News / Insights

  Staying on course in difficult times

In a market environment characterised by macroeconomic and monetary imponderables, long-term investors in particular have good opportunities to enter the market and participate in the price potential of first-class companies.

The MainFirst Top European Ideas Funds team headed by Olgerd Eichler, Evy Bellet, Alexander Dominicus and Alexander Lippert remains true to their investment style, even in volatile and weak market phases. As a general principle, the fund is fully invested and pursues a disciplined investment approach. The aim is and remains to achieve long-term added value for investors through its investment decisions. The team is constantly on the lookout for new ideas and opportunities. These can be solid companies that perform better than average in operational terms by increasing efficiencies and gaining market share. Or even shares in companies that have been unfairly excluded from the focus of the broad investor base due to current market opinions and therefore have attractive valuations.

Achieving respectable and predictable profit growth is an ideal prerequisite for a revaluation on the stock market that can be expected in the future. This is often accompanied by a significant increase in valuation. In combination, this can lead over the years to extraordinary price gains or even to a multiplication of the investment. The core of the portfolio lies in the long-term participation in the success of undervalued companies with an outstanding business model, high growth potential and above-average profitability. Important criteria for the valuation are an excellent and above all conservative as well as reliable management which uses the shareholder capital entrusted to it profitably in an entrepreneurial and conscientious manner.

An intensive examination of potential investment candidates is essential. The more than 200 business contacts that the team makes every year also help in this. Due to the high demands placed on the quality of the business model and management, however, only a few new shares actually make it into the portfolio each year. The fund volume of almost 1.1 billion euros is spread over approximately 50 stocks. If the team is convinced of a company, they also like to buy heavily and take a larger position in the fund. The concentration of the fund is correspondingly high. The top 15 represent more than two thirds of the fund. The team spends even more time than on new ideas on the constant examination of the operational development of the existing portfolio companies. In order to be close to the companies at all times, there is a regular, intensive exchange with company representatives and board members as well as with analysts through personal meetings and telephone calls.

The macro level plays a role in this purely bottom-up approach only in the second instance. Especially in times such as these, market events and the welfare and woe of share prices are usually dominated by the macro perspective. The balancing discussion between the consequences of the uncertainty about the further development of the world economy and the consequences of an unprecedented expansive monetary policy overshadows all valuation and quality issues.

Hella is an example of an outstanding company that is keeping its course even in the difficult waters of the automotive industry. Hella is a niche company predominantly family-owned with a strong balance sheet and a highly innovative product portfolio. The company develops and produces lighting solutions and other electronic components such as sensors and radars for the automotive market, which will also remain relevant in electrically powered vehicles (EVs). Hella is already benefiting from long-term trends such as the hybridisation of the automobile and the introduction of LEDs in more and more vehicle classes. Sales growth is supported by the introduction of innovative new products. High investments in research and development lay the foundation for future organic growth. This also enables Hella to grow far above the average of the automotive industry, which gives it a relative advantage, even if the overall growth of the industry slows down. With a very good, prudent and reliable management and a still attractive valuation, the company is one of the top investments of the MainFirst Top European Ideas Fun.

Olgerd Eichler and his team also find worthwhile investment opportunities in the financial sector. The Austrian Bawag is one of the most efficient banks in Europe. With a recent cost-income ratio of 43 percent and a high dividend yield of over five percent, it is currently the largest position in the MainFirst Top European Ideas Fund. The rationalisation of the branch network and the improved profitability of recent acquisitions are currently opening up further optimisation potential. The outstanding Management Board team is strongly incentivised by a multi-year remuneration system. The extremely profitable bank with an enviable equity base is very inexpensive in terms of valuation and has not yet received adequate attention on the capital market.

Shares that have come out of the focus of market participants and certain segments that have been left behind are trading at historically favourable valuation multiples. Looking at company valuations in relation to turnover or book value, many cyclical stocks are already at levels that were last marked at the low point of the financial crisis a good ten years ago. The discrepancy between cheap, cyclical stocks and expensive, defensive stocks is enormous. In a market environment characterised by macroeconomic and monetary imponderables, long-term investors in particular have good opportunities to enter the market and participate in the price potential of first-class companies. It is precisely in such volatile and undifferentiated market phases that the greatest profits can be achieved in the long term.

With its investment strategy, the team has consistently generated attractive returns for investors over more than 10 years. They use all their skills and passion to keep it that way.

  A universe of opportunities: emerging market corporate bonds

In 2004 the EM hard-currency corporate bond universe was relatively small at approximately USD 270bn. By 2009 the asset class had more than doubled to USD 600bn driven by strong economic expansion across developing economies. By the end of 2018, the emerging market hard-currency corporate bond universe had grown to USD 2.2 trillion. The investment universe also boasts attractive yields, solid fundamentals, which continue to improve, and it still has a lot of potential for continued growth. In short, EM fixed income still delivers income. 

Improved fundamentals

EM corporate bonds bring attractive yields and – contrary to popular opinion – are less leveraged today than their US peers. In fact, it is US leverage which is still at elevated levels. The fundamentals of EM Credit not only held up well, but further improved in 2018. And that despite the fact that 2018 was a tough year for global markets, characterized by political uncertainty, interest rate raises by the Federal Reserve, currency crises in Turkey and Argentina as well as the ongoing trade war between the US and China. Moreover, despite all of the political and economic turbulence, in December 2018 EBITDA for the last 12 months for Emerging Market High Yield bond issuers increased by 27% YoY, while net leverage decreased from x2.1 in December 2017 to x1.5. This improvement in Emerging Market Credit has been impressive, also in comparison to US peers. So far in 2019, with most companies having reported Q1 results, we do not see any material weakness of EBITDA generation in emerging markets and expect the positive deleveraging trend to continue.

Conservative CAPEX plans and better liquidity

The key reason of EM deleveraging are the more conservative capital expenditure (CapEx) plans. The ratio of CapEx vs. EBITDA has been decreasing in tandem with the deleveraging that started in 2017. In growth terms, CapEx had only grown by 5% YoY by December 2018 while EBITDA had grown by 27%. Many companies were heavily penalized during the 2015 to 2016 EM bear market and were struggling to quickly reduce CapEx. This is visible on a daily basis in that management teams have become more prudent.
It also means that companies are on average less willing to grow through aggressive CapEx and instead focus on targeted expansionary opportunities while putting a lot of energy into increasing efficiency and decreasing costs.   
Liquidity, another very important aspect to monitor as an EM investor, have significantly improved over the last year and cash to short-term debt stands at the highest level over the last 10 years. We expect that, given the current cash levels and debt mix (short term vs. long term debt), most companies can comfortably cover maintenance CapEx and short-term financing needs even under extreme scenarios of prolonged market volatility and no access to capital markets.  

Improved resiliency of EM corporates offers opportunities

Despite the positive performance of EM HY for 2019, spread levels are roughly unchanged compared to the end of 2018, with most of the performance coming from carry and the decline of US interest rates. Taking into account the improved fundamentals, we think that EM corporates are more resilient and current levels already discount a significant decline in EM fundamentals -- offering a buffer in case of further worsening of the global economy.

Their potential for growth, solid fundamentals and the attractive yields coupled with the fact that many EM hard-currency bonds are not overly correlated with developed markets, makes investing in them – always given a solid understanding of markets and companies – a great chance for investors.  
Authors: Dimitrios Nteventzis and Thomas Rutz, fund managers of the MainFirst Emerging Markets Corporate Bond Fund Balanced and the MainFirst Emerging Markets Credit Opportunities Fund

  How to take advantage of opportunities in frontier markets: Thomas Rutz explains the process in the Börsen-Zeitung

In the interview, the fund manager explains not only that the low correlation to other markets makes frontier markets particularly interesting in the current political climate, but also which investment criteria are important.

Read the article (German only)

  The Opportunities of Low Interest Rates

Frankfurt, 28 June 2019 – Germany's public debt fell by 1.1 percent year-on-year in the first quarter of 2019 to 1,927.2 billion euros. This was reported by the Federal Statistical Office (Destatis) on Thursday. At the same time, the cabinet draft for the federal budget 2020 adopted on Wednesday foresees a further reduction of the debt ratio from 59 percent of gross domestic product (GDP) in the current year to 51 percent in 2023. According to Patrick Vogel, one of the fund managers of the MainFirst Absolute Return Multi Asset, now is not the time to save.

"The continued low interest rates present an ideal opportunity to help the country achieve higher long-term growth through targeted fiscal policy, economic stimulus programs and structural reforms," Vogel said. At minus 32 basis points, the 10-year German government bond yield is at a historic low. Austria has already used the low interest rate environment to issue 100-year bonds. Germany should also take advantage of the low refinancing costs. "In this interest rate environment, investing in future growth makes particular sense," emphasises the investment expert.

Solutions from the Far East: Targeted investment and reforms
Germany can learn from Japan. "Japan has a lot in common with Germany. Let's take demographic trends alone: the population has been declining for 20 years," says fund manager Vogel. Nevertheless, Nippon has achieved an increase in GDP per capita since the bursting of the real estate bubble in 1990. "Japan has achieved this through a unique combination in which monetary and fiscal policy as well as structural reforms are mutually supportive." Austria is already moving in the right direction. The AA-rated bonds with a maturity of 100 years were offered anew and quickly bought up by the market. "This enables Austria to finance necessary investments," explains the fund manager. Germany should take heed and strive for systematic reforms and economic stimulus programmes - instead of for a black zero. "If Germany does not want to be left behind by new technologies such as big data and artificial intelligence, now is the time to invest," Vogel emphasises.

Germany must now set the course for the future
Areas such as big data coupled with artificial intelligence will continue to grow strongly in the coming years. Patrick Vogel is strategically focusing on solid investments with strong long-term growth. "Such structural trends offer high growth potential and, given a successful stock selection - which requires appropriate expertise - attractive returns can be achieved both with bonds and equities," says Vogel. The amount of data is constantly increasing and can generate high profits for the owner. Many companies generate both growth and innovative business areas. "Most people only know the Nasdaq as an index, but don't realize that there is an enterprise with an attractive business model behind it, which feeds on the huge amounts of data that grow out of the many transactions that take place via the platform. Amazon and Alibaba also use the central role of data in a variety of ways. One of their fastest growing businesses is storing data in the cloud. And data is also an important area of application for artificial intelligence. "AI is a trend that will grow strongly in the coming years and Germany should define such a trend as a key industry," says the fund manager.

  Role Model: Land of the Rising Sun?

For years now, Japan has faced such challenges as an ageing population, high pension liabilities and persistently low interest rates. Europe is increasingly being affected by the same challenges. Can Japan's solutions also offer Europe a way out?


