In recent years our economy has been thriving. European stock markets are unusually bullish, unemployment rates are low and GDP’s are constantly growing[i]. During recessions, the causes of the economic downturn are the issue of the day, whilst in times of abundance we seem a lot more stoic. I imagine this is because there is generally not a specific event or reason we can point out to explain the rally, and the rally has a less abrupt effect on our lives. In the next paragraphs, I will break down some of the events that caused our current rally, specifically the actions of the European Central Bank (ECB) from the 2008 crisis until now. As you are probably aware, there is a general economic cycle that tends to take about 7 to 11 years to fulfil itself. Our last major economic downturn was in 2008. After that follows damage control, recovery and then expansion. This repeating cycle is therefore one of the reasons for our current wealth. European economy has quite cleanly followed this pattern, and now seems to be at the top again, perhaps waiting for a new correction. In modern times, we have a more regulated economy with central banks that try to smooth out the economic cycle, to get a more predictable and less turbulent growth. In response to the 2008 crisis, the ECB lowered its key interest rate to stimulate investments and relieve some pressure for banks. This worked out and after some time, economic recovery started to set in.[ii] After a period of damage control, where numerous banks were bailed out by their governments, a new threat arose for the European economy. It turned out that some countries were not as financially sound as they made themselves appear, and the 2008 crisis was a shock they could not take on their own. Greece, and to lesser extent Ireland, Spain, Italy and Portugal were stuck in a spiral of expanding debts they had no money to pay off, causing their credit ratings to drop and the loans to get even more expensive. Due to a singular monetary unity of Europe, they had no way to get out of these problems without a bailout or a bankruptcy[iii]. To maintain a strong and undivided appearance, Europe had to intervene and they financed the debts whilst restricting these countries in their national financial policy in an attempt to stop further gross mismanagement of national budgets. Europe’s hand was forced to some extent, either losing face as a strong unity by cutting loose the weakest link(s), or biting the bullet. They chose the lesser of two evils and additionally kept a low interest rate so that the countries lacking behind could catch up as well. [iv] A couple of years later, another problem started to arise. Inflation rates were dropping and there is a constant fear of deflation as our monetary system is based on inflation. Allow me to elaborate on this as briefly and clearly as possible. We have a limited total money supply. This money is mostly managed by banks, who multiply it and distribute it. Money is created when a new debt is taken on, either at a commercial bank or at a central bank. Money is destroyed when this debt is paid off or when bad debt is depreciated. Money has a time-value. Having a debt costs you money over time, and in essence all existing money is a debt. This means there is a constant outflow of money due to interest payments. To keep paying for this outflow of money new debt has to be created. Therefore, as long as there are interest payments flowing out of the system, there has to be a constant growth in debt to enable the interest payments. If the debt stops growing, interest payments will continue to take money out of the system, and the money supply will keep dropping until the outstanding interest payments exceeds the money supply and there is no more money left. When inflation staggers, there is no need for extra money in the system and the risk arises that the system implodes. “The news is about terrorists and celebrities and we are looking at our future holiday destinations. Nothing to worry about, right?” As a solution to boost inflation rates, the ECB set up a ‘quantitative easing (QE)’ programme, starting March 2015. This programme involves buying assets from commercial banks to create more money in the banking system that will set in motion a cause-effect chain[v], benefiting everybody. As a double-edged sword the ECB started buying mainly risky high-yield bonds from banks, taking out a few domino-pieces in case of a new economic downturn. The QE started to take effect, and banks were able to sell off risky bonds, reducing their risk profile. Now, we are at the current situation. We are wealthy, the rich get richer and everybody has a job. The interest rates are low, so there is a great economic climate for growth. The news is about terrorists and celebrities and we are looking at our future holiday destinations. Nothing to worry about, right? You may have noticed a slightly sarcastic undertone in pieces about the seemingly wonderful interventions of the ECB. Before I elaborate on that, I will show you a few graphs. The first one quite theatrically demonstrates that European High Yield bonds yield less than US 10 year Treasury bills. [vi] At this moment, the riskiest European corporate bonds are deemed a safer investment than the US 10 year Treasury bill. Part of this is the QE programme pushing prices of high-yield bonds down by providing demand, but European high yield bonds that are not eligible for getting bought by the ECB have the same yields. This basically implies that the high yield bonds hold no risk, because the ECB has your back on this one, besides having such cheap interest rates in Europe, a bankruptcy is very unlikely, as companies can refinance forever. Even the least-functioning companies
