Innovative and well positioned in the niche market
The DJE - Mittelstand & Innovation has clearly outperformed the market during the Corona pandemic. In an interview fund manager René Kerkhoff talks about his special approach and how he interprets growth.
What is the basic idea of the DJE - Mittelstand & Innovation?
René Kerkhoff: The fund focus the countries of the D-A-CH region, i.e. on Germany, Austria and Switzerland. And within this region, we concentrate on innovative, fast-growing companies from the mid-cap sector with a market capitalization of a maximum of € 5 billion. With around 1,500 medium-sized companies the German-speaking part of Europe is the core region for so-called "hidden champions", i.e. hidden world market leaders. These companies are very well positioned in their respective niche and have a very high market share. Often these - mostly still family-run - companies have a more long-term approach than larger companies. This is an important factor for us: their innovative strength is stronger, they act more farsightedly and as a rule they also invest more into the future. And that is precisely why we have chosen this focus.
You are not only the fund manager of the DJE - Mittelstand & Innovation but also an analyst with expertise in the technology sector. Can you explain the investment concept of your fund from this perspective?
As with all DJE funds, Mittelstand & Innovation is based on an active company analysis approach. In doing so we deal intensively with the fundamental key figures, the economic figures of the companies. A special feature of the DJE - Mittelstand & Innovation, however, is its focus on the research and the development of the companies, precisely because of their innovative strength and also on their market share gains. We also try to break down these figures into smaller ones. And of course, investments in the future also play a decisive role. It is of central importance to us to be in contact with the companies on site, to talk to the management, to inform us about strategies and products, for example. In short: the proximity to the companies, the direct contact to the managing directors has a high value within the investment concept for us.
Isn't the investment universe too restricted by focusing on the D-A-CH region, especially in crisis phases such as the Corona restrictions?
In my opinion, the D-A-CH region offers decisive advantages: we have a very stable domestic economy, we are relatively strong in exports and, above all, we have a high level of legal security here. These are precisely the criteria for an environment in which medium-sized companies can feel at home. That is why I would even say that we have here one of the regions in Europe where companies with difficulties can best cope. Ideas play a major role, especially in critical phases. Companies that are able to implement innovations quickly can gain market share and emerge from the crisis stronger.
Keyword Corona: In this crisis the DJE - Mittelstand & Innovation has outperformed the market by almost 16%*. How did you manage this?
We actively manage our fund and this includes not only selecting sectors and companies but also managing the liquidity ratio. This enables us to react actively and promptly to various reports such as infection rates or economic restrictions and to increase the liquidity ratio, for example. At the lowest point we were then able to buy back some medium-sized company stocks at favorable prices.
In your opinion, what distinguishes the DJE - Mittelstand & Innovation from the competitors?
We follow a focused growth strategy. This strategy is based on three pillars: structural, cyclical and potential growth. The majority of the stocks in the portfolio show structural growth. This means that these companies are established, domiciled in their respective niche and have a high market share. If this niche grows faster than the market as a whole, we benefit. We also take cyclical growth into account. This means that we also invest in companies whose order intake is showing strong momentum and which are growing at a temporarily above-average rate. The third pillar is the potential growth that companies can achieve thanks to their innovative strength. In other words, through new products or by penetrating different countries. In addition, as a technology analyst, I always keep an eye on the technology sector. Here we can benefit from long-wave trends: Currently, digitization, which has been rapidly accelerated by the Covid 19 pandemic, is a very big issue. This is followed by topics such as IT services, software, cloud, big data and cybersecurity, which I am monitoring very closely.
Finally, what would you say, for whom is the DJE - Mittelstand & Innovation suitable and which investment horizon should an investor bring along from your point of view?
On one side we have asset management strategies for which the fund is well suited as a performance provider. On the other hand, private investors can of course also benefit from this fund and its growth strategy: They invest in companies from the D-A-CH region. Investors from German-speaking Europe may know the companies, which in my view gives them a better feeling when investing. And in the long term there is actually no way around shares. Nevertheless, it must of course be said that as a private investor you need to have stamina, especially in view of the volatile phases triggered by crises that occur from time to time. That's why I would choose an investment horizon of seven to ten years.
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.