Investment Strategy
Unique Portfolio Characteristics Deliver Superior Performance
The higher outperformance probability comes from investing in companies with high scores in the following 5 dimensions:
Growth – is the company successfully expanding its business?
Profitability – does the company operate efficiently?
Financial Health – is the company in good financial condition?
Valuation – is the market price of the company attractive?
Sustainability – does the company excel in terms of ESG scores?
Our proprietary research on relevant fundamental selection criteria is the foundation of our fundamental model. We published the key results in the Wilmott Magazine
Companies with high ESG scores will outperform, because they:
Are a good proxy for superior management
Will attract significant institutional flows
Contribute to Investment Risk Mitigation
What makes our Approach to ESG unique?
Investing with a sole focus on ESG can result in buying over-priced stocks. We create portfolios with superior fundamental characteristics and very high ESG Scores and very low Carbon Footprint at the same time.
What is the expected Performance impact of ESG?
We use MSCI ESG database and we developed our own ARTICO ESG factor, which is a good predictor of future outperformance
Artico Partners is a signatory of the UN PRI, follows the engagement work and the exclusion list of the SVVK (Swiss Association for Responsible Investments), fully supports the PARIS agreement on climate change and is also a supporter of the TCFD (Task Force on Climate-Related Financial Disclosures).
Published ARTICO Research:
Is sustainable investing a positive or negative contributor to outperformance? And how patient do investors need to be to capitalize on any positive effects? Our research results answer these questions and our conclusions on the required time horizon may come as a surprise for investors hesitating to introduce sustainable investing.
A Team of Experienced Partners co-invested in our funds
Dr. Ulrich Niederer
Chairman and Senior Partner
As Chairman of ARTICO Partners, Ulrich oversees the business strategy, the product development and the investment activities of the firm. Operationally, he is directly responsible for Risk Management and Compliance. Ulrich is a Founding Partner of ARTICO.
Ulrich has more than 30 years of investment experience and started his career as quantitative research analyst in 1986 at the then Swiss Bank Corporation. His various functions at SBC and later UBS Global Asset Management included: Chief Investment Officer, Co-CEO Switzerland, Chairman of the Swiss Business and Head of the Alternative Investment Management Business (Private Equity, Hedge Funds, Infrastructure). Ulrich holds a PhD in Nuclear Physics from University of Basle.
Dr. Gabriel Herrera
CEO and Senior Partner
As CEO of ARTICO Partners, Gabriel is responsible for all aspects of the business including the product development, client relationships and the investment activities of the firm. Gabriel is a Founding Partner of ARTICO.
Gabriel has more than 30 years of investment experience and started his career as equity research analyst in 1987 at the then Swiss Bank Corporation. His various functions at SBC and later UBS Global Asset Management included: Head of Equity Research, Co-CEO Switzerland and then CEO Europe Middle East & Africa. Gabriel holds a PhD in Economics from University of Basle.
Tero Toivanen
CIO and Partner
As Chief Investment Officer Tero is responsible for the research and development of investment strategies and portfolios. His responsibilities include the continued development of the investment platform and the portfolio management of ARTICO funds.
Tero’s background contains several years of experience in global equity portfolio management and prior experience in the areas of software development, quality management and team leadership. Tero holds MsC in computer science from the Helsinki University of Technology and MBA from the Purdue University. Tero is also a CFA Charterholder.
Michael Brenneis
Head PM and Partner
Michael’s main responsibility is the portfolio management of ARTICO funds. His further responsibilities include the development of the investment platform, and research and development of investment products and strategies.
Michael holds diploma certificate in electrical engineering and MBA from the university of South Australia. He has several years of experience in global equity portfolio management and prior experience in software development in the areas of telecommunications, medical engineering and finance.
Andreas Konrad
COO and Partner
As Chief Operating Officer of ARTICO, Andreas is responsible for the operational part of the investment management, including the fund operations and trading activities.
Andreas‘ background involves several years of work experience in the finance industry, mainly in global equity trading and operations functions. He is holder of Swiss federal diploma in business organization and a diploma in applied psychology.
