NO. 5 ∙ MAY 2020


Why should I care about what I said before?

AUTHOR: Christian Schmitt

Senior Portfolio Manager

… a famous statesman is supposed to have said, and then continued with “I reserve the right to be smarter today than I was yesterday.” This quotation is often attributed to the first Federal Chancellor of the Federal Republic of Germany, Konrad Adenauer. Whether he said it or not, the phrase expresses the key to dealing with unforeseen and rapidly evolving situations: flexibility. A certain degree of flexibility is required to succeed in adapting to changing circumstances. Stubbornly sticking to what one said or did before may come across as reliability, but can have fatal consequences if foresight is lacking. In this Market Commentary, we would like to give you a closer look at the advantages that flexible portfolio management offers, and explain to you why investors’ opinions on what direction markets will take vary so widely at the moment.

We’re just four months into 2020. In this short time, we have all seen things hardly anyone would have thought possible at the beginning of the year. On the basis of governmental lockdown orders, much of the global economy as well as private and social life were forced to come to a standstill. At the same time, it has been a veritable rollercoaster ride in the capital markets; the magnitude and speed of diverse price movements are without precedent. While unparalleled asset purchase programmes from central banks and fiscal rescue packages from governments were to be expected in response, the fact that the all-important West Texas Intermediate (WTI) oil price dipped well below zero is likely to have been the big surprise in April. And to think that only in January we were justified in expecting a rather uneventful year – we definitely know better today!

In light of recent history, current predictions about the remaining eight months of the year are on a spectrum, which can be described as “everything and nothing is possible”. With predictions, there is usually a baseline scenario, flanked above and below by two alternatives. With regard to the economic fallout in particular, the scenarios currently being debated among investors cover the entire spectrum. We do not claim to have deeper and better insights than other, much larger firms of economic analysts. What’s more crucial to long-term investment success is asking where possible scenarios fit into the bigger macro picture and taking intelligent action within the portfolio. For example, where are there risks of sustained capital losses? What real economic developments have the markets already anticipated? Thus, the problem can soon be rephrased as: what is already priced into the market and where could there be opportunities and risks for our funds?

At ETHENEA, this is a question we have always asked ourselves each and every day. In fact, of late, if prices were 5% higher or lower than they were just that morning, we’ve been asking it multiple times a day. Flexibility is the order of the day, as is trust in the experience and prudence of a selected portfolio manager. Looking at ETHENEA’s guiding principles we see that, for us, care, foresight, responsibility and partnership are the key to long-term success and inform what we do. These strong values are not something to be dismissed as ‘yesterday’s chatter’, but will continue to be the foundation for the sustained success of all of the Ethna funds.

In addition to the great uncertainty about how the economy will develop, there is a second reason for the extreme differences of opinion in the capital markets at the moment, which must not be underestimated: a lack of flexibility. The strategic positioning of the Ethna funds, with their high degree of flexibility, was a real distinguishing feature in the market when the Ethna-AKTIV was launched in 2002 – and still is to this day. Over the years, we have continuously enhanced the adaptability of our focused fund range. This is why we are not backed into a corner in the current market environment and have plenty of room to manoeuvre at all times. Only those who are unconstrained by a benchmark and thus have a full range of asset allocation and security selection options at their disposal can be truly free to make decisions in all conscience. Without this room to manoeuvre, subjectivity all too quickly overrides objectivity. Then a portfolio positioning over which one has limited control can colour one’s expectations for future market development, whereas it should be the other way around.

If, however, an investor chooses one of the three funds from ETHENEA – be it the Ethna-DEFENSIV, the Ethna-AKTIV or the Ethna-DYNAMISCH – they are deliberately handing over a great deal of responsibility into the experienced hands of our active portfolio managers. We are conscious of this responsibility day in day out, and act with the necessary intuition and as much objectivity as possible. Depending on the individual investor’s risk appetite, we want the Ethna funds to offer suitable investment solutions whatever the conditions in the capital markets. So far this year we have succeeded in what have been difficult conditions. Because our multi-asset funds are highly flexible we can actively seize the opportunities that arise, while managing the risks and looking forward with an open mind – even when entering uncharted territory, as is currently the case.

Thank you for placing your trust in us.
Stay safe and well!


Please contact us at any time if you have questions or suggestions.

ETHENEA Independent Investors S.A.
16, rue Gabriel Lippmann · 5365 Munsbach
Phone +352 276 921-0 · Fax +352 276 921-1099 ·