Model solutions: Abe’s three arrows for Japan
The economic policy of Abenomics, named after Prime Minister Shinzo Abe, consists essentially of three arrows: fiscal stimulus including economic recovery measures, ultra-loose monetary policy and structural reforms. They are designed to ensure the generation of sustainable economic growth in the future despite the named challenges.
The ultra-loose monetary policy financed the government’s economic stimulus packages of over 230 billion Euro in infrastructure such as roads, bridges and earthquake protection. The tax cuts for companies - especially for technology companies – have also served to boost the economy. The Nikkei, Japan's leading index, has risen significantly in recent years and unemployment is at its lowest level in 25 years. Part of the structural reform programme included a liberalisation of the labour market and a deregulation of the energy, environment and health sectors to help restore Japan's competitiveness.
The initiative Society 5.0 is also intended to restore Japan’s competitiveness and to increase productivity. Accordingly, robotics was declared a key industry to counter the consequences of demographic change and the associated labour shortage in 2004. Robots are to be found not only in production halls, but also in the service and entertainment sectors. Already today, robots support and facilitate heavy physical activities, such as lifting during care-taking activities. Through targeted support, Japan has developed into an export country for robotics and is making a name for itself as a market leader in the long term, profiting from rising revenues and a relief on the labour market. Nippon is a pioneer of modern technologies and has promising companies whose shares can achieve significantly higher returns than any savings account.

Tried and tested arrows for Europe
The same measures could also spark new growth in Europe as it faces similar challenges. Japan's population has been shrinking for 20 years. Europe’s population has also started to decline slightly (if one looks at natural change, discarding net migration) over the past years. At the same time, while overall earnings, as measured by the per capita gross domestic product, are quite high, overall economic growth is sluggish and interest rates have been low for a number of years now and no end is in sight. A consolidated strategy at the European level is essential if Europe wants to keep its place. Arrows in the form of economic stimulus packages, greater monetary easing and structural reforms could hit the bull's eye here and thus help to secure Europe's future and continued prosperity.

At the same time, while total revenues, measured in GDP per capita, are quite high, overall economic growth is sluggish and interest rates have been low for years with no end in sight. But a consolidated strategy at European level is essential if Europe is to maintain its position as a region with a high average income. Arrows in the form of stimulus packages, major monetary easing and structural reforms could hit the bull's eye and help secure Europe's future and continued prosperity.


A sustained money flood in conjunction with low interest rates could help the peripheral states to pay off their debt burdens. This would boost the potential for economic growth – creating the possibility that growth outstrips inflation, so that the real asset situation can increase again and purchasing power can also grow more strongly. To make these debts more manageable, the European Central Bank (ECB) could hold a large proportion of government bonds - the Bank of Japan holds just under half of the outstanding Japanese government bonds.

Targeted credit-financed economic stimulus packages are a second measure that could help boost the European economy. The "black zero" goal, particularly in Germany, does not bring any added value in an environment of low growth or recession. Instead, the future must be secured through targeted support. Measures to expand infrastructure are important here - Europe's digital infrastructure lags behind that of many countries. There is an urgent need for action here, especially in the transition to 5G, so Europe is not left behind.

At the same time, key industries should be defined and systematically promoted. For example at present, Germany is the country with the fifth highest number of start-ups in artificial intelligence and the third highest density of robots in manufacturing processes. But such efforts need to be systematically supported and propagated through government funds as well as appropriate education programs. Structural reforms could provide additional support here by implementing reforms aimed at tax incentives for promising industries, especially in new fields such as artificial intelligence, could also boost growth. Other important structural reforms regard pension and labour reforms, which some countries have started to implement, but where much still needs to be done. For it is essential to reduce these long-term liabilities, especially in the area of pensions.

Bullseye for the future
The above measures and in particular the promotion of industries such as robotics and artificial intelligence could generate a cycle of success for Europe in which, on the one hand, a lack of jobs can be compensated by automation and, on the other hand, the products themselves could bring Europe forward in the arena of global competition. The Land of the Rising Sun has shown that robots can help when faced with an ageing population and the resulting shortage of skilled workers. And artificial intelligence is said to be capable of revolutionizing our world once again. The forecasted sales growth in artificial intelligence is expected to rise from USD 1.4 trillion in 2016 to nearly USD 60 trillion by 2025. Currently, the companies that are of interest in this field are – in addition to such well-known names as Amazon and NVIDIA from the USA and Alibaba and Tencent from China – Keyence and Fanuc from Japan.

Europe has the potential and the opportunities to stay big and move forward. To do this, however, it has to move away from outdated ways of thinking and to proactively, innovatively and courageously fill the quiver and put on the bow so the arrows hit the bullseye.

  Thomas Rutz in the HandelsZeitung explains how to invest successfully in frontier markets

Strong fundamentals suggest that frontier and emerging markets will continue to grow faster than developed markets.To read how to achieve attractive returns, click here (German only):

Investieren in Terrae incognitae, published in the HandelsZeitung, 13 June 2019

  Mexico: Interesting investment opportunities in the energy and finance sector

Zurich, 12 June 2019 - A new president, low growth in the first quarter of 2019 and the tensions with the US around immigration and trade: Mexico faces a number of challenges. Not least in view of the tense situation with the US, many investors are currently rather cautious towards the Latin American country. Cornel Bruhin, fund manager for the MainFirst Emerging Markets Corporate Bond Fund Balanced, continues to find interesting investment opportunities in Mexico - particularly in the energy and financial sectors: "Oil and gas, electricity and finance have little exposure to the US economy. Tourism and exports can even benefit from a weaker Mexican peso as most goods and services are paid in US dollars but their operating costs are in pesos," Bruhin points out. With a precise knowledge of the companies, there may even be opportunities to expand positions.
In addition, the US and Mexican governments have reached to an agreement based on months of secret negotiations. Even if Trump threatens to impose tariffs again, they are unlikely to be imposed. Because they would affect US consumers considerably and the American automotive industry would suffer particularly as a result.  Moreover, Mexico is the third biggest trading partner of the USA and the tariffs would jeopardise the new United States-Mexico-Canada Agreement (USMCA).

Structural reforms provide a solid basis
Overall, Mexico is increasingly becoming a heavyweight among emerging markets. Its gross domestic product amounted to USD 1.2 trillion in 2018, which puts it in 15th place directly behind Australia with 1.4 trillion US dollars. It is also the twelfth largest exporter in the world and has free trade agreements with 46 countries, more than any other country. It produces and exports the same amount of goods as the rest of Latin America combined. “Its no. 1 exports are not commodities, but manufactured products such as cars, electrical equipment and computers” points out Bruhin. 
In recent years, many reforms by the previous president, Enrique Peña Nieto, have helped reduce dependency on oil, which used to account for about 40 percent of government revenues, to about 20 percent today. The new President Andres Manuel Lopez Obrador, AMLO for short, wants to push this development forward and plans to build two new refineries, renovate six existing ones and allocate 4 billion US dollars for new exploration. "These investments are urgently needed to increase margins and boost production," Bruhin said. AMLO's goal is to increase production from currently 1.9 to 2.5 million barrels per day within two years.

Investment opportunities in the energy and finance sector
Although Mexico is undoubtedly closely linked to the US, one can also find interesting investment opportunities that are relatively independent of the USA, for example in the energy sector. Saavi Energia (the bond is emitted under through the special purpose entity Cometa Energia) is the fourth largest independent energy producer in Mexico and has been in the market for over 20 years. Most of its customers are commercial and industrial clients, of which they retain 92 percent. The cash flows are thus quite stable and predictable. The yield on the recently issued bond is currently 6.3 percent. In the financial sector, too, there are interesting, innovative financial companies such as AlphaCredit and Unifin Financiera, which give borrowers easy online access to loans and generate a return of over 10 percent. "As active managers and value investors, we keep finding gold and will be on the lookout if the current tensions can be used as buying opportunities," Bruhin says.


Your press contact:

Edelman GmbH
Jörg Schüren
Director Financial Communications
Phone: +49 221 912 887 29
Email: joerg.schueren(at)edelman.com

  Why this fund manager beats the market: Olgerd Eichler in "Neue Zürcher Zeitung am Sonntag"

Beating the market with equity funds? Read here how Olgerd Eichler tackles this task with the MainFirst Top European Ideas Fund:  

  Video: Thomas Rutz on CNN Money Switzerland

Add frontier markets to the portfolio for higher return potential, diversification and lower volatility, says Thomas Rutz. Watch him explain how this is possible in Are Frontier Markets worth the risk? and why in-depth knowledge of target markets, countries and companies are essential parts of the team’s investment process in Why getting close to management before investing matters.

  Attractive yields with bonds from Ecuador, Surinam and Papua New Guinea – how can one achieve that?

All three countries belong to the so-called frontier markets, i.e. they are on the verge of becoming emerging markets. The term usually goes hand in hand with robust growth potential, a strong drive for reform and low valuations. This offers interesting investment opportunities for expert investors and active managers. As contrarian investors and early movers, we in the Emerging Markets Team at MainFirst not only observe emerging markets such as Brazil, China and India, but also frontier markets such as Surinam, Papua New Guinea and Ecuador – and their growth potential.

Detailed observation of promising frontier markets
For us, it is interesting to know that the number of tourists visiting the Galapagos Islands has increased significantly, as this means that there is a greater flow of passengers through the airport in Quito and the investment in its expansion has upside potential. Of course, this is just one indicator that leads us to take a closer look. We would never base our decisions on just one factor. Rather, we always invest on the basis of a holistic approach where the political situation, the country's natural resources and many other components play a role.
Consequently, in Ecuador, in addition to the increase in tourism, we see the country as rich in commodities. At the same time, we note that President Lenin Moreno has been working hard to attract investment into the country since he took office almost two years ago, especially in the area of mining, and oil production is also on the rise. All these developments also increase the number of air passengers. And Quito is the main hub for flights within the country – not only for tourism to the Galapagos Islands, but also to the mines and other extraction sites. This makes a company like Quiport, which successfully operates the only airport in Quito, that it has rebuilt and now further optimized and expanded, an interesting investment opportunity. If the figures of such a company corroborate the positive overall indicators, we are likely to take its bonds into our portfolio.

Another South American frontier market we keep an eye on is Surinam. Similar to Luxembourg, Surinam has around 600,000 inhabitants – but the country is almost as big as Estonia, Latvia and Lithuania combined. Surinam's main sources of income are the gold mine and oil, given the country's high reserves of raw materials. Since the discovery of additional oil fields off the coast, its growth potential has multiplied. On the other side of the world, we are analysing a similar case, that of Papua New Guinea. Here, too, there are extensive deposits of raw materials, a sufficiently stable political system and plenty of potential for growth. Especially since a large gas field was discovered off its coast, which is currently being developed. As a result, the country's revenues will rise considerably and its debt is projected to fall sharply. The government bonds of both countries thus offer interesting upside and long-term growth potential. 

Identify opportunities early and move in
In our search for interesting investment opportunities, we often observe companies well before they go public, and then invest in them before many others have even heard of them. In Moldova, we have long been in talks with Trans-Oil, the only producer of sunflower oil. The company attracted our attention with its interesting and solid business case. During our observation period, we were able to directly witness how well thought-out project plans were successfully implemented. Trans-Oil's business model is not to own fields, but to buy their products from the surrounding farmers, process them and export them from their own ports. Thus, they have low storage costs and are well hedged. Plans are currently being implemented to further expand the production chain, build silos and expand the port. In the last 12 months Trans-Oil has achieved an EBITA increase of 15 percent and our analysis shows that the new development plans are very realistic.

We are also looking at companies in Georgia. The country itself has grown steadily in recent years and has carried out many structural reforms that have helped the economy and the population to become richer. Georgia Capital, for example, specializes in providing capital to promising companies so as to help accelerate their growth. Another interesting company is Silknet, the second largest telecommunications provider. Here, too, we see interesting upside potential.

