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?
• More „booze“ for equity markets and the party goes on into extra-time
• Global Developed Markets were up 4.7%, Global Small Caps gained 4.3% and Emerging Markets advanced 2.5%
• Markets driven by strong economic rebound (mainly led by US and China) and a super-loose „laissez-faire“ approach of central banks
• ARTICO stock selection continues to generate excellent results in all three investment universes Year-to-Date
• Significantly outperforming former winners focused on large cap growth stocks
• If you think about inflation you can either not see it at all or see it everywhere
• Looking at wages and basic consumer baskets, inflation has not been a concern at all over the last decade
• However, if you look at equity market and real estate valuations, the story is different:
• Asset price inflation is everywhere and continues to change the structural distribution of wealth
• Those invested in real assets benefit while those confined to nominal assets loose
• This bifurcation is not healthy
• But: The case for real assets still looks much better than for nominal assets
• The more exuberance you see in markets the better it is to follow a solid investment strategy
• Artico Sustainable Equity Funds are well positioned to navigate through unpredictable futureÂ
 (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
We are expecting approval soon to launch our new Artico Sustainable Golden Dragon Fund. It will be different from other „Greater China Funds“ as it will have not only better fundamental characteristics, but also a much better ESG rating and a significantly lower carbon footprint. This will be a key feature in the years to come as China has a lot of catch-up to do in terms of sustainability. Please contact us, if you are interested to receive more information on our new fund project.
• The „Big Rotation“ continues: Former out-performers (Large Cap Growth) overtaken by higher quality and Small/Mid Caps
• Global Developed Markets were up 3.3%, Global Small Caps gained 2.0% and Emerging Markets declined 1.5%
• ARTICO stock selection significantly outperformed in all three investment universes in March and Year-to-Date
• Spectacular surge in implosions of companies and funds (Wirecard, Greensill, Archegos) should not be seen as a cumulation of random events
• Such „accidents“ tend to happen in late stage of financial expansion
• Reason is growing deficiencies in common-sense risk management
• Omni-present risk management bureaucracy and meticulous regulatory oversight often misses true risks
• So: Where is the next time-bomb hiding? Derivatives? Credit expansion?
• And can the unlimited money supply prevent a financial market collapse?
• Only time will tell: In the meantime fasten seat-belts as the roller-coaster ride is not over
• The long term case for equities still looks much better than for nominal assets
• In such a fragile environment we recommend to avoid any extreme position in terms of style, factor exposures, sectors or individual holdings
• Artico Sustainable Equity Funds are well positioned to navigate through turbulent times, because:Â
• First, Artico is invested in companies with fundamental characteristics of highest quality
• Second, Artico funds have no single style or single sector bias (growth, value, technology, etc)
• Third, Artico funds cover the full spectrum of market capitalization (large, mid and small caps).Â
• We are making progress with the CSSF to be ready to launch our new Artico Sustainable Golden Dragon Fund
• It will be different from other „Greater China Funds“
• It will have not only better fundamental characteristics, but also a much better ESG rating and a significantly lower carbon footprint.
• Please contact us, if you are interested to receive more information on our new fund project.
Is inflation a significant threat to equity markets?
• Wild roller-coaster markets with large ups and downs in February.
• First, markets were fearing overheating, inflation and earlier than expected rising interest rates
• Then they recovered, fueled by optimism on economic growth and company earnings…..
• Global Developed Markets were up 2.6%, Global Small Caps gained 4.4% and Emerging Markets advanced 0.8%
• Is inflation a significant threat to equity markets?Â
• What if hefty catch-up demand leads to strong inflationary pressures?
• Equity markets should be able to deal with higher inflation rates
• The risk is not inflation itself
• It is rather the prospect of rising interest rates which would be very negative for markets given valuations are at all-time highs
• The key is therefore with central banks and their determination to keep interest rates low for longer than justifiable by emerging inflationary pressure
• In such a likely financial repression scenario (rising inflation with still artificially low interest rates), cash and bond holders will suffer most
• The awakening of inflationary expectations will certainly continue to stress equity markets
• But in an environment of rising inflation, the long term case for real assets like equities is much better than for nominal assets
• We recommend to be very cautious with investments too much focused on the past winners, i.e. large cap growth stocks
• Equity markets are still in the danger zone with very high historic valuations and several signs of bullish over-optimism
• Artico Sustainable Equity Funds are well positioned to navigate through trend reversals and potentially turbulent times
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
How long will the Music Play this Time?
Markets continued their rally in DecemberÂ
Global Developed Markets were up 4.2%, Global Small Caps gained 7.2% and Emerging Markets advanced 7.4%
For the full year 2020 global equity markets were up 16% (Developed Markets) to even 18% (Emerging Markets) despite pandemic and lockdwons
Artico stock selection for the full year was negatively affected by large cap growth stocks significantly outperforming small caps
The valuation gap between small and large cap stocks has considerably widened
Equity markets are driven by apparent over-optimismÂ
Enthusiasm has reached retail market (usually not a good sign)
Tesla has performed over 1000% in just over one year and Airbnb’s IPO was exuberant. Just two of many warning signals that markets are overheated
Valuation approaching or exceeding all-time highs
Markets are climbing on thinner ice as they have entered the danger zone
However: Unlimited money supply functions as a safety net, providing plenty of oxygen for this climb to go further
Meanwhile government debt levels keep rising and central banks finance it while keeping interest rates ultra-low
How long can such governmental Ponzi scheme last? Nobody knows really.
Economic growth alone is unlikely to resolve the problem
Debt restructuring or even monetary reform are very ugly scenarios
Stay focussed on real assets, avoid nominal assets
Prepare to enter the Danger Zone
Markets sky-rocketed in November fueled by optimism on vaccines, further stimulus packages and sustained economic recoveryÂ
Global Developed Markets were up 12.8%, Global Small Caps gained 14.3% and Emerging Markets advanced 9.2% in one month!
Artico stock selection for the full year was behind markets, as the performance was mainly driven by large cap segments of the market, while small caps underperformed
This has significantly increased the valuation of large cap stocks and considerably widened the valuation gap between small and large cap stocks (feel free to contact us for our research on this matter)
Equity markets show now too many similarities with 1999 (value out of favor, over-concentration on few large caps, exuberant valuations, retail euphoria, margin-debt levels record-high) to fully ignore these warning signs
Also, the same discussion has started, whether or not „this time, it is different“
Indeed, some aspects are clearly different: First, several of the hyped companies have become money-making machines and secondly, the unprecedented monetary and fiscal stimulus is of a size not even imaginable 20 years ago
So, while markets have become exuberant, they can also stay extreme for much longer. Given valuations and over-confidence, we need to prepare to enter the danger zone. That does not mean a collapse is imminent, but it requires a disciplined investment approach
