The benefits of investing in DNB Fund – TMT Absolute Return
DNB Fund – TMT Absolute Return invests in the global technology, media and telecom sectors and primarily in developed markets, though there are no geographic constraints in the mandate.
The fund seeks to generate consistent positive returns over time with low correlation to general market conditions.
The strategy combines long and short positions in order to be market-neutral and to remove unintended disturbance from the portfolio. DNB Fund – TMT Absolute Return derives return from security selection rather than market movements.
The stock selection process is based upon four pillars: Theme, Value creation, Valuation and Momentum
Theme:We look for long-term trends within the TMT (telecom, media and technology) universe to identify the stocks that are best and worst positioned for changing industry trends. The TMT sector is characterized by rapid change which benefit certain business models while being disruptive for others. Understanding the industry themes and trends is a critical part of our investment process and form the basis for the screening of stocks.
Value creation:After the screening process we look at the value creation potential. At the core of this process is management evaluation. The key parameters we are looking at are management track record, board track record, relative scale within the industry, barriers to entry, product demand, input factor scarcity and inventories.
Valuation:The focus is on capturing future price directions by identifying value early. E.g. we will occasionally be long stocks that have unfavorable trends or poor historical value creation if we identify deep value that can be realized through future changes in management, mergers, acquisitions, or a change in capital allocation.
Momentum:We carefully monitor short term earnings momentum and appurtenant market expectations. Certain companies and sectors also exhibit strong price momentum which impact our entry/exit strategies.
Through modelling the whole value chain within the TMT sector, we sometimes find discrepancies between our own expectations and the market expectations. If we see satisfactory reward in relation to risk, we will make adjustments to our portfolio. As such situations often creates high volatility, we take advantage of that to find good entry points for our long or short term positions.
Cash is placed in OECD Zone 1 government bonds. Equity exposure is achieved through return swaps with Credit Suisse. ETF s and futures are occasionally used.
Skilled and incentivised industry experts working with proven infrastructure within a strong risk management framework.
Valuation is viewed as a qualifying, but not an absolute factor. What is actually priced into the stock is also a question. Company-, industry-, and stock-specific knowledge are all part of the investment decision and analysed through the use of various methodologies.