Investment strategies

At QUAERO CAPITAL, we believe that value stems from independent thinking, an original  approach and strong convictions.

Whenever you find yourself on the side of the majority, it is time to reform or pause and reflect
Mark Twain

These principles underline our investment strategies.

European small capitalization stocks

Using a very focused and disciplined Value Investment philosophy, the Quaero Capital SA team aims to invest in smaller European companies that trade at a substantial discount to both their intrinsic value or to their long term profit potential. The small cap team is one of the most experienced in its field and operates in one of the least researched part of the European markets. This dedication to investing “under the radar screens” and to a very research-intensive process has produced very credible results over the past 9 years. The Quaero Capital Funds (Lux) – Argonaut is one of the few funds investing exclusively in micro capitalisation stocks and concentrating on the lowest tiers of European stocks. The Quaero Capital Funds (Lux) – Smaller European Companies fund uses the same investment philosophy and process but with a bias towards companies that have a substantial shareholder that is a family. This additional filter has shown to produce strong results over the long term but is as yet widely ignored by most investors.

High Conviction Equities

Berger van Berchem & Cie SA has been appointed as the new manager of the Quaero Capital Funds (Lux) – World Opportunities as of December 1st 2016.

Quaero Capital Funds (Lux) – World Opportunities is an investment fund designed to offer professional investors a diversified exposure of world equity markets

  • The Fund’s investment objective is to achieve superior risk adjusted returns relative to world equities over a 3 year rolling period
  • The Fund uses both a price trend and a fundamental approach to select and evaluate companies in absolute and relative terms.

The portfolio has, as a result been substantially modified during the first days of the month. The Fund is now managed with both value and growth principles from a global investment universe of more than 5’000, with a clear bias towards reasonably valued stocks.

For the Quaero Capital Funds (Lux) – Bamboo, Quaero Capital SA has partnered with emerging markets veteran Robert Lloyd George. The Quaero Capital Funds (Lux)  Bamboo is a long only, UCITS Asian equity fund. Actively managed, the fund which aims to generate consistent returns by investing in a portfolio of 30 to 50 stocks of Asian and emerging market companies that will benefit from the emergence and growth of domestic consumption in what the manager believes will be the fastest growing regions of the world.

Stock selection will focus on strong cash flow generation and sustainable dividend yield. The fund will at all times be invested at least 67% in Asia, with the MSCI Asia Pacific Index* as Benchmark.

The investment strategy will use both top down asset allocation and bottom up analysis to build a concentrated portfolio. The investment team identifies growth themes across the investment universe and will research and invest in companies in specific sectors which will benefit from these growth themes. The portfolio management team will focus on original research and maintain a disciplined investment process, paying particular attention to corporate governance and ESG principles. The fund aims to have low turnover and a strong risk management framework in order to deliver consistent and repeatable returns for investors.

* The benchmark is not in the investment policy.

Japanese Equities

The objective of the Japanese Equities strategy is to achieve long-term capital growth by investing in listed Japanese companies. The strategy seeks to profit from investment opportunities by identifying under-valued securities using a variety of fundamental analytical tools focusing upon growing cashflows and then employing qualitative screens to implement positions.

The strategy has a concentrated portfolio, typically holding between 20 and 30 different positions at any given time but with diversification across multiple sectors. The strategy invests in companies throughout the capitalisation range but not below JPY 20bn.

Equities Long / Short

The objective of the European Equities Long / Short strategy is to generate equity-like returns over the long term whilst limiting losses over the medium term. To reach this objective, we aim to profit from pockets of market inefficiencies in European equity markets through the application of a systematic investment process. More specifically, we carry out a European, all-cap, value-driven, “quantamental”, equity strategy, which follows a transparent and disciplined investment process, subdivided into three main elements: a pure bottom-up stock picking procedure, a robust concentrated portfolio construction procedure and a dynamic market risk mitigation procedure. The core idea of the approach is to combine valuation indicators with price and outlook momentum indicators.

The Disruptive Innovation L/S Equity strategy aims at generating absolute risk-adjusted returns by investing in the winners, and shorting the losers, of disruptions across industries and markets. This is a low net exposure, fundamental, global thematic strategy. The portfolio is concentrated and can invest in any sector. Risk and volatility management is a major objective in managing the strategy, which uses a long option overlay to create asymmetry and benefits from increased volatility in disrupted sectors. The management team is complemented by a dedicated Advisory Board of academics and business figures with strong backgrounds in understanding long term disruptive trends. The management of the strategy is underpinned by a fundamental investment process resulting in a high conviction portfolio. Top down sector analysis in conjunction with the Advisory Board members is the key starting point of the process, with the objective of being ahead of other investors on technological impact, market trends and structural changes. Bottom up stock analysis is carried out by the investment team running a truly active, multi-sector and multi-geographies concentrated portfolio. Risk management occurs both at the investment team level, via model-based analysis and monitoring of all positions as well as the use of hard stops and price targets, and at the risk management team level, via pre and post trade checks, liquidity monitoring, VaR analysis and extensive monitoring of positions.

Infrastructure

Quaero Capital SA has also developed a strong expertise in real assets and more specifically infrastructure investment in Europe. The investment team focuses on the PPP / PFI sector and private project financing by targeting small to mid-size infrastructure projects. We believe that this strategy offers an attractive risk / return framework and direct access to recurrent cash flows over the long term.

The Quaero Capital SA investment team has in-depth knowledge of the infrastructure market and its players in Europe. It has strong expertise in financial engineering enabling to invest with protective features for its investors, following a thorough investment process. QUAERO Infrastructure implements a generalist approach: telecom, transport, social infrastructures, utilities, water and energy.

The QUAERO Infrastructure team is also committed to responsible investing and has established a charter of principles to integrate responsible governance, social and environmental criteria in its investment process.

Real Assets

Using research gathered over several years, the Quaero Capital SA team has built an expertise in real assets focusing on a liquid solution for a very defensive asset class. The objective of the Real Assets fund is to create a long-term thematic vehicle with a 10 days liquidity for investors wanting to take advantage of the solidity of Real Assets and their resilience to the economic cycle and inflation. The Fund aims to produce substantial long-term capital growth with a dividend yield in excess of 3-4% p.a., replicating the return of a diversified portfolio of direct real asset investments. This will be achieved by focusing on strong book/price ratios, and high asset intensity, using funds, REITS, ETFs and equity securities of companies across the world to provide exposure to all 4 key sub-classes of real assets: Real Estate, Infrastructure, Timberland Assets and Agricultural Assets.

Absolute Return

The Quaero Capital Funds (Lux) Yield Opportunities fund invests in assets with attractive risk-adjusted yields across Bonds and Equity asset classes on a worldwide basis and aims to achieve consistent risk-adjusted returns with low volatility over the long term.

Using a macro overlay, the manager invests in undervalued yield opportunities currently subject to concurring positive macroeconomic changes. The portfolio construction is the result of individual securities selections and is not managed by reference to any benchmark. The manager applies a rigorous capital allocation and risk control by monitoring overall exposure to FX, rate and credit spread.

Mixed assets

Quaero Capital SA offers three mixed asset funds and one International equities fund of funds. The mixed asset funds each offer a specific risk return profile – conservative, balanced and dynamic – to cater for investors’ specific investment profile. The fund of funds aims at providing exposure to global equity markets by investing in long only equity managers across the globe. The asset allocation is the result of QUAERO CAPITAL’s global economic forecasts and funds are selected using both quantitative filters and a qualitative research process. Each of these funds are offered in several currencies.