“Coins are points”, economics of professional football
The economics of professional football is a rather simple form of economics: “Coins generate points.” In general, clubs with a relatively large budget will outperform clubs with a relatively low budget. This also holds at the national level. The so-called classical top-three, viz. Ajax, Feyenoord and PSV are the only serious title candidates. During the last decade, two proverbial exceptions to this rule have occurred. First, AZ won the Dutch title in 2009, mainly based on the large budget provided by sponsor annex sugar-daddy Dirk Scheringa. After the collapse of the business empire of Scheringa, AZ had to make substantial downward adjustments to the budget. During that period, the management of the club performed outstandingly, so that they have reached a stable position in the sub-top of Dutch football. Second, FC Twente captured the Dutch title in 2010. Certainly after this championship victory, the management of the club took unacceptable financial risks. Currently, FC Twente has become a serious candidate for relegation. Former chairman Joop Munsterman was always ‘Working On a Dream’ (Bruce Springsteen), but this dream has now turned into a nightmare. One lesson can be learnt from these two cases: sub-top clubs should not attempt to join the top teams in Dutch professional football for a longer period of time. Both Ajax and Feyenoord have a large national base of fans, while the supporters of PSV, though more regionally concentrated, are very loyal. Moreover, these three clubs are strongly embedded in business life. “In sports, the success of firms requires the presence of competitors, which makes sports different from regular business life.” In 1982, the commercialisation of Dutch football finally took off, when shirt-sponsoring was introduced. One ought to realize, that Feyenoord have won only four Dutch titles in 35 seasons ever since. Ajax have won 13 Dutch titles since 1982, while PSV have even captured the Dutch championship 16 times. Now, one should keep in mind that the last eleven titles in the amateur era went to eleven different clubs: ADO (1943), De Volewijckers (1944), FC Haarlem (1946), Ajax (1947), BVV (1948), SVV (1949), Limburgia (1950), PSV (1951), Willem II (1952), RCH (1953) and EVV Eindhoven (1954). The first five titles in the professional era also went to five different clubs: Willem II (1955), Rapid JC (a predecessor to Roda JC, 1956), Ajax (1957), DOS (a predecessor to FC Utrecht; 1958) and Sparta Rotterdam (1959). Five title- holders in five years in Dutch professional football: that will probably never happen again, although the period 2008−2012 came close (PSV, AZ, FC Twente, Ajax). If only Feyenoord had been aware of their own strength in the 2011–2012 season! In 1960, a play-off between Ajax and Feyenoord decided the ‘Eredivisie’. By the way, Ajax beat the arch-rivals 5–1, with three goals from Wim Bleijenberg, a former Dutch international centre forward, but then only an Ajax-reserve. In the regular league, he had scored just one goal in four matches. After that, only DWS (1964), AZ (1981 and 2009) and FC Twente (2010) have won the league, apart from the so-called classical top-three. Thus, within two decades, football became rather predictable and far less competitive. In the Netherlands, we have grown used to dominance of three clubs. It does not seem to diminish the entertainment value of the ‘Eredivisie’. Except for some clubs (FC Groningen, Roda JC en Vitesse), the attendances are still quite satisfactory, even if the stadium of Excelsior is rather small. Television audiences are also fairly large, just like attention in the media. In some other countries, the situation seems to become even worse, at least from the competitive perspective. In Germany, every point that FC Bayern München loses is a real sensation. The club from Bavaria has now won the German title six times in a row. The same holds for France, where the large resources of Paris Saint-Germain FC have been too much for the rivals since 2013, except tor AS Monaco, not a poor club itself, in 2017. In Italy, Juventus have dominated the Serie A since 2012. Will this become a problem? A central hypothesis in sports economics is the so-called Louis-Schmeling paradox (Walter Neale, “The Peculiar Economics of Professional Sports”, Quarterly Journal of Economics, 1964). In sports, the success of firms requires the presence of competitors, which makes sports different from regular business life. According to my view, Bayern München, Juventus and Paris-Saint Germain, still face competition, though not at the national level. Their main goal is victory in the UEFA Champions League. There, they still face competition from the Spanish top-three (Atletico Madrid, FC Barcelona and Real Madrid) and the English top teams, like Arsenal, Chelsea, Manchester City, Manchester United, Liverpool and Tottenham Hotspur. Thus, competitors are still present with regard to their real target, i.e triumphing in Europe. And if Real Madrid would win the Champions League five times in a row? They already did this once (1956 – 1960), and professional football has still survived.
