Lars Oberle, Chairman of Finanz Konzept, spoke to IFM about the company and developments in Europe
Tim Evershed
February 17, 2015
Tell us the history of Finanz Konzept and the ethos behind the company?
We concentrate all of our efforts on meeting the personal expectations of our clients and we guarantee that we will provide them with outstanding service as regards to security, discretion and exclusivity. Our small but efficient team performs its tasks with passion to offer superior results based on mutual trust, discretion and common goals. Finanz Konzept AG was founded in the Principality of Liechtenstein in 2001 by two experienced financial consultants — Daniel Köchli and me.
The location in Zurich, Switzerland was added in 2004. Finanz Konzept AG is authorised as an asset manager in Switzerland and is controlled and regulated by the supervision of securities. It has been a member of the Swiss Financial Analysts Association since 2006. In 2011, we launched a very successful dynamic fixed income hedge fund called Triple Opportunity Fixed Income Fund and in 2012 we launched the world’s first Physical Diamond Fund.
How do the products and funds work?
Our core business is managing accounts for institutional clients and affluent individuals. As our German company name says, we provide an overarching financial concept based on individuality and stability. Thereby we take the clients’ origin, age, stage of life, currency preference, risk appetite, future purpose of use etc. into account.
Besides the integrative wealth management, we offer two innovative funds.
The Triple Opportunity Fixed Income Fund (TOFIF) is an open-ended investment fund established as an exempted company limited by shares in the Cayman Islands. The investment objective in respect of each class is to achieve a positive return in the long term. The TOFIF is a Leveraged Value Bond Fund and aims to achieve an annual rate of return of 8-12%. It has a broad diversification with over 180 bonds invested globally, mainly in industrialised countries, but also emerging countries. The TOFIF is realising its market potential by using three higher-level fixed income investment classes, namely government bonds, corporate and convertible bonds. Their implementation and rebalancing strongly depends on global market trends offering various chances. Evaluating the weight of these investment classes in the portfolio happens on a monthly basis. The average portfolio duration of this fund normally varies from one to eight years, based on the investment manager’s forecast for interest rates.
| We launched the first Physical Diamond Fund in the world. It acquires (1) rough diamonds, which will be cut, polished and certified and then sold on the world market, (2) rough diamonds, which will be sold on the world market, (3) natural polished diamonds (white and coloured), which will be sold on the world market. Some acquired diamonds will be held for long-term investment. The fund actively trades diamonds every day, of course only with conflict free diamonds. An excellent network is crucial in order to score best prices. The diamonds are stored in free zones and tax-free countries all over the world and insured as well. |  Lars OberleChairman of Finanz Konzept |
How do Finanz Konzept’s products differ from those of its competitors?
The TOFIF follows an absolute return strategy and, therefore, is not using any benchmark. Through this fact, in combination with the Cayman Island structure, the TOFIF adopts a flexible approach to asset allocation and is able to adapt to all market situations. At the moment, the fund is benefiting from the use of a leverage-capital (up to 200%), which generates additional returns.
Our Physical Diamond Fund and its approach to ensure liquidity by investing in natural rough and polished diamonds below 5 carat is unique. Therefore, our clients enjoy an exclusive investment opportunity, which offers a safe haven with low volatility, low correlation to stock markets and stable value increase. Other diamond investment opportunities are either buying diamond mine stocks/exploration stocks or are not in a form of an open-end fund. Instead, they invest in diamonds above 5 carat, which will make it hard to ensure liquidity.
What is the company’s investment strategy?
Our strategy combines optimal asset allocation with adequate timing and selection. The TOFIF aims to invest in securities that are undervalued significantly. Undervalued bonds benefit from recovery in the credit quality and thus provide a useful diversification to traditional bond portfolio.
What is the current situation in the fixed income market? And the outlook?
We have seen that over the course of the year, the yields of 10-year government bonds of the most important Euro countries declined strongly. The yields are at the lowest level since 10 years. We see the ECB as mainly responsible for this with its continuing expansive monetary policy. In September, it lowered the base interest rate again. In October, it tried to relieve banks of their toxic assets by buying asset backed securities and covered bonds.
In November, Mario Draghi reinforced his intention to expand the bond purchasing program. This announcement led to a rally at the bond markets of south Europe. With that, Mario Draghi follows in the steps of his colleagues in Japan and in the US who have also been trying to gain momentum on the economy by quantitative easing. Solely in Greece, the yields of 10-year government bonds went up after it was revealed that country has financing sorrows again. Albeit the debt burden of the above-named countries remains oppressive. Someone should be facing the risks from an investment in government bonds of peripheral countries in particular, since by our estimation, the risks aren’t priced correctly and the low yields are artificially created by the monetary policy of the ECB.
We believe that interest rates are currently far too low in order to provide long-term price and financial stability. The situation resembles the time before the financial crisis. Managers of big corporations prefer to use the cheap central bank money for share buybacks and mergers and acquisitions instead of investing in their business. However, a turnaround in interest rates in the near future seems unlikely.
How will falling oil prices affect investors next year?
Depends on which side of the table you are. Stocks of oil companies will continue to suffer. We hope that companies will use the freed-up opportunity costs to invest in their business and thus boost the economies.
How will problems in the Russian economy and the rouble crisis impact Western economies?
As long as the conflict is not expanding, we see moderate impact on the Western economies as a whole because Russia is not really integrated too much in the international financial system and the Russian economy seems to be more resistant to devaluation than was the case in 1998. In addition, we believe that the EU has a fallback plan hidden in the drawer. On the other hand, not only Russian companies, but Western companies too will suffer due to the sanctions. The current situation in Russia affects Western companies on the demand side. One issue is that Western goods become massively more expansive for the Russians and thus lead to a decreased demand in foreign goods and services.
Will a ‘Grexit’ be a positive or negative for Greece and the rest of the Eurozone?
By exiting, Greece would shoot itself in the foot. The new currency would be too weak to repay the debt burden. The rest of Europe could cope with a Grexit since the economic importance of Greece is relatively low. In case of a debt “haircut” though, we fear that other highly indebted countries would like to follow the bad example of Greece, resulting in a domino effect.
What is your economic forecast for 2015?
In our perspective, the hot topic of 2015 will be the divergence of the world economy offering many opportunities and risks.
It’s a really fragmented situation: the US is expected to grow around 3% and the job data will recover. Furthermore, we believe that the Fed will raise interest rates in the middle of next year.
On the other side, in Europe we are worrying about the structurally weak France and Italy. We believe that government bonds will continue to have the risk not priced in correctly due to artificially low kept interest rates. Europe remains burdened by insecurity.
The same fragmented situation is seen in the emerging markets. While China and India have introduced important reforms, which should stabilise their growth, Russia and Brazil face major problems.