Our research shows us time and again that those who look carefully will find attractive investment opportunities if they have the necessary expertise to identify them. Meaning that places like the Galapagos Islands offer special riches on many levels.

  "Everything as a service" – where will the trend lead?

Frankfurt am Main, 20 March 2019 Rumour has it that Apple will announce a competitor platform to Netflix and Prime Video at its keynote on 25 March. Following the success of Apple Music, this would not only be a logical step for the group, but also an indication of a structural trend: "Everything as a service". What is meant here is the change away from the sale of simple products towards services. Frank Schwarz, fund manager of the MainFirst Global Equities Fund, is convinced that the business model "as a service" (aaS) could in future dominate across industries - and that investors can take advantage of this development.

The aaS business model has already revolutionized entire industries. According to the market research company Superdata, almost 74 percent of consumers in the United States now buy films and series via streaming subscriptions and the figure for music is 64 percent. Originally, the model originated in the IT sector, where software (Software as a Service: SaaS) and entire platforms (Platform as a Service: PaaS) started to be increasingly sold as services around the beginning of the 2000s. Well-known examples include Salesforce, Microsoft Azure and Adobe Systems. "The commercial advantages are impressively demonstrated by Adobe. The company has doubled its revenues to more than 9 billion euros since it switched its sales model to SaaS in mid-2013," says Schwarz. This business model was also quickly adopted outside of the IT sector - especially where digital goods are traded.

Lower costs for consumers, more stable revenues for companies

For the customer, aaS primarily offers cost advantages. On the one hand, a service eliminates the need for high initial investments, on the other hand, the product - whether software, database or media library - is continuously updated. "Thanks to PaaS, companies can now reduce their data center costs by up to 70 percent. This can be an existential advantage, especially for start-ups: Instead of having to raise millions of dollars, founders can realize their ideas with much more modest sums," says Schwarz. In addition, the provider guarantees the security and stability of the infrastructure of his service.

At the same time, service providers benefit in particular from more stable and cyclically resistant revenues. One reason for this is that the model creates stronger customer loyalty by creating a greater dependency on the service. "For example, a Spotify user who sorts his or her favourite songs into playlists by hand over a period of months will think twice before switching to the competition such as Apple’s iTunes," Schwarz illustrates. In addition, aaS has proven to be an effective tool in the fight against pirated copies, which music, film and software producers in particular have had to contend with. This is one of the reasons why video games for Sony and Microsoft consoles are now sold as aaS subscriptions. Consumers are increasingly acceptant of this.

The analogue world offers more and more services

However, Schwarz emphasizes that aaS can also be used successfully outside of digital products and entertainment media. "Among the up-and-coming companies in the residential space sector in metropolises, for office space or car sharing models, one can find such service providers as Uber and Lyft," says Schwarz. The fund manager also draws attention to WeWork, a company founded in 2010 that provides shared workplaces and is now the largest office property owner in New York and London. Similar to the idea of a sharing economy, according to Schwarz, it is the younger generation in particular that not only accepts the business model, but even prefers it to traditional products.

With his fund, which prefers companies with structural growth, Schwarz wants to invest in companies with this business model in the future as well. Today, around 20 percent of its portfolio companies already follow similar practices, including stocks such as Amazon, Adobe, Salesforce, Netflix and Spotify.

  What does China's course mean for European investors?

China was the most developed country in the world for over 4000 years. Only in the last 400 years was this not the case. But over the last 40 years, China has been catching up again and has already overtaken the western world in many areas. The question many investors ask themselves, is how they can profit from this development. In other words, how can investors judge which changes currently offer the greatest growth potential and how can they use them to generate returns. To answer this, the team around Frank Schwarz at MainFirst has analysed general structural trends, specific Chinese developments and the country’s strategic orientation in order to be able to make the best investment decisions. Some interesting trends they found come from the area of power production and consumption. 

Strategy, innovation and energy 
The Middle Kingdom is known for its long-term planning. Its declared strategic goal by 2025 is to enhance Chinese industry, improve product quality, and advance automation and digitization. In order to achieve its strategic goals as the world's leading manufacturer of, for example, electrical power supplies, the Chinese state invests a good 2 percent of its gross domestic product annually in innovative projects such as alternative forms of energy. It is within the framework of this strategic orientation that the tenfold increase in the number of patent applications from China over the past ten years must be seen, as it is a clear sign of China’s greater innovative muscle and strategic positioning to fulfil their long-term goals.  

Structural trends in energy generation 
The time span between invention and patent application and the commercial adoption of it can take quite some time. For example, the technology for energy storage with lithium-ion batteries was invented about 80 years ago. But only by about 2005 had enough progess been made so that the batteries can be produced cheaply enough and can therefore be used more and more extensively. Since then, the further reduction in production cost has been fast: Between 2005 and 2017 alone, the price fell by a factor of 6 (from approx. 1300 to 209 US dollars). This allows companies to use lithium-ion batteries in new and different ways.

Tesla is a well-known name that takes advantage of this fact and not only uses the technology for its electric motors, but has also employed it in the Hornsdale wind farm in South Australia, which has a discharge capacity of 100MW and an energy storage capacity of 129MWh, making it the largest battery storage facility in the world. The implications of this trend are enormous, because renewable energy has the incredible advantage that once the infrastructure is in place, energy production costs are close to zero.

Energy and other consumption in China 
China is following suit and is starting to develop and exploit the possibilities of lithium-ion batteries in a variety of ways. Battery production facilities for electric automobiles are currently being built, so that by 2021 China is expected to produce 70 percent of the world's production of electric vehicle batteries. In 2019, construction also began on the first Gigafactory for batteries in China. In view of China's continuing growth, the search for new ways of generating energy is urgently needed, among other things to satisfy the country's growing hunger for electricity. By 2030, about 9 of the world's 15 largest cities will probably be Chinese. These developments require enormous investments in power generation.

At the same time, the purchasing power of the Chinese will also continue to grow, as the volume of private assets in China alone will grow by up to 180 percent in the next 10 years to almost 70 trillion US dollars, second only to the USA, which will reach estimated private assets of 75 trillion US dollars. These are developments that will boost growth not only in the energy sector, but also in other areas such as financial transactions or luxury goods. Companies that stand to benefit from this growth are such Chinese giants as Alibaba and Tencent, but also international luxury goods manufacturers such as LVMH, Kering and Canada Goose.

In the MainFirst Global Equities Fund and the MainFirst Global Equities Unconstrained Fund, Frank Schwarz and his team use such developments to generate attractive returns for investors. The MainFirst Global Equities Fund has generated an annual performance of almost 14 percent since its inception six years ago (ISIN LU0864710602, as at 28.02.2019).

  The low-interest environment returns problem – do dividend stocks offer a way out?

In a sustained low interest rate environment, dividend stocks are an essential component in maintaining real purchasing power and achieving positive returns after inflation. Dividend stocks enable investors to participate in a broad equity market and to receive continuous distributions.

The low interest rate environment coupled with inflation results in a toxic mix for German investors
Real returns, i.e. the interest income after deduction of the inflation rate, of investors in Europe will in future be just around zero percent. These are the results of a recent study by the independent financial services provider MainFirst. Thomas Meier, Head of Equity Fund Management at MainFirst, describes this trend as worrying. To give one example, calculations by the Bundesbank show that the asset allocation of private households in Germany over the past ten years has enabled an average adjusted increase in value of 1.4 percent per year. Over the past 20 years, the increase in value even reached 2.6 percent per year. However, such returns can no longer be achieved today with an average German portfolio due to the ongoing low-interest rate phase. A new weighting must therefore be given to asset allocation – if money is not to dwindle away. 

The way out of the dilemma: dividend stocks 
In order to be able to generate attractive returns today, investors must rethink their approach. Investors can only achieve higher returns through a change in portfolio allocation away from cash, insurance, pension provisions and similar investments - a share that currently averages 77 percent in German portfolios. In other words, investors will not be able to achieve their savings targets without a significant increase in the equity component, which still has the most attractive performance potential in the long term.

Dividend stocks offer a particularly high return potential, as higher pay-out ratios could be observed here in recent years. In 2018, distributions in Germany totalled more than 50 billion euros for the first time. Despite the more difficult environment, current estimates anticipate further increases for 2019. Investors should therefore pay attention to the quality of dividends when selecting stocks so that returns are as attractive and sustainable as possible. Such dividend stocks can be found above all, where robust business models are in place. The MainFirst Global Dividend Stars is an example of a fund that has equities with high quality, sustainable dividends in its portfolio.

Targeted investment in high-quality dividend stocks 
The fund managers of MainFirst Global Dividend Stars, Thomas Meier and Christos Sitounis, rely on focused stock picking. They invest independently of the benchmark in companies with above-average dividend quality. The decisive factor is not the amount of the dividend, but the sustainability of the distributions. In the view of the fund managers, such dividend distributions are mainly found where robust business models with strong balance sheets, high structural profitability and solid substance are found. In addition to established, defensive large caps, they add more dynamic small and mid-caps that have a higher potential for growth to create a balanced, attractive risk-return profile for investors. To ensure the sustainability of dividend payments, the extent to which the payments are covered by business development and the achievement of a positive free cash flow is determined. Finally, a company is analysed based on valuation ratios in a peer group comparison. If a security has withstood this extensive review, it is usually included in the portfolio on a long-term basis. In addition to individual developments, the team continuously monitors around 600 companies worldwide, with direct company contacts at the heart of the analysis process. The management conducts a total of approximately 300 meetings per year, mainly with decision-makers from companies.

The MainFirst Global Dividend Stars is thus an actively managed fund with a bottom-up-driven stock selection. Its focus lies on substantial dividend titles and the systematic admixture of growth-strong small and mid-caps. Not only in view of the low interest rate environment does it offer an attractive alternative to savings deposits.




The MainFirst Emerging Markets Team expects that given the still healthy global economy, EM is set to grow more than developed countries 

Strong fundamentals point to performance potential in emerging markets 
Emerging market corporate bonds should deliver solid returns in the coming years as the fundamentals of EM companies remain strong and continue to have upside potential, as they are considerably less levered, and, thus, have more room for manoeuvre than companies in developed countries. For example, bonds in the JP Morgan Corporate Emerging Market Bond Index (CEMBI) have an identical risk-reward profile to USD and EUR high yields. Moreover, in contrast to industrialized countries, emerging markets are still early cycle or at most in the middle of the cycle and there is, therefore, still a lot of growth potential. This makes many emerging market corporate bonds very attractive.

The global economy is also still in a healthy state, despite the slowing in growth it has recently seen. And the MainFirst Emerging Markets Fund Management Team, consisting of Cornel Bruhin, Dorothea Fröhlich and Thomas Rutz, do not foresee a recession in the next 12-18 months. Rather, they expect that the current business cycle will continue, albeit with weaker global growth, that positive developments on the trade front between the US and China will start to take effect, and that the Chinese measures of easing should start to affect the real economy by mid-2019. While it may still take a few months for this stabilisation to become visible, constructive outcomes of the trade negotiations should have a further positive influence on this trend. 

Favourable factors boosting emerging markets 
Over the last year, emerging market assets have generated significantly better risk-adjusted returns than comparable investments in developed markets. For example, CEMBI high yields achieved equity-like returns while their volatility was only one-third as high. A comparable portfolio without emerging market positions performed weaker than one with EM positions. The MainFirst Emerging Markets Team expects this trend to continue in the coming years.