Vision or Tunnel Vision?
A quarter of firemen fatalities are due to traffic accidents. Why is that? When firemen are rushing to a fire they are extremely focused on reaching and analysing the fire. This tunnel vision helps firemen do their job well, but it comes at a high price: due to their focus, firemen do not pay sufficient attention to other important issues, like fastening their seat belts. The same can happen to investors who invest against a benchmark. Because they are so preoccupied with trying to beat the benchmark, they might overlook important factors. They elaborately analyse in which stocks, in which sectors and with what strategies they recently performed well or poorly. In jargon: where did they win and lose performance? This means investors focus too much on the past and neglect important matters like the long term value creation of a firm. That should not be the intention. What is ultimately the purpose of an investment? It may look good to beat the benchmark, but if the absolute return is negative it still isn’t good. In the end, it is about enabling customers, people like you and me, to secure their financial futures. But of course, that requires there to be a liveable future in the first place. “Finance does have an important social function, namely to steer means to their most productive ends.” How liveable that future will be, partly depends on current investment decisions. Many investors think that finance is socially neutral; that they only need to focus on the expected risk-return for all to turn out well. But that is a misperception. Finance does have an important social function, namely to steer means to their most productive ends. It is easily forgotten that these are productive ends in a social sense too, which can turn out quite differently from financial reporting returns. After all, the firm’s activities can yield social gains and losses that do not benefit or burden the firm. These unpriced social gains and losses are called externalities. For centuries, firms have been able to get away with negative externalities – think of manufacturers who dumps waste materials in rivers or do not recover lands to their original condition. But society is becoming increasingly less tolerant of such behaviour. The costs of matters like CO2, waste and tobacco are being internalized more and more by regulations, taxes or consumer actions. This often comes at the expense of the profitability of producers of negative externalities. The opposite applies to producers of solutions (like catalysts, enzymes, windmills etc.). Unfortunately, financial-economic models do not take a changing world into account. Investors who only focus on the statistically measurable risks of models, are in fact focused on past patterns and do not take into account changing distributions, new business models, etc. For instance, they might keep investing in manufacturers of cigarettes because they achieved historically high returns in combination with a low variance. Indeed superficially, manufacturers of cigarettes have been good investments, but socially they have destroyed a lot of value due to very negative health effects. These effects are accepted less and less, and tobacco business models might very well collapse. In my opinion, these are not sustainable firms. But what firms are sustainable then? To answer this question one needs to assess the sustainability of their business models. A good sustainability score is not enough. For several reasons, such scores are flawed. For example, they mainly focus on the firm’s operations (how do they treat suppliers, employees and other stakeholders?), but barely take the sustainability of products into account. Consequently, manufacturers of cigarettes and oil companies can achieve high scores. Moreover, the scores are based on reporting, which is an advantage for larger companies with big reporting departments, and a disadvantage for smaller companies with fewer resources. In addition, scores often look at the wrong issues or weigh them incorrectly. So please, do look beyond these scores and judge firms on both their products and their behaviour. How do they really contribute to society? “It is attractive for asset managers to invest in companies that invest in the SDGs. Moreover, it is a way to show the added value of active asset management in a world that is shifting to passive investing.” A good measure for firms’ social contributions can be found in the UN Sustainable Development Goals (SDGs). These are 17 ambitious goals set by the United Nations in September 2015 in order to improve the world. Goals include eradicating poverty (SDG 1), achieving clean and affordable energy (SDG 7) and reducing inequalities (SDG 10). National governments have committed themselves to achieving these goals, but they need help from companies to deliver. This