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Active equity management

Dr. Rainer Matthes, Geschäftsführer Metzler Asset Management
Dr. Rainer Matthes is Managing Director at Metzler Asset Management GmbH and responsible for portfolio management

How does active equity management drive risk-adjusted excess returns?

Active managers are engaged only if they are personally able to deliver “alpha” – a return that exceeds the return of a benchmark. Among other things, this includes recognizing structural changes and sustainable business models and using them successfully in the portfolio. Such investment approaches centered on fundamentals will therefore always be long-term.

Expertise in true-to-style active stock-picking with clear processes and structures is a hallmark of Metzler Asset Management. Now more than ever, we meet the challenge of generating alpha head-on, even against the trend toward passive investments.

Our management of the assets entrusted to us and our teamwork follow a philosophy that we see as a steadfast pillar of strength in a market environment of constantly changing trends.

The starting point: diligent fundamental analysis

Investors value us as an active manager because they know we deliver “true” alpha, where excess returns don’t come from well-known risk premiums, but are instead entirely attributable to the strengths and expertise of the portfolio managers. Our portfolios are not “secret index funds” – they are the product of thorough fundamental analysis of companies, sectors and trends. We strive to understand business models in detail and test their fitness for the future, and then to classify the current valuation of the stock correctly, based on fundamentals. We also include non-financial indicators (keyword “ESG integration”) in this fundamental company analysis – if we believe that those might have an impact on the share price.

Generating alpha through concentrated stock-picking

The continuing trend toward passive or benchmarked investment strategies actually does not make things easier for fundamental stock-pickers, because it will keep inflating the value of benchmark stocks in the short-to-medium term. A fundamental investment approach must therefore be long-term; “true” alpha will be found in more concentrated portfolios that tend to have less turnover.