According to them, the fundamentals of EM corporates are now in the best shape they have been in since the global financial crisis. EBITDA generation has also been strong, growing at 27 percent in the second quarter of 2018.  Most importantly, many companies are employing a more prudent approach and the balance sheets of many companies are improving. This means that compared to the previous cycle, CAPEX strategies are more defensive, cash balances are higher and corporate governance has improved. Overall, EM corporates have been deleveraging due to the strong EBITDA generation and moderate new debt issuance.

Moreover, EM default rates have fallen significantly from their November 2016 peak, which strongly indicates the beginning of a new credit cycle. The global growth trend – even if more moderate now – still supports corporate earnings growth further and leads to higher cash holdings and lower debt. On top of that, commodity markets are balanced, which is why the team expects the commodity cycle to continue and emerging markets to be buoyed by this.

Another positive influence should come from the US Dollar, which is likely to weaken in 2019 as the global economy rebalances away from the 2018 US-led growth trend. The team views the recent FED communication as dovish enough and believe that the FED will be particularly careful in further hikes down the road, meaning that the currently foreseen two hikes do not have to happen necessarily in 2019 and will depend on the US and global economy in 2019. The team already predicted a year ago that the US 10-year benchmark yields would be in the range of 2.75-3.25 percent and not up to 4 percent – as assumed by many other market participants. Moreover, since the interest rate differential has narrowed again in the last few weeks and the carry situation is somewhat less attractive than a few weeks ago, the team feels that many investors are still heavily overweight in their US Dollar asset allocation and see this as not based on sound fundamentals.

What this could mean for investors 
Based on this, the team expects that EM corporates will be more resilient – even in a bearish economic scenario – than their US and EU high yield peers and are likely to outperform them. The described outlook also leads them to the view that, in terms of risk-reward, credit is a much more attractive asset class than equity – always only if investors have in-depth knowledge and know how to choose well.

The team has acquired and established its expertise over the last 20 years and both their funds show this through their attractive returns. The MainFirst Emerging Markets Corporate Bond Fund Balanced C (ISIN LU0816909955) achieved an annualised performance of 8.2 percent over the last 3 years and currently has an attractive credit margin of 730 basis points while the Investment Grade corporate credit margin in the portfolio has a spread of well over 300 basis points. By comparison, JPM CEMBI Investment Grade is currently at 240 basis points. The MainFirst Emerging Markets Credit Opportunities Fund C (ISIN LU1061984545) achieved an annualised performance of 9.4 percent over three years and currently has a credit margin of almost 1000 basis points.

Regarding the general valuation, the current yields (Yield to Worst) on the two funds’ portfolios are extremely attractive with over 9.8 percent YTW and a credit margin of 730 basis points in the MainFirst Emerging Markets Corporate Bond Fund Balanced and over 12 percent in the MainFirst Emerging Markets Credit Opportunities Fund.

  MAINFIRST and ETHENEA combine their distribution support in new company

Frankfurt am Main, 9 January 2019 MAINFIRST Asset Management and ETHENEA Independent Investors S.A. are combining their distribution support in a newly formed company, FENTHUM S.A. Based in Luxembourg, FENTHUM is taking over the distribution support activities for both fund asset managers with immediate effect.
MAINFIRST will continue to manage the accounts of institutional investors and individual mandates for Germany and Austria directly. In this way, specific institutional requirements can be implemented easily and efficiently. Moreover, the close cooperation with the fund management and the dedicated account managers will continue to be available. 

"With FENTHUM, we gain a Europe-wide market presence and further expand the advantages for our clients by having a larger team available that possesses strong competencies to advise customers in more depth and at more locations," says Oliver Haseley, Managing Director of MAINFIRST Asset Management. FENTHUM is exclusively responsible for distribution support. "The independently managed companies MAINFIRST and ETHENEA will remain stand-alone companies and will continue to offer an independent, complementary product range," says Haseley.

In addition to the optimised service, the wider selection of funds also presents an advantage for customers. "The combined range from ETHENEA and MAINFIRST offers the ideal choice of portfolio solutions for each client profile," says Dominic Nys, Executive Director and Global Head of Business Development at FENTHUM S.A. " With the larger and more diverse team, we can provide the best possible client service. FENTHUM will support ETHENEA and MAINFIRST in offering existing clients an even better service and win over new clients with an attractive range of funds".

All three companies, MAINFIRST Asset Management, ETHENEA and FENTHUM, are majority-owned by Haron Holding. With the formation of FENTHUM, the three sister companies will focus even more strongly on their core business: a broad range of asset management solutions with excellent client service. 


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  EM corporate bonds: MainFirst expects solid returns over the next years and perceives interesting buying opportunities

 Frankfurt am Main, 13 December 2018. Emerging market corporate bonds should deliver solid returns in the coming years. Thomas Rutz, an Emerging Market expert at the independent financial services provider MainFirst, is convinced of this. "The fundamentals of EM companies remain strong and they have more room for manoeuvre than companies in developed countries," says Rutz. In his view, many emerging market corporate bonds are currently very attractive. Bonds in the JP Morgan Corporate Emerging Market Bond Index (CEMBI), for example, have an identical risk-reward profile to US and EUR High Yields. In addition, many EM companies still have upside potential, as they are considerably less levered. Moreover, in contrast to industrialized countries, emerging markets are still early cycle or at most in the middle of the cycle and there is, therefore, still a lot of potential. 

Points in favour of Emerging Markets 
In retrospect, emerging market assets have generated significantly better risk-adjusted returns than comparable investments in developed markets. For example, CEMBI High Yields achieved equity-like returns while their volatility was only one-third as high. A comparable portfolio without emerging market positions performed weaker than one with EM positions. According to Thomas Rutz, the fund manager of the MainFirst Emerging Markets Corporate Bond Fund Balanced and the MainFirst Emerging Markets Credit Opportunities Fund, this trend will continue in the coming years. The EM and frontier markets are very heterogeneous, and although some of the CEMBI zero volatility spreads have widened in recent months, the majority of emerging markets have proved quite resilient. Many of them now offer attractive entry opportunities, and the high yield market has not been as cheap as it is now since December 2016. In addition, EM default rates have fallen significantly from their November 2016 peak - "a sign that we are entering a new credit cycle," says Rutz. The balance sheets of many companies are improving. The global growth trend supports corporate earnings growth and leads to higher cash holdings and lower debt. In addition, commodity markets are balanced, which is why Rutz expects the commodity cycle to continue and emerging markets to be buoyed by this.

The impact of the US dollar is limited 
Rutz considers the impact of the US dollar on investments in emerging market corporate bonds to be limited. The development of the US currency remains an important factor for the performance of investments in emerging markets. "However, many EM companies hedge their currency risks or even receive cash flows in US dollar, so that the strength of the currency has only a limited impact on the balance sheets of such companies in emerging markets and can even have a positive effect," says Rutz. Emerging market currencies, however, have lost an average of around 14 percent in value since the beginning of the year and are currently at the level of the beginning of 2016. In view of the positive fundamental data and the broader real interest rates in emerging markets compared to developed markets, Rutz expects the level to rise again and that the US dollar will not strengthen further. 

Emerging markets constitute the most diversified bond markets today 
More than 150 individual markets are already included in the four most important EM benchmark indices for fixed-interest securities, and there is still a great deal of upward potential. In comparison, there are a maximum of 144 individual markets in the developed countries. In other words, Emerging Markets are already the most diverse fixed income asset class in the world. "Diversification will continue to increase in the future. And the growth potential is also much faster than in developed countries. With the necessary expert knowledge, investors can find attractive investment opportunities here," says Rutz. 


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  Facts in favour of Indonesia

Frankfurt am Main 26 November 2018 Since the Asian crisis of 1997/1998, investor confidence in Indonesia has been dampened. "However, the general sell-off recently lacked any factual basis," says Thomas Rutz, fund manager of the MainFirst Emerging Markets Corporate Bond Fund Balanced. "Investors are guided by their fears and not by the continued robust fundamentals. In fact, since 2010, the Indonesian economy has enjoyed considerable and continuous growth of around 5 percent per year, which makes it the G20 country with the most stable economic development. Inflation has been fairly stable since 2016, usually at around or below 4 percent. The main reason for this is a strong export business with commodities such as coal, whose prices increased by 6.6 percent in 2018 alone. In the last five years, 15 percent of coal exports went to China, which makes Indonesia one of the largest coal suppliers to a country that continues to use it as its primary energy source. “The coal market is currently under a healthy supply-demand regime and coal prices have recovered significantly since the supply-side reform introduced by the Chinese government in late 2016”, explains Rutz.  

Interesting relative value opportunities
Coal will continue to be one of the most important sources of energy for China and the emerging markets in the future. So demand is secured for decades to come. Despite this positive industry outlook and improved fundamentals, Indonesian coal mining companies such as ABM Investama & Geo Energy have suffered significantly in recent months. Not least for this reason, Rutz sees considerable potential for investors here: “Since exports of both companies are usually traded in US dollars, they have minimal currency exposure and volatility in the Indonesian Rupiah (IDR) does not affect the companies negatively, but can even have a positive effect on their profit margins as they are actually rising through lower operating costs (which are paid in IDR).” Both companies demonstrate solid performance with increasing EBITDA figures and moderate leverage. “Given the industry outlook and fundamentals of the two companies we expect them to trade 80-100 basis points tighter vs. their peers,” adds Thomas Rutz.

Potential for continued growth
The Indonesian economy performed well in the third quarter and is forecasted to continue to grow by a good 5 percent over the next few years. The foreign debt is low and the national debt amounts to only about 29 percent of the gross domestic product (GDP). “With currency reserves of between 115 and 120 billion US dollars, Indonesia is more than well positioned,” the fund manager says. In addition, president Widodo plans to support growth further through government spending, increasing it by 10 percent in 2019. “Recently, quasi-sovereign bonds such as IDASAL (Indonesia Asahan Alumini) have become very attractive and we expect more opportunities to emerge. In the course of just one week, its credit spread vs US Treasuries has already narrowed by 64 basis points to 299,” explains Thomas Rutz. Fixed investment, supported by higher commodity prices and government consumption, is likely to receive a boost ahead of elections in April next year. At the same time, the additional spending should help to underpin domestic demand. "In the longer term, rising incomes and steady growth of the middle class and population will also contribute to this," says Rutz, giving a positive outlook of the future. 


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  How can investors avoid the demographic trap?

Frankfurt am Main, 19 November 2018 Demographic change does not only affect pension debates in Europe. Economists are also warning of the effects of population decline, which are likely to have an impact on economic growth. Not only in Germany, but throughout Europe the average age of the population is rising steadily. According to studies, around 30 percent of people in the euro zone will be older than 65 in 2070. By comparison, in 2016 the figure was still 20 percent. "Demographic change in developed countries will have an economic impact," says Adrian Daniel, fund manager of the MainFirst Absolute Return Multi Asset, warning against a slowdown in economic growth. At the same time, however, he sees opportunities in industries that are growing particularly fast as a result of such structural changes. "Structural trends, including demographic change, offer interesting investment opportunities," says the fund manager, citing developments in healthcare and automation as examples. 