applies especially for the goals of innovation (SDG 9) and sustainable products and services (SDG 12). Fine, you might think, but in what way is this important for investors? SDGs matter because companies benefit from contributing to the SDGs in various ways. Firstly, they help making the world a better place – which is rewarding in itself but also raises their own chances of survival. Secondly, they are likely to achieve higher financial returns. After all, they create social value by offering solutions for the SDGs, which can often be translated into shareholder value, provided that people are willing to pay for the offered solutions. It is therefore attractive for asset managers to invest in companies that invest in the SDGs. Moreover, it is a way to show the added value of active asset management in a world that is shifting to passive investing. But the SDGs are not the only criterion on which to assess companies. That would be tunnel vision too. Other criteria include financial returns (i.e., based on valuation and value creation) and decent ESG (Environmental, Social & Governance) factors: is the company well managed? Does the company have a healthy culture? Is it well prepared for the future? Back to the firemen: they too can benefit from companies that make a positive impact. Innovative companies are developing self-driving
Interview with Marc Jansen, Manager BOM Brabant Ventures
BOM Brabant Ventures is a development company as well as venture capital investor based in Tilburg. BOM exerts itself in promoting sustainable development of the economy in the province of North Brabant. What does a job in venture capital look like? Does responsible entrepreneurship obstruct financial success? We spoke with Marc Jansen, manager at BOM Brabant Ventures. Marc, can you tell us something about your study time and career path? After high school, I studied IT in Eindhoven. I discovered that IT was not really for me, so I went to Tilburg to study Economics. I found out that I liked all different fields of economic, but my most preferred subjects were technical and numerical classes. After five years I finished my Master in Finance, doing an internship at KPN about currency risks. Next to my study I did a lot of side activities at AIESEC, where I was the chairman. I gained a lot of international experience as chairman, for example by attending congresses abroad. I also worked at a bar to earn some money. When I had my master’s degree, I served in the army for one year as officer, because at the time there was still an obligatory military service in effect in the Netherlands. After serving, I decided to work at ABN AMRO, where I started, after a traineeship, as consultant for small to medium sized companies. I chose for a banking career because at a bank, you get to know not only one, but a lot of different companies. I have had a lot of jobs within ABN AMRO, most of them as in management roles in the Midcap clients segment. Because I switched to a new function every few years, I kept developing myself. When I was head of Finance for the South of the Netherlands, ABN AMRO was split and sold to three banks. As ABN AMRO merged with Fortis, which was later nationalised during the credit crisis, the European committee demanded this split up in the Netherlands. The split up part was bought by Deutsche Bank. At Deutsche bank, I worked amongst other things as head Credit Risk for small to medium sized companies. The financial sector kept shrinking after the economic crisis, so I started to orientate myself to other possibilities, which allowed personal development in different fields. Soon after I started reorienting myself, an old colleague from ABN AMRO called, who was managing BOM Capital at that time. As the province of Brabant received a large sum of money from the sale of Essent, money was made available to stimulate innovative entrepreneurship. Two teams had to be formed. I got the opportunity to build the LifeTech team. What does BOM do exactly? Within BOM, there are three types of clients. BOM Foreign Investments aims to attract (innovative) foreign companies to Brabant. The assembly and distribution centre of Tesla, which settled in Tilburg, is an example of a success story of this team. This team helps entrepreneurs in Brabant to get foreign contacts, to e.g. expand their selling market. Next, we have an energy fund, where investments are made for developing and stimulating sustainable energy-projects. Last, we have BOM Brabant Ventures, which focusses on stimulating and developing businesses in Brabant, by amongst other things providing expertise, a network, capital and coaching. ”At BOM, economic gains are only one of the criteria for our investments.” BOM Brabant Ventures invests in (early-phase) innovative and technological businesses/projects. In 2014, BOM received €200 million