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- “Flexibility is crucial”
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Trade disputes, Brexit and zero interest rates: market conditions used to be simpler. What factors do you look at these days?
I start by looking at the key interest rates and monetary policies of the central banks such as the U.S. Federal Reserve and the European Central Bank. Policy shifts by these banks, such as the ones we’ve seen this year, can have a major influence on the market. Second, I look at the political situation: what are the consequences of Brexit and the current trade dispute between the U.S. and China? Monetary policy and geopolitics influence the real economy. The third thing I look at is the profitability of the companies. In the end, that is the decisive factor in any investment decision.
Defensive, dynamic − or somewhere in the middle? Where would you place DWS Multi Opportunities on this spectrum?
I’d say right in the middle because I pursue a well-balanced strategy. In other words, the fund can take advantage of market opportunities but not be swayed by the market’s whims and fluctuations.
Theoretically, the fund could consist entirely of stocks. Most investors, however, wouldn’t consider that well-balanced...
Experience has shown that investors are certainly willing to accept funds having a higher stock ratio. This has been the case when, for example, the market conditions are positive and the forecast is for further market opportunities and greater returns. The opposite is true when there is uncertainty in the market. Given that scenario, we would naturally review the situation and make the necessary changes. Risk management is then the top priority.
If you risk too little, the probability of achieving an above-average rate of return fades into the distance. If you risk too much, losses become more likely. How do you strike the right balance between these two extremes?
By weighting the various asset classes, I’m able to balance the portfolio. I also use asset classes that focus on delivering a good rate of return. These include, for example, stocks and corporate bonds. Investments such as this generally constitute a large portion of the portfolio. I also use asset classes that provide stability. Examples are government bonds issued by countries considered safe and stable currencies such as the Yen. Gold is another possibility. So you see that the fund strikes a good balance between stability and achieving a good rate of return. In the end, the key is having the flexibility necessary to use both advantageously.
Can you give us a specific example?
In December 2018, stocks constituted less than 30 percent of the portfolio. We made this decision based on the economic situation, which was deteriorating. Shortly thereafter, we increased this percentage back to 45 percent because the market − especially in cyclical sectors − had overreacted.
Which gamble you took with the fund was most profitable?
Well, I wouldn’t call it a gamble. However, the market does have phases in which we take a strong position in a particular asset class. This tactic was very successful with corporate bonds in 2011 and 2012. Back then, we had invested in European hybrid bonds, especially those in the financial sector. This strategy was also successful in 2015/2016, and recently as well with high-yield bonds of commodities and utilities companies. We currently see potential in gold and gold mines, although gold mines are subject to strong fluctuations. They have a high operating leverage regarding the gold price.
In retrospect, when was your strategy especially successful?
This fund really shines when there’s a multitude of movements and shifts in the market. It even weathered the 2007/2008 financial crisis without any significant negative effects.
Which situations presented a challenge for you?
Phases without strong shifts, such as the significant upward trend in 2017, are more challenging.
How so? One would expect the exact opposite to be true.
The reason is people’s tendency to act in a countercyclical manner. People tend to create a buffer against risk when times are good, and then use this buffer when times become more difficult.
How satisfied are you with your fund’s development?
Our strategy has overall proven very successful in the long term. Its flexibility has been very helpful in phases when the market is turbulent and the opportunities correspondingly great. Actively managing a fund requires assessing the situation and making sense of it all, then developing your opinions and reacting accordingly. The success might not be immediate, but rather long term.
You invest primarily in funds, not individual securities. Why?
This strategy has evolved over time. Balanced funds, the predecessor to today’s multi-asset funds, were previously often a fund-of-funds. This generally gave the portfolio a good mix without any cost disadvantage to the investor. Specialized investment concepts − such as those developed by our multi-asset team − I implement as direct investments, however.
Please complete the following sentences
If a friend wanted to invest 10,000 euro ...
he or she could diversify their investment by using a variety of funds − such as the DWS Multi Opportunities − or investment styles and timing.
If I wouldn’t have become fund manager of DWS Multi Opportunities ...
then I’d now be spending more time in my hometown Salzgitter.
If I were to miscalculate an investment ...
I’d try to objectively analyze the situation and determine if the original investment concept was still valid.
