Investment Strategy and portfolio characteristics - SKAGEN m2
SKAGEN m2 is a long-only, actively managed equity fund that seeks to generate long-term capital growth by investing in real estate companies from across the globe.
The fund is managed by Michael Gobitschek.
The fund’s strategy is to find high quality and undervalued companies that capture the underlying returns of real estate investment in relevant markets. SKAGEN m2 provides an alternative to direct investment in global real estate markets, reflecting the risk profile of property investment but with higher liquidity. The fund’s returns are expected to be in the range between those available by investing in more conventional equities and bonds.
SKAGEN m² uses a total return strategy. The portfolio manager believes that the compounding effect of reinvesting retained earnings is a key reason why the real estate sector delivers attractive returns over time. The fund’s strategy also seeks to exploit special situations and has the ability to adopt an opportunistic approach in certain circumstances (e.g. capital management initiatives, M&A activity, shareholder activist campaigns, macro distortions and restructuring or asset rotation opportunities). The portfolio manager typically selects companies with an embedded growth model (e.g. properties undergoing refurbishment, repositioning and / or development) combined with fixed cash flow generating assets. To manage risk, SKAGEN m2 maintains balanced geographic, property categorisation and sub segment exposure, based on a company’s underlying value drivers and phase of the economic cycle.
SKAGEN m2 is benchmark agnostic; the portfolio manager has complete freedom to invest with conviction away from the index to find value and deliver attractive long-term risk-adjusted returns.
The fund typically consists of 25 to 35 companies with the top 10 holdings representing 45-55 percent of assets. The investment horizon is typically two to four years but may be longer as the portfolio manager attaches greater value to fundamentals than short-term trends. The ideal investment for SKAGEN m2 is a company positioned to exploit the mega trends driving property markets in the long-run, such as urbanisation, growing affluence in middle class consumers and the rise of e-commerce, combined with attractive fundamentals and valuation. In addition to rigourous bottom-up analysis, the portfolio manager seeks to identify structural shifts in real estate markets based on changing demographic trends, consumer patterns, transformation of cities and non-cyclical asset bubbles.