from the province of Brabant, to expedite local business. What distinguishes BOM Brabant Ventures from other capital providers? BOM invests mostly in companies that are still in an early stage, mostly the Idea, Start up and Scale up phases by often taking an equity position in the enterprise. Because these companies are still very young, there is a lot of risk in these investments. Banks only fund these companies to a very limited extend. For private equity providers, the capital needs of these companies is mostly too small, because of fixed costs that accompany any investment (think of things like due diligence, market research, etc.). These young companies often rely (partly) on venture capital for financing. Only one in ten projects/companies where we invest in actually becomes a big success. This risk is reflected in our high discount rate of 25% up to 60%. We work together closely with other investors and only put in money if other parties also take care of a part of the financing. Fortunately, many of the other projects out of ten are successful as well, but returns are limited as goals are not met as fast as expected or more capital is required to meet the goals. Besides all this, the focus at other money providers is almost always making a profit. At BOM, economic gains are only one of the criteria for our investments. We look at the sustainability of the project and the executing company, the economic impact on Brabant, and the importance of the investment for the entire ecosystem. We don’t invest in businesses that only meet the criteria for a high potential return. This also works the other way around. Businesses that are very social, but are not eligible for a profit on the long term, are not sustainable either. It’s about the balance between these things. How does BOM Brabant Ventures get investment applications? The areas of expertise of my colleagues at BOM are very diverse. We have employees with amongst others molecular biology, physics, legal, technical and economic backgrounds. Because there are a lot of different backgrounds that are represented within BOM, we know what is going on in a lot of different disciplines. We are often actively looking for sustainable businesses/projects where we might want to invest in. We identify about 500 investment opportunities each year, and about 20 actually receive an investment by us. Additionally, we help about 60 companies a year with coaching and support, or getting contacts and / or financing elsewhere. Do you
It’s better to be lucky than good.
Do you regularly read stories about people who failed? Of course you don’t, you prefer to read about those who succeeded. The problem is that, if we spend our life studying successful people and companies that shook the planet, our knowledge of the world will be strongly biased and enormously incomplete. Bullet holes1 During World War II the English sent daily bombing raids into Germany. Many planes never returned; those that did were often riddled with bullet holes from anti-air machine guns and German fighters. Wanting to improve the odds of getting a crew home alive, English engineers studied the locations of the bullet holes. Where the planes were hit most, they reasoned, is where they should attach heavy armor plating. Sure enough, a pattern emerged: Bullets clustered on the wings, tail, and rear gunner’s station. Few bullets were found in the main cockpit or fuel tanks. They concluded that they should add armor plating to the spots that got hit most often by bullets. Was this correct? This is a stunning example of “survivor bias” — drawing conclusions only from data that is available or convenient and thus systematically biasing our results. Let me explain… Planes with bullets in the cockpit or fuel tanks didn’t make it home; the bullet holes in returning planes were “found” in places that were by definition relatively benign. The real data is in the planes that were shot down, not the ones that survived. So you want to be the next Steve Jobs?2 The survivor bias was also evident in Walter Isaacson’s 2011 best-selling biography of Steve Jobs, as readers scrambled to understand what made the mercurial genius so successful. Want to be the next Steve Jobs and create the next Apple? Drop out of college and start a business with your buddies in the garage of your parents’ home. David Cowan of Bessemer Venture Partners writes: “For garage-dwelling entrepreneurs to be successful, their path almost always involves raising venture capital and then getting their start-up to an initial public offering (IPO) or a large acquisition by another company. But VCs hear 200 pitches for every one they fund. So for every successful start-up founder, there are 199 other entrepreneurs who end up with only a cluttered garage.” No one writes books about them and their unsuccessful companies! Google, Victoria’s