Valuations will be key in 2017 as value has underperformed growth and there will be greater pressure when interest rates begin to rise further.
That is according to Loys’ managing partner and fund manager, Ufuk Boydak.
Citywire + rated Boydak, who currently runs several funds at the firm, including the LOYS Sicav – Global System fund, said investors should not just buy stocks due to speculation on growth due to incoming US President Donald Trump’s policies.
‘Investors need not just follow Trump when he says he will ‘make America great again’, but look to countries where the fundamental value is actually there.’
Boydak currently has 10.08% of the fund exposed to the US, a position he said is ‘super underweight’, as he has significantly chopped the holding since November’s election result.
‘We are looking at the US market from a fundamental standpoint. In November I had more exposure than today, then I halved it, then in December I also sold more.’
‘I’m not sure whether the expectations which have been built into Trump becoming the president will maintain or evolve, after all, Trump is not a magician.’
Boydak said once Trump is inaugurated there will more than likely be a large number of tweets and messages but it remains to be seen what will actually happen when he assumes office.
‘Trump is not 100% priced in, the biggest things he can change would be infrastructure investments and corporate tax rate cuts. Both of which will help stock market growth over the coming years.’
Investing isn’t a lottery
Both Boydak, and his partner at the firm Christoph Bruns, are heavily invested in the funds they manage. A move Boydak said has made sure the fund's risks are under control.
‘We have an alignment of interest, I am not in the business to lose my money, so I am not in the business to lose my clients money.’
‘You need to have your risks under control. I could easily say, ‘let’s buy a biotech company who have designed a cure for cancer’. The stock would go tenfold, I would never personally invest my money in this, you can’t invest with a lottery pick mantra.’
Loys currently has five funds within its range, both partners, fund managers and the corporation itself are invested with ‘a double-digit million euro range’. Boydak said this amount of investment is one of the reasons he has never invested in banks.
‘I have never owned one bank stock. When I look at Deutsche Bank and the current situation the company is in, is anyone of their managers giving back their bonuses? I don’t think so.’
‘If there was an increase in capital, who is paying the bill? This is why we are invested in every fund, if the fund is suffering then the managers suffer too, the management need to work for investors, just as in stocks, the management needs to work for shareholders.’
The LOYS Sicav – LOYS Global System fund, returned 16.49% in US dollar terms, over the three years to the end of December 2016. This compares with a 12.27% rise, by its Citywire-assigned benchmark, the FTSE World TR USD, over the same time period.