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Portrait of a man
Øyvind Fjell took over the reins of the equity fund SKAGEN Vekst in July and has already started to make his mark on the portfolio. Photo: SKAGEN

It was with a dose of humility and high expectations that Øyvind Fjell took over the reins of the Nordic/global equity fund SKAGEN Vekst at the beginning of July. In this interview, he explains how he has spent his time since then and what expectations he and fellow portfolio manager Alexander Stensrud now have for SKAGEN Vekst.

What experiences from the Nordic market do you bring with you to the management of SKAGEN Vekst?

"You could call the Nordic markets my home ground, since I spent more than nine years working as sole portfolio manager in the region. As a result, I know the markets well and know how they react to various stock market climates. This means not least that I am very familiar with a large number of companies in the region, having followed them for many years.

The Nordic stock exchanges complement each other well on a sector level, at the same time as the companies are generally well run and have good corporate governance. This is reflected in the returns that have historically been generated in these markets – they are far higher than most of the other regions that it would be natural to compare them with. That being said, there are many cyclical companies on the Nordic stock markets and the returns of these are obviously not equally good in all periods. I am thinking particularly of sectors like commodities (oil, wood, metals), industry/shipping and finance.

I believe that much of the key to success in Nordic management lies in Denmark where you can find stable and sound companies that you can balance against the more cyclical exposure further north. On a company level, I know a lot of Danish companies very well, since I have spent a lot of time looking for Danish "dynamite", and we have already seen the Danish stocks in the SKAGEN Vekst portfolio increasing in value since I joined."

What changes have you made in the portfolio since joining?

"Alexander and I sat down quite early on to agree on some targets for the portfolio. One of these was a wish to concentrate the portfolio around even fewer companies, and prioritise those stocks where we see the best prospects. At the time of writing, there are 44 companies in the portfolio, down from over 50 when I took over. In time, we would like to have between 30-40 holdings at any one time, preferably at the bottom end of this range.

With regard to specific changes, we have bought into two US technology companies, namely Broadcom and Applied Materials. These bring with them exposure to exciting themes like cloud computing and artificial intelligence, at the same time as being attractively priced. We have also increased our exposure to commodity stocks somewhat, including Anglo American, Boliden and Outokumpu amongst others. These companies currently have strong earnings at the same time as they are trading at low multiples relative to other cyclical companies, such as in the industry sector for example.

Another newcomer in the portfolio is Lonza, a Swiss company with special competence within the manufacturing of drugs and chemical ingredients. It is a stable company with sound growth prospects and attractive pricing, which adds diversification and balance to the portfolio.

Of the larger positions, we have sold out of Continental and Norwegian. With regard to Continental, we are now entering a period where a lot is happening in the automobile industry, which will entail significant investment for the company, and we therefore feel that our money would be better allocated elsewhere. As for Norwegian, I feel they have been disappointing operationally speaking, and their costs are not under control. We chose to sell out from a risk perspective. Nonetheless, I wouldn't rule out owning the company again at some point or other. Most of the other positions we have exited are smaller, on average around one percent of the fund, so haven't been of vital importance to portfolio composition."

How have you adapted to SKAGEN's investment style?

"The most positive thing for me was to discover how much common ground I share with the rest of the portfolio team. This facilitates productive and in-depth discussions. There are also a large number of positions in the other funds that could slide right into the SKAGEN Vekst portfolio – it is definitely a strength for us managing Vekst that there are ten other portfolio managers searching for global ideas alongside us.

When it comes to position sizing, this depends amongst other things on what we believe the risk/reward is for the stock, how it fits into the portfolio and the underlying liquidity in the security. Typically we try to build our position in the stock relatively quickly. If we anticipate that the weighting of the position should be three percent of the portfolio, we will try to buy around half of this fairly quickly, and then increase it if we see that it is developing as expected.

There is a slight difference between my approach to positioning and what SKAGEN's approach has been historically. However, if you spend too much time building a position in a stock which is already doing well, you risk the train leaving the station – and that can be extremely frustrating. When exiting a stock, I already have alternatives in mind that I wish to invest in. I might feel that the fundamentals are fully-priced, so then it is just the liquidity in the stock which sets the limits. On the whole, I prefer liquid companies, so exiting a position shouldn't take a long time.

I am convinced that we have a very good starting point for creating good results and that we have a product that many people will find attractive."

Historical returns are no guarantee for future returns. Future returns will depend, inter alia, on market developments, the fund manager's skill, the fund's risk profile and management fees. The return may become negative as a result of negative price developments.