Secret and the role of luck Now, consider the story of Larry Page and Sergey Brin.3 Larry and Sergey were two very creative students in the computer science department at Stanford University who came up with a superior way of searching information on the Internet. They sought and obtained funding to start a company and made a series of decisions that worked out well. Within a few years, the company they started, Google, was one of the most valuable stocks in America, and the two former graduate students were among the richest people on the planet. What is hidden from this success story is the fact that a year after founding Google, they were willing to sell their company for less than $1 million. They eventually didn’t sell the company because the buyer said the price was too high. Mentioning this single lucky incident still underestimates the multitude of ways in which luck affected the outcome. ”When looking for advice, we should look for what not to do, for what is missing. However, we should not expect to find it among the quotes and biographical records of people whose signals rose above the noise.” Another Stanford graduate observed that it was a universal certainty that most men would rather be in a war zone than in a women’s underwear store. What if there was a nice place that men could feel comfortable in; a shop where they could browse at their leisure without having to manically flash their wedding bands? It led Roy Raymond to found Victoria’s Secret back in 1977.4 In marketing only to men, Raymond forgot the basic principle that most of a women’s underwear drawer will be purchased by her and not her other half. Alienating the main consumers of women’s underwear, i.e. women, was probably not the most sensible idea, and in 1982, due to financial stress, Raymond was forced to sell the company to sportswear magnate Leslie Wexner for around $1million. By 1995, when the brand launched its now iconic catwalk shows, Victoria’s Secret had become a $1.9 billion company, with 670 stores across the US. Today the brand controls a huge 35% of America’s lingerie market (according to Forbes), with sales over $6.6 billion in 2013. Sadly, despite his original foresight, Raymond did not share in this success. After staying on as president for a year, he left to form another retail and catalogue company, this time in children’s clothes. His brand My Child’s Destiny was declared bankrupt within two years, leaving Raymond personally liable for its debts. In August of 1993, Roy Raymond jumped to his death from San Francisco’s Golden Gate Bridge. No one wrote a book about Roy Raymond! Those who fail rarely get paid for advice on how not to fail. When looking for advice, we should look for what not to do, for what is missing. However, we should not expect to find it among the quotes and biographical records of people whose signals rose above the noise. They may have no idea how or if they lucked up. Also, keep in mind that those who fail rarely get paid for advice on how not to fail, which is too bad because despite how it may seem, success boils down to serially avoiding catastrophic failure while routinely absorbing manageable damage. But don’t tell a successful person that he has been lucky. Nobody accepts randomness in his own success, only his failure. Burying Evidence: The File-Drawer Effect Survivorship bias has also become a problem in science. Scientific journals only present the survivors of the journal process – studies showing statistical significance. Psychologists call this the File Drawer Effect. The studies that disprove or weaken the hypotheses
Interview with Jack Neele, Fund Manager Robeco
Most students enrolled in a program with an economic nature are interested in investing. Some students even start investing during their studies. What would it be like to invest €1,4 billion? How do you decide if a company is a good investment based on trends? We talk to Jack Neele, fund manager at Robeco. Can you tell us something about yourself and your career? After high school, I started studying econometrics, because I was interested in both economics and mathematics. During this education I got really interested in investing and was privately trading stocks, sometimes speculating in options too. I was a good student, going to most lectures. Nevertheless, I took 5,5 years to finish all my studies. Since I gained a lot of knowledge about financial markets during my studies, I tried to make my hobby my profession after graduating. In 1999 I started at the General Bank on the asset management department, and in 2006 I made the transfer to Robeco. At the moment, I am working as a fund manager of the Robeco Global Consumer Trends Fund. I succeeded to make my hobby my profession and the work remains very interesting and varied! What does being the fund manager of the Robeco Global