„You just have to be consistently good"

For the fourth time in a row the balanced mixed fund DJE - Zins & Dividende won the German and Austrian Fund Award. In the Corona year 2020 the conditions were particularly tough because the stock markets were under pressure, there were dividend cuts and hardly any interest could be earned with bonds. In an interview fund manager Dr Jan Ehrhardt talks about the lessons he has learned from the pandemic and where he currently sees investment opportunities.

Mr Ehrhardt, the DJE - Zins & Dividende was honoured with the DEUTSCHE FONDSPREIS (German fund award) in the category Mixed Fund Global Balanced in March. How did you manage to achieve such a success with the fund especially in the Corona year 2020?

Jan Ehrhardt: The DJE - Zins & Dividende did indeed perform well in 2020 with a performance of around six percent. This is true both in relative terms compared to our competitors and in absolute terms. One reason for this is that right at the beginning of the Corona crisis we reduced the equity ratio quite quickly from 50 percent to around 25 percent. When the Covid 19 virus appeared in China, we compared the cases with the bird flu that had been circulating there in 2003 and with SARS2. We therefore overlaid the curves and saw that the new virus is about ten times more infectious. Then the first cases appeared in Italy and we knew that this Corona virus would go around the world. So we immediately became cautious in managing the fund. When the markets crashed up to 30 percent resulting in a fast reaction of the central banks, we took advantage of the low prices to buy in order to benefit from the recovery. That is one reason why the DJE -  Zins & Dividende performed successfully in 2020 and certainly why the fund won an award.

So you see other reasons?

Ehrhardt: A fund award is usually not just the result of one year. I'll compare it with a personal example from my school days: At the beginning of twelfth grade I asked my school headmaster what he would advise me to do in order to achieve an A-level. He said you don't always have to be outstanding but you have to be consistently good. I think that is the same funds too. And being consistently good - that only works if the whole team works closely and really well together. So the fund owes its good development and the prize very much to the great job our team has done over the past years.

The Corona crash happened just over twelve months ago. Which of your funds was hit hardest by the slump and how did you manage to more than recoup the losses?

Ehrhardt: For the global equity fund DJE - Dividende & Substanz the year 2020 was the most difficult. This fund suffered an even greater slump than our Asia fund, for example. Dividende & Substanz was down 20 percent at times. Compared to the benchmark index MSCI All Country World, which lost almost 30 percent, this was still good. But it was not so easy in 2020 to recoup the losses with dividend stocks. In the end it worked out quite well, the fund was finally up five percent, which was outstanding for a dividend fund. However, we only succeeded by adding large value stocks from the technology sector to the portfolio in addition to dividend stocks. In my opinion, it would hardly have been possible to compensate the losses with dividend stocks only.

Is there anything you have learned during or from the crisis?

Yes, there are two things in particular. Firstly, I realized how extremely important it is to be well positioned in terms of IT. The crisis is often described as an accelerant for technical development. And indeed, the companies that were already in a good IT position before the outbreak of the pandemic usually developed better. This is not only true for e-commerce companies, which benefited from the fact that shops were closed. Restaurants with a high delivery share or financial service providers that communicate well with their customers online also had an easier time. Our online asset management company Solidvest, for example, grew extremely strongly in 2020. But it is also important for the processes in a company itself to have a stable IT structure that functions smoothly.

Was that the case in your company?

Ehrhardt: Yes, beforehand we had often tested if we could work in the event of a fire and no one could enter the office. In the Corona crisis it helped us a lot from the beginning that we were already decentralized. The research department, for example, works with a database that can be accessed from everywhere. This system had been developed already before the pandemic, because I travel a lot and wanted to have the possibility to access all data in Asia, for example. That was and still is very beneficial to us during the lockdown.

What is the second thing you have learned from the crisis?

Ehrhardt: It is not so much a lesson as an appeal for less bureaucracy. I believe that especially for large and difficult projects it is better if decentralized decisions can be made. By that I don't just mean vaccine procurement. In the school system, too, there should be more opportunities to make decisions independently and thus more quickly. In addition, we need more incentives in schools for further developments in the IT sector. I also hope that after the elections to the Bundestag (German Parliament) there will perhaps be fewer bureaucratic hurdles for innovative companies. This also applies to universities and the entire medical sector. That would certainly be good for a possible next crisis.

One day, hopefully, the pandemic will be controlled to such an extent that living and working like before the Corona crisis should be possible again. Will you then maintain certain things that you have changed in the past months?

Ehrhardt: Yes, we will definitely keep our internal video meetings via Teams. Before the Corona crisis we always met in a large meeting room for the weekly research meeting or the monthly strategy meeting. But it was not so easy to find a date where all the board members and the relevant staff was available. Now the meetings take place virtually and even the colleagues from our Frankfurt office are able to attend. I didn't think it would work but it works much better for us. One reason is that you listen intently to the person who is speaking. There are simply fewer distractions compared to 15 people sitting together in one room.

Will there be anything that you will do after the crisis exactly as you did before the pandemic?

Ehrhardt: I would like to travel again. I have always loved to do that and I miss it very much. I will travel more consciously than before the crisis. In the future there will be no more day trips to London, for example, if only for reasons of sustainability, but I would like to continue visiting companies. My impression is that one prepares oneself more thoroughly for personal talks on site and also remembers the contents better. For example, I remember sitting with Apple's CFO at the headquarters in Cuppertino a few years ago and what we discussed. The last meeting vie Teams with him a few months ago is less memorable to me. Also attending a conference doesn't work so well virtually. And in Asia you simply have to be there from time to time in order to catch up on all the new developments.

And finally: In which markets, regions and sectors do you currently see particular opportunities for equities?

Ehrhardt: The topic of environmental protection has recently taken a back seat due to Corona, but that will return. For example wind power companies and suppliers of electric mobility are still promising in the long term. In my opinion investments in environmental protection will increase in the coming years. Therefore, I see opportunities in companies that are active in the cleantech sector, for example. I also expect the state to invest more in infrastructure and the construction sector in the future. Of course, companies that are active in these areas will benefit from this. The pharmaceutical sector, one of the main losers of the crisis, could also catch up again in the second half of 2021 and next year. Then I think financial service providers, which are gaining market share compared to banks, are promising. And last but not least insurance companies, which will benefit from slightly higher interest rates in the long run. One should also not forget that especially reinsurers will record fewer claims due to failed events as of 2022.

And what about bonds?

Ehrhardt: Bonds have already recorded part of the rise in interest rates. Here you just have to keep lying in wait for opportunities. But the interest rate side is already looking better than it did six months ago.


Thank you for the interview. 


Funds Profile DJE -  Zins & Dividende


Note:  All information published is for your information only and does not constitute investment advice or other recommendation. Long-term experience and awards do not guarantee investment success. Securities are subject to market-related price fluctuations which may not be compensated for by the active management of the asset manager or investment advisor. This information cannot replace a personal consultation. All information has been provided with care and to the best of our knowledge at the time of preparation. Despite all due care the data may have changed in the meantime. Further information on opportunities and risks can be found on the website www.dje.de. The sales prospectus and further information are available free of charge in German from DJE Investment S.A. or at www.dje.de The fund management company is DJE Investment S.A. DJE Kapital AG is the distribution agent.