Fundamental analysis can only go so far and the challenges posed by geopolitics can even undermine market leaders when tensions rise far enough.
‘Our worst bet was a German company called Do & Co. It was the best company out there for airline catering, but their biggest client was Turkish Airlines and anything that has been remotely close to Turkey has been turbulent.’
Turkish Airlines has now severed ties with the Vienna-based group and the airline has now hired Singaporean catering company SATS.
‘The stock has lost over 30% and it has been a tremendous underperformer for the last two years. Even though it’s not direct emerging market exposure, it sort of is indirectly and we don’t have much EM exposure at all, mainly for reasons such as this.
‘With EMs you have certain political leaders, the currency and economic situations, which are really difficult, which is why we look at developed countries. I would prefer to invest in German companies with under 20% valuation to Turkey’s 40%. Because even though the currency lost 20% you can’t really hedge it.’
Easy to allocate
Citywire AA-rated Boydak said asset allocation should be easy and highlighted that he always looks for a simple way to allocate.
‘It shouldn’t be structurally challenged, you don’t have to make the hero calls and show everyone you are right about the oil price or something else.’
‘You need to look for good solid business which generate cash flows and has substantial management in place, which is working in your interest and not pocketing everything.
‘This is one of the reasons we still don’t invest in banks, as 55% of banking bonuses go out of the profits. In Germany for example, Deutsche Bank is a disaster, it has had a lot of capital increases and there is a misalignment of interest.’
Over the three years to the end of October 2017, Boydak returned 13.06% in euro terms in the Alt Ucits long/short equity space. This compares with a 10.18% return by the sector’s average manager over the same time period.
Boydak will feature in the next edition of the Citywire Selector magazine, to subscribe click here.