As significant co-investors in our funds at the same conditions than our clients, we have „skin-in-the-game“. Is there a better way to fully align our interests?
A Brewing Winter Storm or Just Temporary Turbulences?
• Market correction in September
• Investors had to cope with too many adverse developments: Looming government shut-down in the US, a soaring energy-crisis, ongoing supply-chain shortages, uncertainties around Evergrande and China more generally and the prospect of higher interest rates
• Global Developed Markets were down 4.2%, Global Small Caps declined 2.8% and Emerging Markets were down 4.0%
• What does this mean: An indication of a brewing winter storm or just temporary turbulences?
• Take several years of super-loose monetary policy, add global supply-chain shortages plus unexpectedly soaring energy prices within already overshooting inflation rates,,,
• Consider the question-marks around the US budget and the regulatory crackdown in China, the possible default of Evergrande and potential contagion effects across China and globally…
• You could easily see yourself looking at a perfect winter storm brewing
• Given high historic valuations such storm could trigger fears of a significant imminent melt-down in global markets
• We believe investors should not take these developments lightly
• At the same time, most of these negative developments should be temporary in nature
• Inflation will probably remain higher than expected and overshoot longer than most people think
• BUT: Monetary and fiscal expansionary forces will (have to) continue even after tapering has started
• Real assets represent the only viable place to hide given such monetary exuberance
• While we would expect a turbulent 4th quarter until these matters are resolved, lower prices represent rather an opportunity to add positions in real assets
• Artico Sustainable Equity Funds are well positioned to navigate through such times
• (1) Artico is invested in companies with fundamental characteristics of highest quality
• (2) Artico funds have no single style or single sector bias (size, growth, value, technology, etc)
• (3) Artico funds have excellent ESG characteristics and very low carbon footprint
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We have recently developed two new strategies: The ARTICO Sustainable Golden Dragon Fund combining excellent fundamental characteristics with much better ESG scores and significantly lower carbon footprint (a key feature in the years to come as China has a lot of catch-up to do in terms of sustainability). The ARTICO Zero Carbon Global Equity Fund combining an ARTICO portfolio with much reduced carbon footprint with CO2-removal certificates for a carbon-neutral investment.
• Bullish markets in August including a rebound in Emerging Markets
• Investors seem not influenced by Afghanistan developments, but closely monitor inflation uptick (temporary or not?) and impact of new Covid variants (economic recovery slowdown?)
• Some uncertainty around the new China paradigm of „common prosperity“
• Global Developed Markets were up 2.5%, Global Small Caps advanced 2.3% and Emerging Markets were up 2.6%
• Recent correction in China reminds investors of regulatory risks involved when investing in China
• In a western culture of free markets such interventions may indeed feel quite odd.
• But: We believe the vision of „shared prosperity“ will make the Chinese economy stronger in the longer term
• China continues to represent thesingle largest growth opportunity in the worldÂ
• Central banks are slowly preparing markets to expect a tapering (i.e. a reduced asset purchase) and eventually even a rise in interest rates
• Huge government deficits and their refinancing need suggest a continued monetization of future fiscal deficits
•The point-of-no-return may already have been reached where there is no way back
• What does life look like in the „post-modern monetary“ world?
• As long as the trust in the financial system is not eroded, such monetization can go on for a very long time
• Real assets represent the only viable response to such monetary exuberance
„The Monkeys should not be scared by a slaughtered chicken“
• Continued gains for developed equity markets, while emerging markets take a hit.
• Global Developed Markets were up 1.8%, Global Small Caps were flat (- 0.1%) and Emerging Markets were down 6.7%
• ARTICO stock selection continued to generate excellent results in all three investment universes
• Citywire awarded Artico Partners a GOLD group rating in emerging markets
• Markets were shocked when Chinese government announced it would disallow profit-making from private teaching activities
• The old Chinese saying „kill the chicken to scare the monkeys“ was quickly evoked
• Should this scare investors away from China? We don’t think so!
