Interview with Mike Judith, DNB Asset Management

Mike JuditzMike Judith joined DNB Asset Management S.A. in June 2010. Since 2015, he has been heading both the Luxembourg-based portfolio management as well as the international sales team. Mike has also been lecturing at the Frankfurt School of Finance & Management in Germany since 2007 and holds banking-related Bachelor’s degrees and a Master’s in Banking Management (Dipl. Bankbetriebswirt). DNB set up UCITS alternative funds as early as 2007, way before most alternative asset managers even knew about the possibilities under the UCITS directive. What led to this decision?
Mike Judith: Initially, one of our long-standing customers who already trusted in our stock-picking capabilities in thematic areas, asked us to propose corresponding market neutral strategies. Based on the existing fundamental bottom-up stock selection approach, we launched market neutral funds which simply strip out unwanted beta and leave investors with our ability to generate alpha. We will complete our 10 year track record in 2017. Which strategies do the DNB alternative UCITS funds cover?
Judith: We manage long/short equity portfolios in the global technology as well as in the global clean tech space. Both themes are among DNB’s focus areas, where we have a long history and deep industry knowledge. Both sectors prepare the ground for successful market neutral strategies since they are sufficiently large and liquid, as well as shaken by disruptive forces, which create interesting opportunities for both the long and the short side of investing. It seems you focus on a liquid and volatile universe like the global technology sector. What opportunities do see for new products in the alternative UCITS space?
Judith: Independently of the product, it is important that the investment universe is broad enough and that it offers enough volatility and liquidity. Plus, one must have the right and motivated team with a disciplined, consistent strategy in place. That is the foundation for a successful strategy. L/S equity strategies are getting more popular, but inflows are still moderate. What must happen until we see them on top of the league tables?
Judith: At the present, the flows in this segment are largely driven by institutional fund investors. Regulatory pressure and a generally low level of transparency as well as lacking demand from retail investors represent the present obstacles. Plus, given the broad range of available strategies, it takes a very sophisticated approach to analyse varied L/S approaches and their respective fund set ups. Clearly, in times of increased volatility and an assumed limited upside for conventional long-only strategies, we expect L/S solutions to become more sought after. We therefore would see an improved flow picture in the near future. I expect the retail investors to find their way into such structures via fund of fund solutions, where a designated professional fund selector picks  L/S funds and manages correlations. Besides all the other uncertainties in the global landscape the BREXIT is looming above the European Union. In your opinion, which strategies will fare well for the second half of the year and why?
Judith: Both the political as well as the digital disruption are influencing the markets, which results in sufficient market volatility. We believe that the tech sector continues to offer interesting opportunities thanks to reasonable valuations and an above average sector growth in a near zero interest rate environment. We are positive on themes like the new media channels, cloud computing and online travel agencies. However, due to the disruptive character of the way conventional business models are being changed, we see a large number of winners and losers. This bodes well for long/short strategies. Thank you for the interview.