Effects of demographic change 
Falling numbers of workers in relation to pensioners will lead to a decline in labour force and employment and thus to lower productivity. One example of the consequences of an ageing population is Japan, where senior citizens already make up 27 percent of the population. "The historical development in Japan shows that an ageing population leads to a decline in consumption. In contrast to young families, the older generation has settled and does not foster growth trends," explains Daniel. A further complicating factor is that the low willingness to consume leads to price pressure among competitors and thus to deflation. "Mature consumers are less willing to make new purchases if they can assume that they will be even cheaper in the future". According to the fund manager, conditions in Japan can be taken as a blueprint for the euro zone and Germany is considered as being most affected by the loss in population.  "For the younger generation, the challenge of creating growth is becoming increasingly difficult," says the fund manager. 

New growth markets offer opportunities for investors 
But demographic change also offers opportunities from a microeconomic point of view. Genetic medicine is already advanced and will in the long term enable the development of tailor-made, targeted medication and thus reduce treatment costs. Thus, healthcare companies have interesting opportunities to position themselves. The nursing sector is also a growth sector. "Companies can benefit from demographic change if they deal with the needs of older people". In this context, automation is also an interesting topic, even though - except in Japan - there are still great reservations about "robo caregivers". At the same time, this sector is promising for the future wherever traditional workers can be replaced. In China, for example, there is an increasing shortage of migrant workers, and automation should now help to counter the shortage of labour.

Structural growth trends enable long-term return prospects 
"Investors can take advantage of structural growth trends, as they can be forecast well in advance and are long-term. This means greater security for investors," explains Daniel. This is shown by history where sectors have alwayas dominated for an average of 50 to 70 years. "However, in order to take advantage of this growth, we need comprehensive expertise and an analysis-based forecast," says the fund manager. "In this way, returns can be generated with an attractive risk/return profile despite demographic changes."


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  Interview with Thomas Rutz: Move early to achieve higher returns for investors

In his interview with Citywire, Thomas Rutz explains, why he likes to buy in early: “You can get a huge valuation gap and you can pick up really cheap stories.” Find out more about the strategy he and his colleagues use to generate an attractive performance in the MainFirst Emerging Markets Corporate Bond Fund Balanced. 

Read the interview (p. 22f)

  Interview with Adrian Daniel on the Advantages of Investing in Structural Trends

In an interview with Citywire, Adrian Daniel explains why structural growth trends are good investment themes: Long-term trends are gaining ground and bring sustainable returns while short-term market volatility recedes into the background.

  Video: Investing successfully in value-oriented equities from the eurozone - 5 questions to Thomas Meier

Find out which four strategies Thomas Meier, Head of Equity Fund Management, combines in the MainFirst - Euro Value Stars in order to successfully use value investing to achieve attractive returns for you as an investor, also in 2019.

  Technological innovators see accelerating growth

Frankfurt am Main, 08 November 2018 – The latest setback in technology stocks could offer attractive buying opportunities for investors wishing to benefit from structural growth trends. Frank Schwarz, portfolio manager of the MainFirst Global Equities Fund, holds after the MSCI World Information Technology Index fell by around twelve percentage points in October. He sees it as a temporary correction based on investor sentiment and profit taking in the current reporting season. However, with an average organic revenue growth of 28 percent for his portfolio companies in the current season, the most important indicator remains intact. Schwarz anticipates rising profit margins in the long term and double-digit growth rates for technological innovators - including for companies other than Facebook, Amazon and Alphabet (Google).

"Increasing computing power combined with falling production costs continues to be the biggest growth driver for technological innovations," says Schwarz. For example, smartphones today do not only have more memory capacity than a classic desktop computer 15 years ago. Every single byte of memory is also produced more cheaply: For example, the production of one gigabyte of storage space in 1957 cost around two million US dollars, but today its price is only 0.02 US dollars. "The same development can also be seen in current innovations such as batteries for electric cars or 3D printing, which are only at the beginning of their development and use," reports the fund manager. For example, the production costs of electric car batteries have fallen six-fold in the past twelve years, and the costs of 3D printing have even fallen by a factor of 400 within just seven years.

Information technology as growth accelerator
Technological change is not just progressing, it is accelerating. In information science, this is explained, for example, by Moore's Law. It states that computing power doubles every two years, which is attributed to the doubling of transistors in an integrated circuit. Only the boundaries of physics limit this growth. According to Ray Kurzweil, one of the heads of engineering at Google, new technologies make it possible to overcome these physical limits. He postulates in his Law of Accelerating Returns that computing power begins to double every year once information technology is the driving force behind innovation.[1] 

"Not only end-users benefit from the ever faster technological progress. The winners are also companies that satisfy the growing demand for data in technological trends and thus make progress possible," says Schwarz. For example, Nvidia, which is one of the largest developers of graphics technologies and chipsets, recently posted record growth. In the second quarter of 2018, the data center segment alone recorded growth of 83 percent. Also in the long term, Nvidia is one of the innovators with its latest developments: "The latest Nvidia graphics card is six times as powerful as its predecessor. With completely new technologies, it offers applications beyond the entertainment industry," says Schwarz. Nvidia now also serves sales markets such as artificial intelligence, autonomous driving and medical diagnostics: "The graphics card can be used in biophotonics for cancer detection, for example," says Schwarz. 

Just as smartphones and big data are driving economic growth today, structural growth trends such as automation, artificial intelligence and e-mobility are likely to shape the economy in future. Schwarz, therefore, sees accordingly positioned innovative companies as sources of attractive returns, despite temporary volatility, which should deliver high growth rates in the long term.

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  After the run off in Brazil – what lies ahead?

Frankfurt am Main, 25 October 2018 A victory for the favourite Jair Bolsonaro of the Social Liberal Party (PSL) in the run-off elections in Brazil should give Brazilian real and assets values a boost. Thomas Rutz, fund manager of MainFirst Emerging Markets Corporate Bond Fund Balanced, expects a recovery of the Brazilian Real and a narrowing of credit spreads for Brazilian government bonds for this scenario. "We see positive indicators pointing to a sustained economic upturn in Brazil," said Rutz. Recent surveys, such as those conducted by the Brazilian Institute of Public Opinion and Statistics, predict that Bolsonaro will win the runoff elections on 28 October against Fernando Haddad of the Workers' Party (PT).

Upswing in GPD growth and business cycle likely
A first upswing in the markets had already become apparent shortly before the elections and was further confirmed after Bolsonaro barely missed the majority with 46 percent of the votes in the first round of elections at the beginning of October and his PSL became the second largest party in parliament. Since then, the Brazilian Real (BRL) has already recovered against the US Dollar (USD) from 4.2000 at the beginning of September to 3.7000 by mid-October, while Brazil's credit spread (JP Morgan CEMBI Z-Spread to Worst) has narrowed by around 70 basis points from 430 to 360. Rutz assumes that the USD/BRL range will remain similarly tight until the end of the year. Brazilian assets have also repriced quickly - correcting the overshooting of recent months. "We are likely to experience some further repricing as many shorts are now squared and real money folows might return," adds Rutz. 

The Emerging Market expert also sees further potential in the economic cycle. "The Brazilian economy has corrected sharply in recent years, inflation is low, the currency is cheap and external balances are healthy. Brazil is therefore ripe for a long and sustained upswing in the business cycle, which could could support Brazilian markets long after the turmoil surrounding the election will have passed," the fund manager emphasizes. Brazil's GDP growth is expected to accelerate in the third quarter to 1.8 percent year-on-year and to around 1 percent quarter-on-quarter. The current forecast for 2018 assumes a growth in gross domestic product (GDP) of around 1.5 percent. The forecast for 2019 is even more positive, expecting GDP growth to exceed 3 percent.

Bolsonaro’s expected win strengthens positive market sentiment 
The markets are particularly in favour of Bolsonaro, because if he wins, he is likely to live up to his nickname “Trumpinho” (little Trump) and form strong alliances with business and create economic liberty. At the same time, he will take measures against corruption and even more so against crime. He has a strong economic team led by Paulo Guedes, a renowned economist, who advocates pension reform and the privatization of state-owned enterprises. Rutz adds: “The stronger than expected performance by Bolsonaro’s allies, and the right generally, in the congressional election on 7 October means that pension reform and other changes should be within reach.” This is particulary important as the pension reform is by far the most pressing issue in Brazil from an investor perspective due to the massive fiscal cost of the deficit in the public system (about 3% of GDP per year). The topic is therefore sure to retake centre stage when the the election is over. “Bolsonaro has the good fortune of inheriting an economy that is enjoying a cyclical upturn and a reform initiative to social security that is far enough advanced that it should be hard to reverse,” highlights Rutz.  

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  Video: Mainfirst Global Equities Fund - a day with the fund management


Do you want to invest in long-term, theme-based global shares, with tactical hedging? If so, the MainFirst Global Equities Fund may be exactly the right investment fund for you, as it is managed by a highly experienced fund management team.

  Investment into global megatrends unconstrained: the MainFirst Global Equities Unconstrained Fund

Frankfurt am Main, 17 October 2018 MainFirst expands its range of funds to include another global equity fund, the MainFirst Global Equities Unconstrained Fund. Its investment strategy is the same as that of the successful MainFirst Global Equities Fund with the difference that the new fund does not use an overlay based on technical indicators. Lead fund manager Frank Schwarz explains: "In response to multiple client requests, we have decided to offer the fund without tactical hedging. 

Its theme-based approach focuses on structurally growing investment themes such as digitization, automation and decarbonization. The investment strategy is long-term, with an investment horizon of over five years. "This allows the fund to benefit strategically from the longer-term performance of the companies and to free itself from short-term fluctuations," clarifies Frank Schwarz.

The fund operates independently of its benchmark, the MSCI World Index EUR Index, and has a high active share. The fund is generally 100 percent invested and operates without tactical hedging. All stocks are carefully selected and continuously analysed with a focus on growth stocks. "Finding fast but organically growing companies that are at the forefront of structural megatrends is at the centre of our approach," explains Frank Schwarz. The team, consisting of Frank Schwarz, Patrick Vogel, Jan-Christoph Herbst, Adrian Daniel and Johannes Schweinebraden, has many years of investment experience and the track record of the five-year old MainFirst Global Equities Fund gives an indication of the potential of the investment strategy.

  MainFirst acquires European Equities institutional brokerage business from Raymond James

Frankfurt/Main, 09 October 2018 - MainFirst Bank AG, a leading independent European equity research and trading firm, will acquire the institutional brokerage business in European equities from Raymond James in Paris and London effective December 1, 2018. As part of this acquisition, MainFirst will also add 29 employees from Raymond James in Paris including Research, Sales and Sales Trading and a further six Research employees in London. These individuals will be integrated into the MainFirst organisation. The acquisition will strengthen MainFirst's strategic position, particularly in France.

"With this step, we will achieve economies of scale, better leverage our competitive advantages in the new world of MiFiD II and an expanded platform to serve our clients," said Ebrahim Attarzadeh, CEO and Head of Equities at MainFirst Bank AG. As a result of the acquisition, the number of European shares covered by MainFirst sees a rise by approximately a quarter to 400, with the number of MainFirst's institutional clients in France also increasing significantly.

