?
Since the beginning of 2012, the performance of LBPAM Actions Euro Focus Emergent is 13.80% at the end of June 2012, against 2.97% for the Euro Stoxx. The fund displays an information ratio of 1.83 over a year and an outstanding 111 million Euros to date.
