C WorldWide Asset Management – Copenhagen

C WorldWide Asset Management (previously Carnegie Asset Management) was created in 1986 as part of the Carnegie Group. The firm was spun out of Carnegie Investment Bank in 2009 and the name changed in 2017. C WorldWide is 80% owned by private equity Altor Fund III and 20% by employees. Today it manages <$20 billion in global equities for institutional clients in the Nordic region, the UK, Canada and Australia. Main portfolios are highly concentrated with just 30 stocks held. The investment approach is bottom up stock-picking and they focus on stocks above $10 billion market cap and the average market cap is nearer $100 billion. The focus is on companies generating free cash flow and earnings growth. In addition to the concentrated global equity strategy, the firm has an ethical and long/short version of the same strategy plus a number of more specialised strategies, including Global Healthcare.

Bo Knudsen is Managing Director and Global Portfolio Manager at C WorldWide Asset Management in Copenhagen.  He holds a M.Sc. (Economics and Business Administration) degree from Aarhus School of Business and San Francisco State University.  Bo has worked with portfolio management of global equities since 1989. Prior to joining C WorldWide Asset Management in 1994 he worked for five years as a global portfolio manager with Danske Capital in Copenhagen and ultimately held the position as Head of International Equity Investments. From 1998 Bo joined Nordea Investment Management as Executive Director and Head of Equities. He re-joined C WorldWide Asset Management in 2001 as global portfolio manager.

How does C WorldWide fit into Danish investment management world?

Growth/GARP camp.  I see a global competitive landscape.  There is a very well-developed institutional investor base in Copenhagen.  Copenhagen and the Nordic region more generally are very globally oriented.  That’s why we look for companies worldwide as local stock markets are limited in terms of market cap.  We have a truly global perspective.  Early on in my career, and I started nearly 30 years ago(!), I initially looked at Danish equities but to understand Maersk, for example, you have to understand the world.  It is a small country, but we live off exports and international relations, so it is an important characteristic of the industry in the Nordics.

You have AUM of $20 bn – what proportion is in equities?

All.  73% of AUM is in global equities.  We have some Asian and Nordic strategies. The majority of our assets are segregated accounts.

Will AUM grow?

A healthy business is a growing business.  But our number one priority is our existing clients.  We think we can further grow assets in our global strategy; but we will take up the dialogue with our existing clients as they have their opinions about our capacity.  We are selectively introducing new products that fit into our core DNA. It is important to have a growing business to retain and attract employees.

Difference between C WorldWide Global Equity Fund and C WorldWide Global Equities Ethical Fund?

The ethical fund started back in 2000.  We were one of the first to focus on ethical investments.  It was basically a negative screen but over the years we have integrated ESG into the way we operate.  We have worked with GES (now taken over by Sustainalytics) since we launched the product.  Early on in Scandinavia, there was a push for ethical investments and now there are strong tailwinds across the world supporting a more sustainable investment agenda. Many of our new segregated client relationships over the past five years have ethical constraints.

What does C WorldWide office in Sweden do?  Are all FMs in Copenhagen?

There are global fund managers in both Copenhagen and Stockholm, but Copenhagen is generally the first point of contact.  A general invitation goes out as we have a common (shared) calendar.  However, global healthcare equities and Swedish equities are of particular interest to our investment colleagues in Stockholm.

Within global equities team – are there any geographic or sector splits?

All portfolio managers look at investments through a global lens. We want to develop and have portfolio managers that can compare a Brazilian utility with a Swedish pharma company.  These capabilities are best developed when you are exposed across sectors and geographies.  At certain times in your career, you can have a particular focus or speciality, but we do not monopolise.  I tend to look more at financials, but I am obliged to invite everyone as it is key to find those 30 stocks and we decide as a team.  We highlight the pros and cons and have a collegiate approach.  The better educated we are and the more globally aware we are, the better decisions we can make.  Not so many out there have our cumulative experience. For example, I have shared an office with Bengt Seger for 23 years.  Yet we also get inspiration from new employees.

 How many stocks are in your investment universe?

We look at stocks >$10 billion.  We have a universe of 700 names which we think are interesting and have unique characteristics.  We use both quantitative and strategic screens, which helps our  analysis.  The particular characteristics that we look for are better identified with industry and company specific knowledge.  So, we look for companies that have strong tailwinds – themes and a strong leading position in its industry and where there is sustainability when it comes to a company’s competitive positioning.  It would likely have a higher ROC and ROE as a result of its strategic positioning.