  Presidential elections in Brazil: immediate risks for financial markets largely priced in

Frankfurt am Main, 5 October 2018 - Around 145 million Brazilians will be voting for their new president next Sunday and on 24 October in the general elections. "The country needs drastic, unpopular economic reforms to reduce the bloated government, counter the high budget deficit and reduce rising social security spending," says Thomas Rutz, fund manager of the MainFirst Emerging Markets Corporate Bond Fund Balanced. However, the expert sees the widening of the spread of the credit default swap (CDS) in Brazil and the correction of the Brazilian equity market as a sign that the financial markets have already priced in the risks associated with the outcome of the presidential elections and should remain stable for the time being after next Sunday. In the medium term, however, investors would take a very close look at whether the next elected president is pursuing a credible and reform-friendly economic program. "If this is not the case, a worsening of the situation will have to be expected," said Rutz.

Two candidates currently stand a good chance of taking office: Jair Bolsonaro, a former military leader and member of parliament, who belongs to the right-wing populist Partido Social Liberal (PSL), and Fernando Haddad, the former mayor of Sao Paulo, who will run for the left-wing Workers' Party (PT). Haddad was nominated as a candidate for the PT at short notice after the popular ex-president Luiz Inácio Lula da Silva had resigned because of his conviction in a corruption trial. "A run-off among these two candidates already seems almost certain," says Rutz. Geraldo Alckmin, the favorite of investors and candidate of the middle class, by contrast, "practically does not stand a chance".

The financial markets are following the election campaign closely. After a severe recession in 2015 and 2016, Brazil has recently experienced a slight upswing. "But the effects are not yet really felt by the population," explains Rutz. In the past four years, the budget deficit amounted to more than seven percent of gross domestic product (GDP). According to the expert, high social security contributions and rising pension expenditure are preventing urgently needed investments in the country's physical and social infrastructure.

Frustration about unemployment, corruption and crime among the population is correspondingly high. "Bolsonaro exploits this for populist slogans," says Rutz. The former captain of the army promises to crack down on crime, fight corruption and restore economic growth. His presumed future finance minister, Paulo Guedes, is liberal, wants to cut spending and buy back debt with income from privatizations of profitable state-owned enterprises and the public pension system. "For many hope that he will implement the necessary reforms makes him the favorite of the two front runners.

Lula's candidate Haddad has worked his way up to second place since his nomination on 11 September. He promises to reverse many of the unpopular (but necessary) reforms of the highly disliked President Michel Temer to cut social spending. Temer had moved to the head of state in 2016 after the dismissal of President Dilma Rousseff. "Instead of pushing ahead with privatisation and pension reform, Haddad wants to boost the economy through investment. The markets hope that, like Antonio Manuel Lopez Obrador in Mexico, he will not implement his more drastic ideas for reform," says Rutz.

  The MainFirst Classic Stock Fund is renamed MainFirst Euro Value Stars

MainFirst’s fund with the longest track record is getting a new name to better reflect its investment approach. Its new name (as of 15 September 2018) is: 

MainFirst Euro Value Stars

‘Euro’ reflects the focus on the Eurozone as its investment universe

‘Value’ stands for the investment into value titles

‘Stars’ highlights the search for promising companies with high price growth potential

Within the general approach of value investing, the fund managers, Thomas Meier and Christos Sitounsis, employ an unusual method using four different value strategies to achieve attractive performance for clients. The four strategies are:

-       Classic Value Investing

-       Deep Value

-       Contrarian

-       Events

The fund combines the four strategies in order to achieve an attractive performance over all market phases. In the fundamental analysis of titles both quantitative and qualitative factors such as promising earnings growth potential, solid cash flow and high-quality business models are taken into account. Since its inception in 2002, the fund has built a solid track record and outperformed its benchmark.

Find out more about the MainFirst Euro Value Stars

  If Technological Progress Accelerates Exponentially – Which Companies Are the Winners?

No one doubts today that attractive returns can be achieved with big tech companies such as Alphabet, Amazon or Apple. They are growing fast – sometimes at seemingly exponential rates. But will this continue? And which companies are benefitting from the progress made?

  Favourable Fundamentals for Attractive Returns in Emerging Markets

EM fundamentals are intact and dedicated experts can profit from attractive buying opportunities says Thomas Rutz, EM fund manager at MainFirst.

Emerging Market fundamentals are much more resilient than they used to be. Although uncertainty over trade tariffs, a strengthening dollar and Trump’s Twitter tirades recently led to market corrections, compared to the time of the taper tantrum Emerging Markets are much less vulnerable to such factors as the macro economic backdrop and credit fundamentals remain constructive. 

Read the full article here. 

  Video: Sustainable Dividends with an Attractive Performance

“We have not only reached our targets, but exceeded them.” This is the positive interim conclusion drawn by Thomas Meier, Head of Equity Fund Management at MainFirst and Portfolio Manager of the MainFirst Global Dividend Stars. Find out more about the attractive results achieved and the investment strategy in the video. 

  What do a scale and the MainFirst Global Dividend Stars have in common?

Both keep an ideal balance for attractive outcomes.

To generate attractive outcomes for investors, the MainFirst Global Dividend Stars uses the Barbell strategy for a balanced portfolio, and focuses on high quality and sustainability of dividend yields. The fund does not follow a benchmark, and invests globally in companies selected on the basis of an in-depth process of analysis. This is what made it the best fund in its category at the end of 2017 (Morningstar ranked it first of 489 funds in the category Global Equity Income, denominated in EUR. As at 12/31/2017).

The Barbell strategy for a balanced investment approach 
The central approach used for the dividend fund is the Barbell strategy, whereby established large caps are blended with small and mid caps (currently 46%) in such a way as to obtain a balanced, attractive risk/return profile for investors.
The two types of investment that create an attractive balance in the MainFirst Global Dividend Stars are: on the one hand, defensive, solid, relatively non-cyclical companies with a high market capitalisation, such as consumer goods manufacturers and insurance companies that bring stability to the portfolio. On the other hand, this is balanced by smaller companies which offer opportunities to generate high returns and dividends. The latter tend to be family-run international niche market leaders (INML), characteristically with a leading market position, great growth potential, strong balance sheets and profitability as well as high quality of the management.

Dividends 2.0 for constant, attractive returns 
At the same time, the stock picking process is focused on high quality dividends, so the returns are as attractive and sustainable as possible. These can be found in companies using robust business models. The selection process, which spans different regions and sectors, includes a detailed, bottom-up analysis of the companies. As well as the quality of dividends, emphasis is placed on criteria such as balance sheet strength, structural profitability, substance and growth potential.

Strong companies for good performance 
Companies that meet these criteria include – on the defensive front – Tiffany and Occidental, and – on the INML front – Sixt, Sika and Washtec.
Tiffany is a world-famous American jeweller established over 180 years ago. Time and again over the years, the company’s innovative ideas have been a talking point and it has successfully overcome challenges and steadily evolved. Since Alessandro Bogliolo was appointed CEO in October 2017, the sales figures have soared. The first quarter of 2018 saw net sales leap 15%, due not least to the company’s success in China and Japan. Overall, quarterly profits rose 53% year-on-year, thanks also to the positive effects of President Trump’s tax reform.
One international niche market leader is Sixt. For years, the mobility firm’s strong growth has been in the headlines time and again. In 2017, group net profit was EUR 204 million, which corresponds to growth of 31% over the previous year. Another international niche market leader is the company Washtec, which provides integrated and service solutions in the carwash industry. The company’s turnover grew by 14% in 2017.
Another good example of an INML is Sika, which is headquartered in Switzerland but operates worldwide as a specialist in the manufacture of various chemical products for industrial bonding, sealing and reinforcing. In 2017, the company grew by 9% and consolidated profit grew by more than 14%. Sika’s main priority is growth through R&D to achieve an annual growth of 6% to 8% between now and 2020.

Attractive outcomes 
This strategy has enabled the fund managers of the MainFirst Global Dividend Stars, Thomas Meier and Christos Sitounsis, to achieve a total performance of 21.8% since its inception almost three years ago. This represents an outperformance of 7.5% versus the MSCI World High Dividend Yield Net Return (as at: 05/31/2018, ISIN LU1238901596). The twice-yearly dividend distributions have been 3.5% on average since its inception.

  MainFirst awarded Best Equity Research for German and Swiss equities

Frankfurt am Main, 6 June 2018 – MainFirst Bank AG has won Best Research for German and Swiss equities in the Extel Survey 2018, Europe's foremost evaluation of the best brokers in research and trading. MainFirst thus maintained its top ranking for Switzerland, and climbed from second to first place for research in Germany.

Every year, a top quality body of sector specialists at Extel Survey evaluates areas including the services of research providers, using the results of a broad-based investor survey. Some 7,000 institutional investors participate in the survey annually. “The fact that we have been named best research provider for equities in Germany and Switzerland serves to underscore our strategy. The experience of our research team, the independence of our around 40 analysts and their excellent contact network to companies enable us to provide high quality research that offers real added value for investors. We focus primarily on German, Swiss, French and Italian equities and several European sectors,” said Lyonel Françoy, Head of European Research at MainFirst. “We plan to expand our coverage of French and Italian equities in addition to our broad scope of German and Swiss securities.”

“The results of this year's survey underpin our success as one of the leading equity research and trading providers. We have recently significantly increased our market share in the area of equities,” said Ebrahim Attarzadeh, Head of Equities and member of the Board of Management at MainFirst Bank AG. “The award for best research in German and Swiss equities is particularly representative in the new world of MiFID 2, where customers are only willing to pay for differentiated, high quality and independent equity research. The award is more than just an acknowledgement, it is also an incentive. Our objective is, and will remain, to offer our clients top class research and efficient execution,” said Attarzadeh.

  Economic cycles or structural trends - Adrian Daniel explains their significance in Boersen-Zeitung

Many investors see economic cycles as important indicators for the equity ratio in their portfolio. However, with this approach investors risk being constantly late and missing the trend. Usually, economic growth has long been priced in, explains Adrian Daniel. Other factors are more indicative…

Find out more in the article (German only)

*MainFirst Absolute Return Multi Asset C, as at: 30.04.2018




The MainFirst Absolute Return Multi Asset, managed by Adrian Daniel, is committed to a long-term investment strategy with the aim of achieving a return of at least 5 percent per annum. He has exceeded this target since the fund's inception 5 years ago (29.04.2013) (as at 30.04.2018, share class C, ISIN LU0864714935). Watch the video to find out why Adrian counts on structural trends.

  4 MainFirst funds receive Lipper Fund Awards

MainFirst was presented with multiple honours at this year’s Lipper Fund Awards.

For more than three decades the Lipper Fund Awards have been awared across more than 20 countries to investment companies and funds that have excelled at delivering consistently strong risk-adjusted performance relative to their peer group.

Honored multiple times, the MainFirst – Emerging Markets Corporate Bond Fund Balanced (ISIN: LU0816909955) managed by our AAA-rated (Citywire) fund managers Cornel Bruhin, Dorothea Fröhlich and Thomas Rutz, took home awards in the Bond Emerging Markets Global Corporates 5-year category in seven different regions (Europe, Germany, France, the Netherlands, Scandinavia, Switzerland and the UK), as well as the award in the 3-year category in Scandinavia. The MainFirst – Emerging Markets Credit Opportunities Fund (LU1061983901), managed by the same team, received the award for the Netherlands in the Bond Emerging Markets Global HC 3-year category. 