• China represents the biggest growth opportunity in the worldÂ
• Political and regulatory risk is – and has always been – inherent when investing in China
• Investors should therefore invest in a diversified manner across Chinese sectors to avoid nasty surprises (like we do in our ARTICO Sustainable Emerging Market Fund)
• Globally, central banks are still behind the curve and in a dilemma
• Economic growth does not warrant such a loose monetary policy
• Hoping for some, but not too much inflation is a risky balancing act
• Given huge government debt levels, it is however unlikely we will see significantly rising rates any time soon
• Despite high valuations (see page 2) real assets should continue to be preferred over nominal assets
Are Central banks hostage to markets and their indebted governments?
• First of all we would sincerely like to thank all of you for your support in our first 10 years of operation!
• Over these 10 years we have delivered a strong absolute and relative performance to our investors
• Our focus on research has resulted in continuous improvements of our investment approach and – 2 years ago –  to a full integration of ESG and carbon footprint criteria
• We are now able to claim a very unique combination of portfolio characteristics not found elsewhere: Excellent fundamentals, very high ESG scores and very low carbon footprint at the same time!
• Your, our investors, have always supported us in these developments. We are very grateful.
• Not much news on the equity markets
• Global Developed Markets were up 1.5%, Global Small Caps gained 0.2% and Emerging Markets advanced 0.2%
• ARTICO stock selection in the first half year generated excellent results in all three investment universes
• Significant outperformance against last year’s winners focused on large cap growth stocks continued
• The FED’s overly prudent tone highlights highlights how much central banks are falling behind the curve in terms of necessary monetary policy adjustments
• Central banks are hostage to markets and their own indebted governments
• It is unlikely we will see significantly rising interest rates any time soon
• So, real assets should continue to be preferred over nominal assets
Financial Repression Stage 2….
• Despite a spike in intra-month volatility (inflation fears) global equity markets ended the month of May again with positive performance
• Global Developed Markets were up 1.4%, Global Small Caps gained 1.5% and Emerging Markets advanced 2.3%
• ARTICO stock selection continues to generate excellent results in all three investment universes Year-to-Date
• Significant outperformance against last year’s winners focused on large cap growth stocks
• The Governor of the Bank of Italy (and ECB council member) stated publicly that „the ECB will counter any unjustified interest rate rises“
• It feels a bit like a Draghi-moment („whatever it takes“)
• Even more interesting: such statement is not contradicted
• What exactly are „unjustified“ interest rate rises?
• Those that would happen in a free capital market without central bank manipulation?
• We enter financial repression stage 2 (negative real interest rates for as long as possible)
• Terrible times for nominal asset holders and savers
• The monetisation of government debt and the super-loose monetary policy may go on for years
• Real assets like equities and real estate will continue to benefit
• Market fragility will increase, as valuations are higher
• Positive and negative market sentiment will likely switch regularly keeping volatility high
Beware of Exuberance in Large Cap Growth Stocks!
• Markets were overall flat in January with the exception of emerging markets
• Global developed markets were down 1.0%, global small caps gained 0.7% and emerging markets advanced 3.1%
• Investors started to worry about the pandemic (delay in vaccines, new mutations) and the risk of a slower than expected economic recovery
• Artico’s stock selection contributed very positively across all funds
OUTLOOK:
• Since a couple of years performance of large cap growth companies has been particularly strong
• This has led to a significant valuation differential with a high potential for a reversal
• Of course market distortions can prevail for much longer than one would thinkÂ
• The time has come to be very cautious with focused investments in the past winners like large cap growth stocks
• Equity markets more generally reached the danger zone with very high historic valuations and several signs of bullish over-optimism
• Markets are therefore vulnerable for a correction
• However, given expansion of central bank balance sheets and piling up of government debt, nominal assets (bonds) look even less attractive
• The long term case for real assets like equities is therefore very strong
• Artico Sustainable Equity Funds are well positioned to navigate through trend reversals and potentially turbulent times for three reasons:
• First, Artico is invested in companies with fundamental characteristics of highest quality
• Second, Artico funds have no single style bias (growth versus value)
• Third, Artico funds cover the full spectrum of market capitalization (large, mid and small caps).Â