Consumer Trends Fund entail? As fund manger you take all the buy and sell decisions within the fund. Within the fund we look at long term trends in consumer spending. At the moment we see a couple trends developing, from which we can expect a lot the coming years. First of all, digitalization. Consumers nowadays spend an increasing amount of their time online, for example, for e-commerce, digital payments, social media or streaming movies, series and music. In addition, we observe growth opportunities in computer games and augmented & virtual reality. Second of all, the growth of consumer spending in emerging markets like China and India. We expect above average growth in those markets, which results generally in interesting investing opportunities. Finally, we are charmed by the strong appeal of powerful brands on consumers. Strong brands have the advantage that consumers are generally loyal, which allows them to charge a premium for their products compared to the competition. This results in higher profitability for these types of companies. The buy and sell decisions we make are based on profitability, growth expectations and the position in the market. Changes in these factors are particularly interesting to monitor. For instance, consumers nowadays are more interested in healthy/organic products with natural ingredients, and willing to pay more for them. To analyze the market, we use a lot of different information sources, including the Bloomberg terminal for financial information about companies and stock rates. In addition, we analyze information from external parties like Morgan Stanley, Goldman Sachs & Credit Suisse. We also follow trends on Twitter. Every now and then we invite trendwatchers or people from the business world to hear their vision on the future. In conclusion, we are frequently in contact with the management of companies we have invested in, naturally we gather a lot of information there too. The most fun part of the job is the variety. Long term trends like digitalization and mobile internet are certainly interesting, but you also keep your eye on the trends in the automotive industry (more electric cars, self-driving technology and innovative business models like Uber) and social media. Also a lot of fun; this month (March) you can find me in the center of the tech-world, Silicon Valley. “I lost some nights of sleep during those days, naturally it is very disappointing when clients lose a large portion of their savings which they entrusted to you.” What kind of investor are you? I am a growth investor, which means I target companies which are expected to show growing increasing revenues and profits the next 3-5 years (minimally). Preferably these are companies which are relatively independent of the economic cycle, since they find themselves in the middle of a long-term trend. In addition, I have a strong preference for what I call ‘structural winners’. These are companies that have a high market share because they positively differentiate themselves from the competition. This can happen by means of a strong brand, a scale advantage, or because of a higher product quality. These types of firms often target one product or service and try to provide the best to their customers. Think of firms like Nestle (food), Nike (sports) or Apple (smartphones). Therefore, I do not invest in conglomerates, or companies with multiple, incoherent branches. How does the fund perform? The long-term goal of the fund is to outperform the stock index annually by an average of 4%. We succeeded the past 1, 3, 5, and 10 years, which I am very proud of. Our growth strategy with a focus on structural winners has proved itself to be very successful. Finally, since a couple of years, we have started considering sustainability and corporate social responsibility as important indicators in the investing process. The year 2017 was extremely successful, partly because of the great performance of large internet platforms (Google, Facebook, Amazon, Netflix) and the recovery of stocks in emerging markets. The lowest point of the fund was in 2008, when it lost about 40% of it’s total value as a consequence of the financial crisis. I lost some nights of sleep during those days, naturally it is very disappointing when clients lose a large portion of their savings which they entrusted to you. Luckily, that loss was recovered halfway through 2010, and business has been exceptionally well since then. What would you advise students? Try to make a career out of what you like to do. You will devote a lot of time to your future job and dedicating it to something you like doing makes it a lot easier! In addition, personal development is very important. I was lucky enough to attend the “Building and Sustaining Competitive Advantage” course at Harvard Business School, which taught me important lessons