Managed by Olgerd Eichler, Evy Bellet and Alexander Dominicus the MainFirst – Germany Fund (LU0390221256) received – in addition to such other accolades as the Euro Fund Award and the Deutscher Fondspreis,  the Lipper Fund Award for the third year in a row in the Equity German Sm & Mid Cap 5-year category in Germany. 

The MainFirst – Absolute Return Multi Asset (LU0864714000) managed by Adrian Daniel, Frank Schwarz, Patrick Vogel and Jan-Christoph Herbst won in the Absolute Return EUR High 3-year category in Switzerland. Adrian Daniel and Patrick Vogel also received Citywire’s Best Fund Manager 2017 Italy award (Mixed Assets - Absolute Return). 

Recipients of a Lipper Fund Award, presented by Thomson Reuters, are investment funds which are evaluated each year on the basis of their historical performances of the past 36 months or more. The funds showing the best risk-adjusted performances in their category over 3, 5 and 10 years are honored with a Lipper Fund Award. 

  Winners and losers: These are the world’s biggest companies in 2025

Frankfurt am Main, 12 March 2018 – By 2025, things are set to change in the list of the world’s biggest companies. A current forecast by MainFirst Asset Management shows that while Apple, Alphabet and Microsoft currently have the highest market capitalisation, Alibaba, Tencent and Amazon look like they will be leading the rankings by 2025. “In the years ahead, they will benefit from the future themes of e-commerce, artificial intelligence, digital advertising and driverless cars," explains Frank Schwarz, who led the analysis. Through the MainFirst – Global Equities Fund, which he manages, Schwarz has been successfully investing for five years in listed companies that benefit from these trends. In 2017, the fund recorded growth of 39 percent, and growth of 125 percent since inception.[1] “The projected shifts in the period to 2020 are already priced into share prices, so we are looking ahead to identify the best investment opportunities,” says the fund manager, whose team monitors a universe of around 700 global companies.

German brain-drain 
What is striking is that the regional shift towards Asia is set to increase in the period to 2025. “Among the 20 most important companies, most will have their headquarters in China, South Korea or Taiwan. Only the West Coast of the US, centred around Silicon Valley, will be able to compete. In contrast, Europe will be totally disconnected – and any kind of comeback does not appear realistic,” notes Schwarz. While in 2017, Nestlé and AB Inbev were two companies in the top 20 with their centres in Europe, the experts at MainFirst expect that there will not be a single European company in the list from as early as 2020. “Fifty years ago, things looked quite different as companies in the automotive, oil and steel industries topped the rankings. But now technology firms are beating all the others," explains Schwarz. In his opinion, the reason for this is: “Here we have global brand manufacturers and producers of luxury goods. The USA, for instance, has benefited in recent decades from immigration policy together with upward mobility opportunities afforded by the education system and a strong venture capital scene. Many children of immigrants have been exceptionally successful as founders of businesses – one example being Sergey Brin, one of the founders of Google.“ In Germany, in contrast, political conditions and an underdeveloped digital network hampered technological advancements, adds Schwarz in a critical note. “As a result, the best German minds have voted with their feet and have now conquered the second and third management levels of companies such as Amazon and Microsoft.“


Download the press release

[1] MainFirst - Global Equities Fund (C), date: 03/08/2018, ISIN: LU0864710602.





Congratulations to our MainFirst Emerging Markets team!

MainFirst's Emerging Markets team, consisting of Cornel Bruhin, Dorothea Fröhlich and Thomas Rutz, has a long track record of managing funds and mandates across different asset classes, including fixed income, equities and currencies. The team currently manages the MainFirst Emerging Markets Corporate Bond Fund Balanced as well as the MainFirst Emerging Markets Credit Opportunities Fund - and this very successfully. Since inception, both funds have achieved a performance of 35.8% and 23.6% respectively. In February 2018, Citywire rated all three managers with AAA, the highest rating. Furthermore, both funds have received a 5-star rating from Morningstar. In addition, the MainFirst Emerging Markets Corporate Bond Fund Balanced has been awarded with the €uro-FundAward.

Click here to read more

  Invest in the global companies of the future

The MainFirst Global Equities Fund invests in global companies that lead structural trends and are high in growth. This approach has generated a performance of 132 percent since its inception almost 5 years ago and outperformed the MSCI World in Euro by 51 percent.[1]

The approach of the Global Equity Team around Frank Schwarz is to look for global companies that have the highest potential for growth over the long-term, i.e. seven or more years. Their focus are not short-term sector rotations and leave to the side smaller and short-lived fluctuations in the stock markets. Instead, they research which structural trends are likely to shape the future and, thus, which companies are likely to be the frontrunners promoting and developing these trends. Three such important trends are e-commerce, digital advertising and artificial intelligence (AI).

The global growth rate of e-commerce for 2018 is estimated to be 21 percent. The two biggest companies are Amazon in the US and Alibaba in China. Amazon’s penetration in the US is currently 42% of online sales and 4% of retail sales. This makes it the number one platform worldwide (except in China). Both firms are constantly developing their product range and use data to react to new developments and trends in order to consolidate their position as industry leaders.

Amazon’s overall net revenue in 2017 was almost 178 bn USD, up from almost 136 bn USD in 2016. While Amazon has a range of products such as advertising, Amazon Web Services, and the Amazon Echo, in 2017, the majority of its net revenues were generated through online retail product sales.[2] It is estimated that its projected valuation for 2019 will be 7 times the Gross Operating Profit and 2.5 times of sales revenue. 
Alibaba already had a penetration of 80% of the Chinese e-commerce in 2014 and 10% of all retail.[3] In 2017 its gross merchandising value grew by 22% to 547 bn USD in China. Its high growth rate is expected to continue over the next years as it continues to expand its retail, cloud and financial business. 

In 2016, digital advertising revenue surpassed TV ad revenue for the first time. In the first six months of 2017 alone digital advertising grew by 23 percent YoY to 40 bn USD. Social media advertising grew by 37 percent to 9.5 bn USD. The social network giant Facebook, one of the two biggest digital advertising providers worldwide, generated 40.7 bn USD of revenue in 2017 compared to 27.6 bn USD in 2016.[4] Facebook now has a total of 2.1 bn users, WhatsApp 1.5 bn, Messenger 1.3 bn and Instagram 0.8 bn – the latter is growing at the fastest rate. 
The social network company Tencent in China, well known for its messaging service WeChat, also has a fast growing online advertising business. In 2017, it reported a 61 percent rise in third-quarter sales, online advertising revenue increased by 48% and this growth rate is likely to continue as it gets more of the market share.[5]

Another trend that is increasingly establishing itself as a long-term fundamental is AI. While the worldwide AI chips revenue was 3.2 bn USD in 2016, it is expected to rise to almost 90 bn USD by 2025.[6]
Nvidia, known as a manufacturer of graphics cards originally designed for gaming only, has diversified into AI-optimized computer chips which are now are now also available for data centers, a fast growing part of the business. The revenue of data centers accounted for roughly 20.8% in the last quarter of 2017 (compared to 13.6% one year before) meaning the business grew by 104% YoY based on the last quarter of 2017. It is believed that these high growth rates will continue. 
Keyence is a key player in artificial intelligence and robotics producing advanced automation sensors as well as bar-code readers and digital microscopes. It is benefiting hugely from industrial-automation boom as well as from the Internet of Things’ need for sensors and connectivity. It is also a producer of 3-D vision systems, a sector that is growing at a rate of 30% a year.[7] Its revenues rose by almost 22% over 2017 and net income grew by 30%.[8]

Structural trends that grow at these or comparable rates are the reasons for the choice of this approach to achieve attractive returns for investors, which has resulted in an alpha of 51% against the MSCI World Index since inception of the MainFirst Global Equities Fund C on 1 March 2013.


[1] *MainFirst Global Equities Fund C, ISIN: LU0864710602, as at 31.01.2018. 

[2] https://www.statista.com/statistics/266282/annual-net-revenue-of-amazoncom/ 

[3] https://www.forbes.com/sites/quora/2014/05/08/how-did-alibaba-capture-80-of-chinese-e-commerce/#60fe02759edd  

[4] https://www.statista.com/statistics/277229/facebooks-annual-revenue-and-net-income/ 

[5] http://adage.com/article/digital/tencent-quarterly-sales-jump-61-boosted-ads-a-hit-mobile-game/311315/

[6] https://www.tractica.com/newsroom/press-releases/artificial-intelligence-software-market-to-reach-89-8-billion-in-annual-worldwide-revenue-by-2025/ 

[7] https://www.barrons.com/articles/keyence-leading-japans-new-wave-of-tech-giants-1515815938 

[8] Source: Bloomberg



  No need to worry about the current turbulence on the stock markets

Thomas Meier, Head of Equity Fund Management, in an interview with ntv explains the stock market developments and why he remains confident:


For a more detailed assessment of the reasons for the fluctuations, see:



In the video Olgerd Eichler explains the strategy behind the MainFirst Germany Fund. The latter achieved a performance of 188 percent over five years. 

Watch the video 

  Video on how to generate market-independent returns

Benefiting from positive and negative capital markets using a conservative investment profile? In the video, Björn Esser, one of the fund managers of the MainFirst Diversified Alpha, talks about how the team uses 4 uncorrelated strategies to maximize returns for investors.

  How to successfully invest in Emerging Markets using a relative value approach

In the Citywire video, Thomas Rutz explains the investment philosophy and investment process the team uses to, for example, achieve a performance of YTD 17% (MainFirst EM Corporate Bond Fund Balanced (C), as at 30.11.2017). Of central importance are a precise analysis and in-depth knowledge of the countries and sectors in order to invest successfully independently of the benchmark.

Watch the video

  Outlook for 2018: future-oriented equities with the potential to outperform

Frankfurt am Main, 11 December 2017 Investors will not have to wait a long time to benefit from future-oriented themes such as digitalisation, artificial intelligence, automation and self-driving vehicles. Companies with structurally expanding business models should already outperform the overall market in 2018. This is the opinion of Frank Schwarz, fund manager of the MainFirst Global Equities Fund. “Future-oriented themes such as these should drive performance in the coming year in an environment that will remain challenging for equities,” explains fund manager Mr Schwarz, whose top holdings currently include Facebook, NVIDIA and Tencent.

The power of platforms is growing

The stock market expert expects particularly strong growth from online platforms better able to monetise their business models in 2018. “Platforms, in particular those belonging to the established top dogs, are seeing their power growing. The reason for this is the increasing importance of digital advertising – today a quarter of all global digital advertising revenue goes to Google and a further ten percent to Facebook,” says Mr Schwarz. Based on forecasts from market research company eMarketer, global advertising revenue will rise by almost eight percent in the coming year to around USD 629 billion. By the end of 2017, global revenues for digital advertising will have exceeded those for TV advertising for the first time. Mr Schwarz sees potential to benefit from rising advertising budgets at Facebook in particular: “User numbers for Facebook, including the in-house Messenger app, the independent WhatsApp messaging service and the photo and video platform Instagram, have been on a constant upwards trend for years. We believe that the advertising potential of Instagram in particular has been massively underestimated by the market.” The expert sees even stronger growth potential for Asian market leader Tencent, whose WeChat messaging service has a monopoly in the Asian market. The major players in the e-commerce sector are likely to also continue to take market share from traditional retailers, with market leaders Amazon in the West and Alibaba in China the main beneficiaries.

