Positive performance at the year-end—outperformance through long-short strategy

1. What is important for fund investors

The for months defensive positioning of our fund had a significantly positive effect in December.
While nearly all stock funds showed high negative returns for the past one to two months, capital preservation was the focus for Mellinckrodt. The hedging strategy worked as desired.

As a result of Mellinckrodt’s good performance in December it achieved first place among all 418 listed stock funds with focus on Europe at the Citywire Fonds & Fondsmanager-Rating in December.

– Outperformance  for five years
Since the launch of the fund five years ago, a performance has been achieved that is better than that of all relevant passive benchmarks. This applies not only to the depicted indexes DAX and Stoxx Europe 600 but also to the Swiss SMI and the MSCI World.

Compared to the active funds “Top European Ideas” and “Frankfurter Aktienfonds für Stiftungen” Mellinckrodt achieved an attractive result as well. DAX investors earned approximately 5% in those five years, buyers of the Mellinckrodt fund and of the other two featured active funds achieved more than 20% growth.

In December, too, the fund portfolio was not only hedged, but the fund was positioned “net short” in net terms, achieving a positive performance in December and the considerable outperformance compared to the DAX and other indexes in the fourth quarter of 2018.

Despite the fund being extensively invested, the net investment quota (long investments minus short investments) was relatively minor in the fourth quarter (light green area).

Apart from comparing returns, the risk taken is significant for comparisons. Taking volatility into consideration, Mellinckrodt still held an attractive position, especially compared to passive index funds.

– Capital preservation continues to be main investment objective
even though currently the bear market rally is on. Capital preservation continues to be our key investment objective for the time being. As we communicated in the fall, we maintain that  this objective is more important than the participation in short-term rallies. For the question when we will get back into the market, we invite you to take a look at the current article “On Stocks.”

 

2. Comments on our own behalf

The continued defensive positioning but also the generally bleak prospect for the world economy and stock markets have led the majority of the currently still invested umbrella funds and mixed funds targeting private investors to believe that our fund is no longer as attractive an investment as in previous years. While the reasons for this belief vary, it is apparent that some of our investors simply have a more “bullish” attitude toward the stock market than we do.

The already announced returns of shares will result in a significant reduction of the fund volume in the first quarter of 2019. The fund exhibits a historically high average market capitalization of the stocks held of around 15 billion euro. Hence, returning these shares is not an issue—in contrast to many other stock funds who still pray for the health of their small caps.

This situation allows us to reconsider the sales strategy of Mellinckrodt. Our focus will very likely shift away from the fund market for small investors in Germany toward selected asset managers and family offices in Switzerland. In addition, we are evaluating an even stronger positioning toward long-short—i.e., hedge funds.  Currently all solutions are interesting to us that will enable us to adjust our extensive experience with the capital market as a service to the needs of wholesale investors even better.  Please contact us with any suggestions, ideas, or requests.

While this doesn’t mean that we’re turning away from the German end-investor market, it’s not as much our focus as it was in the past two years. Our journey will take us to the Alps or to other locations beyond the access of politicians as crooked as those who, for example, want to gain votes in a cheap manner and rake in the money of others undeservedly as is the case in Berlin with the expropriation of condo owners.


Georg Oehm

Georg Oehm founded Mellinckrodt & Cie, in Zug, Switzerland, in 2008. He served as general manager and partner in a financial communications boutique in Frankfurt am Main, founded the CFD Association e.V. and served as its first general manager. He worked in business development and in the M&A business at the Metallgesellschaft AG for five years, followed by a five-year tenure in the field of special restructuring projects. From 2011, he was a member of the administrative board at the Zenergy Power Plc and at the Synety Group Plc from April 2011 to January 2016. Dr. Oehm serves as chairman of the advisory board at InCity Immobilien AG. He completed his Ph.D. at the University of Kiel, department of economics and social sciences. He started his career as a banking apprentice at the Dresdner Bank in Frankfurt am Main. Subsequently, he earned a degree in business administration in Mainz and Kiel.

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