Investment Strategy
Unique Portfolio Characteristics Deliver Superior Performance
The higher outperformance probability comes from systematically 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.
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.
It is time to Act Now: Combine Performance + Sustainability + Climate Objectives
• Global equity markets had a positive month of december marking a strong end to the second pandemic year
• In december, global developed markets were up 4.3%, global small caps advanced 4.0% and Emerging Markets gained 1.9%.
• Artico stock selection outperformed for the month and for the full year in all three strategies
• For 2022, expectations are generally positive
• The economic catch-up to pre-pandemic levels should continue to result in attractive growth rates and company earnings
• The supply-chain problems seem to be diminishing
• Vaccination plus Omicron variant together could lead to the pandemic becoming endemic and hence allowing a return to normality
• Some issues remain:
• There is a latent risk that inflation overshoots for too long and becomes „endemic“ through rising inflationary expectations
• The global financial system, fueled by decade-long monetization of public debt is fragile
• Geo-political risks (Taiwan, Ukraine) could shake markets
• Nevertheless, in any likely scenario, real assets should continue to be favored despite high valuations (see page 2)
• The balancing act needed in monetary policy will not be easy and turbulences should be expected
• We recommend to put all odds on your side for the next year!
• The current trend and requirements for sustainable/ESG investments is becoming mainstream
• The rapidly growing next wave demanding for Paris-aligned/Low temperature investment strategies compatible with a net zero carbon world poses additional challenges to professional investors
• It is Time to Act now!Â
• ARTICO Sustainable Equity Funds are the first and so far only funds to combineÂ
• a) a higher probability of future outperformance,
• b) very high ESG/Sustainability Scores („AA“ ESG Rating by MSCI) and
• c) very low carbon footprint aligned with Paris-climate objectives
Your first priority for your investments is performance and risk. Are you also in the process of integrating ESG? And are you now thinking about aligning your portfolio to the Paris-climate-agreement and a net-zero carbon world?
It can seem pretty challenging to get all of it under one roof! Have you noticed for instance that MSCI ESG benchmarks are NOT Paris-aligned and Paris-aligned benchmarks are NOT very much ESG-aligned? Also the likely impact of either on investment performance much depends on the approach taken. Looks like a dilemma not solvable with traditional passive/ETF strategies.
In 2022, you can get it all: Performance, ESG and Paris-alignment. In one global equity portfolio.
The ARTICO Sustainable Global Core X Fund has
Performance: Â Â Â 5 Star ***** Morningstar Rating
Sustainability:    „AA“ ESG-Rating by MSCIÂ
Climate:         2° Implied Temperature Rise and very low Carbon Footprint at Portfolio Level (Paris-aligned)
We are the first and so far only Global Equity Fund to offer the above combined characteristics. We achieve this systematically, with reasonable tracking error and fees.
Call us now to arrange a meeting to get all three objectives achieved in 2022!
In the meantime we wish you a great start to the NEW YEAR!
Are You Ready for Inflation?
• Global Equity Markets were taken by surprise by the new Omicron variant
• Global Developed Markets were down 2.2%, Global Small Caps declined 4.7% and Emerging Markets lost 4.1%.
• Artico stock selection outperformed for the month and Year-to-Date in all three strategies
• The FED finally changed tone and admitted that inflation might not be as transitory as predicted
• The new focus seems to be onfighting the build-up of persistent inflation expectations across the economy
• That risk increases the longer inflation overshoots
• This change in communication prepares the market for faster than expected tapering and interest rate hikes
• How vulnerable will markets be to rising interest rates?
• How far can the FED let interest rates rise before shaking markets and the economy too much?
• Navigating between the wish to contain the overshooting inflation, preserve a buoyant economy and the necessity to prevent interest rates from rising too much to preserve financial stability will not be easy!
• During this balancing act, turbulences should be expected
• Central banks will probably be forced to regularly jump in with supporting interventions
• The system has for too long relied on monetary and fiscal exuberance to abandon it overnight
• In such an over-monetized economy real assets continue to be the best place to be, despite high valuation levels
Once the Genie is out of the bottle, it is hard to get it back in
• Market recovery in October despite a long list of ongoing concerns:
• Unsettled pandemic, persisting supply chain shortages, Chinese regulations, declining global growth momentum and the uncertain future interest rate trend
• Global Developed Markets were up 5.7%, Global Small Caps advanced 1.8% and Emerging Markets were up 1.0%
• Central banks continue to navigate in risky waters
• A while ago the FED predicted a short and temporary hike in inflation before it would naturally fall back
• We are now in November and inflation is rising
• Higher inflation with low interest rates is animplicit taxation of the private economy (financial repression)
• This can help reduce real government debt levels, if it lasts long enough
• However letting the inflation Genie out of the bottle is not without risks
• When „temporary“ price increases continue for too long, they can turn into persistent inflationary expectations
• If inflation were to become an issue, it is unclear how central bank would fight it back without a huge damage to the real economy
• Most likely, central banks will therefore have no choice than to keep interest rates artificially lower than justified
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
•
Life after the Point-Of-No-Return…
• 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