How do you incorporate ESG into your investment process?

ESG is fully integrated into our investment process. We prefer companies with a long-term orientation and sustainable business models and ESG is a natural part of that analysis.  It should be called GES because Governance is the driving force of ESG. Good corporate governance, driven by management with a long-term orientation, motivates the right social and environmental priorities.

 Sectors in which you can’t invest?

We can invest in tobacco in our core portfolio but not in ethical portfolios.  We do not invest in companies that have a significant proportion of their sales in defence related products.  All our institutional clients have restrictions around defence.

Do you vote your proxy?

We vote our proxy if we are permitted by our clients.

 Average holding period?

>4 years.

Active share – do you have a figure?

It has never been under 90%.  I think it is about 95%.

Buy backs or dividends?

We like companies that pay back either through buy backs or dividends.  Although we like both, we prefer dividends, which have a more direct obligation and is a good discipline.

Average position?

3%.

Largest position?

8%

Discuss some of your European holdings

Novo Nordisk – unfortunately, there is a problem in the world with diabetes. Novo Nordisk is the global leader in existing products and also have very innovative products that both helps treat diabetes and obesity.  It will be a driver going forward.  A molecule is about to be introduced across the world.  They are treating diabetes in a more efficient way.  The underlying business is growing; and they have the best technology/solution and are coming up with interesting new product launches.

Nestlé – is a stock we have held for 30 years. We like the long product cycles of the core products that Nestlé sells. We think Nestlé is good at adapting to the big changes in the consumer goods sector and adapting to the needs of the millennial consumer. Nestlé is planning to be in business for another 100 years and we like the true long-term orientation in the way they conduct their business.

US holdings

Home Depot – is a very well-run company that enjoys tailwinds as the US housing market normalises.  We had the biggest downturn in US housing since WWII in the financial crisis.  We saw a big fall in activity but now you see house prices moving up and activity growing.  We expect the continued normalisation of housing and Home Depot is exposed to that.  With a growing population we see housing activity at reasonably low levels. It is a very focused, well-run company with very disciplined capital allocation, generating free cash flow and paying back shareholders.

VISA – is enjoying the shift from cash payments to electronic payments.  Visa is very well exposed to this generational shift. It is easier and quicker to pay electronically.  Visa has the rails and the relationships borne out of the banking system and has the global reach and brand.  Why Visa rather than Mastercard?  Visa is bigger than Mastercard in number of transactions (more than double the size) so has scale benefits.  Being a big platform is an advantage.  Mastercard has interesting exposure as well to the shift in payment methods.  Both are interesting and we could hold both.

You recently added American Tower – discuss

It is a platform company. It owns 170,000 communication sites across the world. To be able to transport data in this digital society, you need a physical network of antennas where mobile operators can rent space on the towers. They are not just in the US, they have a very strong position in India and other geographies. With the boom in global data traffic, it is much more lucrative for a mobile operator to rent space with others rather than setting up and maintaining its own sites. American Tower benefits from the need for mobile operators to cut costs and be efficient. They have a very strong platform. Also, with 5G, autonomous cars and the Internet of Things – bottom line is you need to transfer data. So that is why we like it.

Do you have to meet management before you buy a stock?

We meet management as we think the governance part is key. We do not just emphasise meeting with management but also having dialogue with people who know the company well – independent analysts across the board that have experience and history with management.  We do not invest in many companies, so we have a rigorous due diligence process. Focus is our strength.

How do you prefer to meet management?

We like to see them in different environments. It is great to meet management, but you also want to evaluate what they do. The key is long term capital allocation.  You can meet a very charismatic CEO, but it is not enough; you need to follow their actions.  Success in investing is also evaluating how they allocate capital, so they create shareholder value over the next 5 – 15 years.

MiFID II – has it affected you?

Yes it has and we embrace the increasing levels of transparency.  We do not know about all the consequences yet – it is early days.

Best companies at IR?

There is so much great work going on out there particularly among larger cap names.  Hoya, a Japanese company is a bit unusual.  Japan is on a journey when it comes to improving investor relations.  Hoya has been very good at explaining a complex business in the last 12 months.

Do you have any tips for companies about how they should communicate with C WorldWide?  Key do’s and don’ts?

Take the long-term strategic perspective.  We can read about the last quarter and we only want to hear about it in the strategic sense of whether the latest developments support the strategy.  So, a 5 – 10 year perspective.

Why should corporates target C WorldWide?

We are long term and take large positions.

 

A version of this interview appeared in IR Magazine

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