Investment Strategy and Characteristics - SKAGEN Vekst
SKAGEN Vekst is a long-only equity fund which predominantly invests in Nordic companies. The portfolio also contains selected global equities whenever they present a more attractive riskadjusted return opportunity. The fund is managed by Søren Milo Christensen and Alexander Stensrud.
Nordic countries contain some of the world’s best-managed businesses. Corporate governance and business practices are typically market leading while levels of protection for minority shareholders and transparency are generally very high. However, the Nordic investment universe is relatively small and the fund’s mandate seeks to overcome this by allowing the fund to gain exposure to companies with attractive valuations from countries outside of the region. In addition to maximising the portfolio’s upside potential, this also helps to diversify portfolio risk away from the Nordic region.
SKAGEN Vekst’s strategy is to find undervalued companies from across the Nordics – where at least 50% of assets must be invested – and beyond with clearly identifiable catalysts to trigger their revaluation. The portfolio managers target companies that – often due to short-term market noise – may be out of favour, but where changes internally or in the operating environment will improve their fundamental outlook. Holdings must have both downside protection and upside potential based on their core earnings, cash flow growth and / or cost restructuring. To further reduce risk, the portfolio seeks to maintain a sensible balance between geographic regions and sector exposure.
SKAGEN Vekst’s investment approach is benchmark agnostic as we believe this gives the portfolio managers greater flexibility to invest with conviction where they find the most value in order to maximise risk-adjusted absolute returns.
The portfolio typically contains 40-60 holdings with the top 35 positions representing 70-90 percent of assets. The fund is actively managed and has a bias towards mid / large cap companies with select high-conviction small cap ideas. The current portfolio is broadly split 50:50 between Nordic stocks and those listed outside the region, which is typical of the fund’s geographic exposure.
The portfolio managers target companies with a margin of safety and possessing clear, coherent and realistic catalysts to drive a share price revaluation. The fund’s investment horizon is typically a minimum of 3-5 years but can be significantly longer as the portfolio managers attach greater value to fundamentals than short-term trends.