Bundgaard & Lund approaching Mercer's global top 10

Story from www.finanswatch.dk (translated from Danish)

Bundgaard and Lund approaching Mercer's global top 10

By KASPER KRONENBERG
Published on 07.06.11 at 11:32

The successful stock pickers from SEB, Bankinvest, Alfred Berg and Nordea, Peter Bundgaard and Anders Lund, are highly successful with global share fund which is number 12 out of 340 funds on Mercer list.

They launched their Bloomberg terminal at the worst time ever in the winter of 2008, only seven months before the stock markets caught fire. The otherwise successful trio consisting of Peter Bundgaard, Anders Lund and Erik Simoni were faced with a tough start as lead entrepreneurs, but in line with the recuperating world economy, the three, known and respected for years by the Danish financial world for their portfolio management skills that beat the wide indices, are now beginning to show their faces again.

Critics point to the successes as being due to the large positions in relatively illiquid shares that were difficult to sell at sensible price levels, but Bundgaard, Lund and Simoni will probably shake their heads at the criticism and simply write www.morningstar.dk in the address field in an empty browser and surf around to show the trio's achievements as portfolio managers in their own right operating from newly established premises on an old farm north of Copenhagen.

Hands on the hot plate

Today, all the partners in BLS have their hands on the hot plate when they invest together with their investors. And with the ceiling of 3 billion Danish kroner to be invested in Danish shares, there are limits as to the size of the positions today when placing 3 billion kroner in more than 10 Danish shares.

But, it is one thing is to be able to handpick Danish shares, which since the launch on 26 February 2008 have generated a return, including reinvested dividends, of 28.1 per cent after costs, while the wide OMX Copenhagen Capped index in the same period came up with a return of minus 5.9 per cent; a totally different story is the trio's ability to put together a global portfolio where companies are further away and the road to top managements is longer for the trio in their endeavours to really understand the drivers of the businesses and how the managements intend to optimise and capitalise their businesses.

But here BLS Invest's Global Equities division enjoyed an early success with companies like McDonalds, Kühne + Nagel, Wal-Mart and Philip Morris among the favourites, which also include the investment guru Warren Buffet's parent company Berkshire Hathaway. Since its establishment on 30 September 2008, the fund has had a turnover, including reinvested dividends, of 42.0 per cent after costs, whereas the MSCI world index, including reinvested dividends and measured in Danish kroner, rose by 18.0 per cent in the same period.

Annual reports are holiday reading

This performance has not gone unnoticed at consulting firm Mercer, which looks at figures before costs. Here Mercer has calculated that BLS Global Equities in the course of two and a half years (to the end of March this year, ed.) ranks number 12 out of 340 funds in the category Global Equity Core. Taking into account the standard deviation (risk, ed.) the fund is placed under average on this parameter as number 232 out of 338.

The number cruncher Anders Lund, who adds thick annual reports to his holiday reading, tells FinansWatch, that they are obviously satisfied with their current position, when measuring the returns, but emphasises that they are long-term investors who want to be evaluated over a much longer time span than two and a half years.

"If you look at our companies, and this applies to both the Danish and the global ones, they are characterised by better results than their competitors year after year.

The youngest company in our two funds is the Hong Kong equivalent of Danish Matas or British Boots, which dates back to 1976. These are companies that adapt to the changes of the world and we believe they will maintain this ability," says Anders Lund.

Wide selection of quality

The broad description of the companies that BLS buys shares in is that they provide quality shares, which, in a nutshell, are shares that are known for their good results over a number of years, produce no major negative surprises and typically have low tied-up capital, correspondingly large dividends share buy-back programmes and massive competitive powers, as a result of which earnings do not deviate much in times of recession. In other words: quality companies with strong and typically very experienced managements.

"You could say that the largest difference for us when we buy foreign shares as opposed to buying shares in Denmark is that there are, quite simply, a higher number of very skilled companies to choose between. To put it in general terms, you could say that we sometimes have to compromise a bit when investing in Denmark, and we do sometimes wish there were stronger cases, whereas the global scene is overflowing with well-run businesses," says Anders Lund and gives a detailed explanation of the background to McDonald's major success in China and Russia and the reason for Louis Vuitton's continuing unique earning power.

Here, he points to Louis Vuitton as a fine example of a company that in a unique way practically determines the price of its goods itself because the brand is so incredibly strong. This is the road that the Carlsberg management is heading down, without, of course, wanting to compare ale to ladies' handbags.

"We are very pleased with consumer companies and have several in our portfolio, among these Nestlé. Nestlé has some very strong brands, which enabled the company to pass on the increased costs to the customers in 2008 when inflation set in, and moreover, its management is very competent, cautious and careful when buying," says Anders Lund.

No beating

He is quite aware that some will criticise him and his colleagues for taking too large risks, also because they have chosen not to include any of the major companies in Denmark such as Danske Bank, Vestas and Mærsk.

"Well, they can say that, but I think they should look at the companies that we do have in the portfolio. And the performance they have year after year. These are not risky businesses, no, their earnings and growth rates are stable to the point. And we have refrained from investing in some of the Danish companies that have been beaten up badly, so I think you could characterise us as very stable funds," says Anders Lund to FinansWatch.