Automation and self-driving vehicles require increasing processing power

Mr Schwarz believes that NVIDIA, market leader in graphic processors and chip sets, is also a very promising stock for 2018: “NVIDIA is a beneficiary of growth in the computer games sector, where trends like virtual reality mean there is a requirement for increasingly powerful graphics performance, but there are other future-oriented trends working in their favour as well,” says Mr Schwarz. As an example, NVIDIA manufactures chips for data centres used for AI applications and the self-driving vehicles sector. Mr Schwarz believes that the company is so well-positioned in these areas versus the competition that it is possible that by 2025 NVIDIA could be the fourth-largest company worldwide by market capitalisation. Mr Schwarz also considers Japanese automation group Keyence a very promising stock, which will benefit from the trend for self-driving vehicles and greater utilisation of robots in production.

“In the current year we have outperformed the MSCI World Index in euros by a good 33 percent[1] with these and similar future-oriented shares from sectors such as semiconductor automation,” reports Mr Schwarz, adding: “We are convinced that the shares in our portfolio have the potential to achieve revenue and earnings growth of around 20 percent in 2018.”


Download the press release

[1] As at: 30 November 2017, MainFirst Global Equities Fund (C), ISIN: LU0864710602.

  SJB FondsEcho: MainFirst Absolute Return Multi Asset

"If you want to bypass the volatility of the financial markets while at the same time participating in attractive returns, you are well catered for with this flexible multi-asset fund!"

Read the complete column by Gerd Bennewirtz, author of the SJB FondsEcho here. (German only)

  The MainFirst Multi Asset Team informs – Annual review of 2017

The Fund Managers of the MainFirst Absolute Return Multi Asset and the MainFirst Global Equities Fund are usually looking several years into the future to create valuable ideas for their clients, but today they take a different perspective. They are looking back at the Year 2017.

  No getting past the emerging markets

Cornel Bruhin, Portfolio Manager at MainFirst, explains why emerging markets are currently strong and stable. As a result they offer attractive investment opportunities.

Read the article, published in Börsenzeitung (German only), here.

  Excellent rated fund management - Citywire Italy Award “Best Fund Manager 2017“

MainFirst is pleased to announce the reception of the Citywire Italy Award “Best Fund Manager 2017“ in the category of “Mixed Assets – Absolute Return EUR“.

Adrian Daniel and Patrick Vogel manage together with their team the MainFirst Absolute Return Multi Asset (ISIN LU0864714935).

  Automation is on the rise and provides interesting investment opportunities

Automation and in particular robots are reshaping the factory floor, production time and costs. Whether it is the manufacturing of iPhones, or humans with collaborative robots, or the time in which online retailers can pack and deliver their wares. This brings huge chances for investors, as revenues of such companies as Teradyne, Keyence and Ocado soar. This year alone, Teradyne grew by 70 per cent over one year, Keyence had revenues of 379,282 million JPN (respectively 3.4 billion USD, rate as at 15.11.2017) at year end 2016. Ocado’s revenues grew by almost 15 percent from 2015 to 2016. The MainFirst Global Equities Fund invests in high-growth companies such as these to generate attractive returns, resulting in a YTD performance of 41.5 per cent*.


As forward-thinking investors, the key question is whether these are trends that are likely to remain and to continue to bring attractive returns. According to Frank Schwarz, the lead fund manager of the MainFirst Global Equities Fund, which has been nominated for the Fund Manager of the Year Awards by Investment Europe, automation through robots and cobots is one of a number of structural trends that is only just beginning. The area of automation constitutes an underlying market, facilitating the production and delivery of consumer goods that is likely to exhibit further structural growth over the coming years.



Trends in automation

Keyence is a Japanese leader in automation. It manufactures the sensors, controls, bar code readers and many other devices used in manufacturing automation. Meaning that quality control now takes place in an automated fashion not only at the end but throughout the production process, picking out faulty parts much earlier, faster and more efficiently and thereby lowering manufacturing costs. Solutions include, for example, machine vision systems such as high speed cameras, smart camera sensors as well as many added services.

Another important player in the automation market is Teradyne, which currently holds approx. 60 per cent of the market share for collaborative robots or cobots. They form a central part of their product portfolio, as the current annual revenue increase lies at 50 per cent. Teradyne projects that his growth rate will continue over the next five years. Cobots work alongside humans and are increasingly spreading across production lines. While not as fast as robots, they are cheaper, mobile, can perform a variety of tasks and can be easily programmed through learning by imitation. In addition, Teradyne is expanding its distribution network as well as his third party hard- and software to be able to serve a wider variety of industry specific tasks.

Automation in use

A well-known online retailer using automation is Amazon. After they acquired Kiva in 2012, they developed a system that uses mobile robots to bring the wares to human packers instead of them having to go in search for the individual items in an order themselves. Since the roll out in 2014 in the United States, hundreds of these robots move around autonomously in a highly orchestrated manner, allowing Amazon to send a greater selection of wares to more customers more quickly.

Another company that is at the cutting edge of using automation in its processes is Ocado, the world’s largest online-only grocery retailer. The company currently ships more than 200,000 orders a week to its customers around the UK. In order to make its processes more efficient and thus be able to accelerate its growth, Ocado developed its own ground-breaking warehouse automation, increasing its efficiency, scalability as well as modularity. In their newest warehouse a fleet of 1,000 robots are collaborating together to collect the groceries stored beneath them. Ocado thereby succeeded in reducing the time it takes to pack an order of 50 items from two hours to five minutes. The biggest challenges were the coordination and controlling of the large amount of traffic and communication with and between the AI-based systems to make them all work together seamlessly, efficiently and without error.

Opportunities for investors

Given these developments in automation and the rising need for automation, Frank Schwarz and his team see great potential in this trend and hold that it will be long-lasting. It is why this investment theme is being continually monitored by the fund management team. It then chooses the companies with the highest potential and invests in them to generate attractive returns. Using this benchmark independent approach, the MainFirst Global Equities Fund has achieved returns of an average of 19 per cent annually since inception*.

*As at 31.10.2017, MainFirst Global Equities Fund (C), ISIN: LU0864710602.



  The right touch for German equities - the MainFirst Germany Fund

According to FondsXpress, Olgerd Eichler delivers top performance with the MainFirst Germany Fund. Read an analysis of the successful fund strategy in the article.

Read the article (German only)

  Attractive returns through Multi Asset - Five questions to Adrian Daniel

Adrian Daniel, Fund Manager of the MainFirst Absolute Return Multi Asset, explains how to achieve attractive returns despite low interest rates with manageable risk.

  The Power of Platforms

The concept of platforms seems innocuous. Essentially, they provide the space and structure that allows things to happen, such as expressing ideas or opinions, connecting with friends, finding online services, or running programs and apps. Yet, as for example Facebook and Google have shown, harnessed into a business model, this facilitation of exchanges, both between consumers as well as between consumers and producers, can turn into highly valuable companies and bring about profound changes in the business world. How is this possible? 

The concept of platforms is not new. For example, bazaars are an early form of platforms.  Yet combined with the possibilities of information technology and the internet, the scalability is considerably faster, vaster and cheaper. Include data mining that helps understand ever better what consumers and producers need and growth can be further enhanced.

Instead of conventional product companies, platform owners create networks that make the availability of a large and diverse set of offerings the main asset, whether this is contact with friends, tracking events or having news posted to one’s wall, to use Facebook as an example. Since such offerings are usually either free or low-cost, benefits are easy to communicate and the threshold for trying is low.

Of course, to make these new business models as successful as they are, the platform owners are continuously working to optimise the infrastructure and to add further offerings and services, which are themselves constantly being developed ever further to make sure that the platform remains the most competitive by providing the largest network with the most capabilities and interconnections as well as the best user experience. In addition, the most successful platform owners do not limit themselves to anything and constantly aim to innovate, to be ahead of the competition and invent the next big thing by not setting themselves any limits.

This is the way to ensure consumers like and use the platform. For, the greater the number of users (both consumers and producers), the greater the attractiveness of the platform as consumers only need to go to one place to get everything, meet everyone, and producers have a higher volume on consumers. The virtuous cycle this creates means that more customers attract more producers which again attract more customers. In addition, tracking customers allows platform owners to get to know their likes and needs before they know them themselves (as Steve Jobs famously said) and in some instances such as Amazon also their concrete buying behaviour. Thus, new features make the platform ever more attractive.

Consequently, one platform usually comes to dominate the industry, which makes life hard for competitors. MySpace and Facebook competed for a while until Facebook won the day. However, China's platform giants (aided by the government) show that different markets can allow other stars to rise. 

Moreover, the owner of the platform can set rules conducive to its business model in a wholly different way. Individual features and content can be made available freely, only for paying customers, in customised form or suppressed. Even when content is user-generated and freely available rules will often restrict how easy (or difficult) it is to export it. Content may also appear in a certain order, for example putting paid content such as ads either at the top of the page or in the making it look like native content within Facebook’s news stream.

Benefits for investors can be reaped especially by recognising new trends early and making long-term investments to profit from the immense growth of many of these companies. The fund management team around Frank Schwarz has shown its aptitude for this in the MainFirst Global Equities Fund. The team studies structural trends in detail and has a proven track record of investing early into platforms that came to dominate the landscape. For example, they invested in Amazon already in 2013. Since then its value has risen fivefold.


Further articles on the topic (German only):

Die Sieben Lehren des Silicon Valley

Es ist noch nicht zu spät

Angreifer aus Fernost



  Eichler’s recipe for outperformance

Through investing in selected stocks on the basis of rigorous analysis, the MainFirst Top European Ideas Fund, headed by Olgerd Eichler, achieved a clear outperformance over the last 10 years.

  For 10 years on average 5 percent better than the index - Olgerd Eichler talks about the MainFirst Top European Ideas Fund during to Börsenwoche

Eichler expects a continued friendly economic development with a lot of stock market potential and attractive opportunities for investors.

  Investments in restructurings can be significant performance contributors in a portfolio

Equity investments in company restructurings are often shunned by investors and fund managers. Indeed, who would be willing to invest in a company when it is not yet clear that a realignment will be successful, or to defend their decision-making to investors following the unsuccessful restructuring of a company in the portfolio? However, this is precisely why, in the case of a successful restructuring, commitments can feature significant prospects of high profits – in many cases even considerably more than 100 percent.

Reasons for restructuring 
There are many reasons as to why restructuring measures can be a necessary cause of action. Frequently, it’s down to the management or to a cost base that is too high. In many cases, however, it is also a result of changes in the market environment. For example, overinvestment or weaknesses in demand, whether structural or cyclical, can lead to overcapacities. Likewise, a change in the competitive environment can encourage competing companies with a superior cost structure to lower their prices, thereby dethroning more established companies. This often results in a loss of competitiveness and an accompanying decline in margins, or even negative results. In such cases, a restructuring can bring the companies back on an extremely successful course – if they have the desired effect.

Important factors for success 
Whether a restructuring is successful or not depends on a range of different factors. First of all, it is crucial that the company is not experiencing issues with the product spectrum. If the company has no products with which to compete with rivals, it may be able to improve its cost position in the short term, but will lose market shares in the future or will be forced to lower prices to keep up with the competition. The consequence is that any positive effects from the restructuring are devoured by the negative effects of falling prices and volumes. A further important success factor for restructuring is the flexibility of cost structures. For example, a capital-intensive company with large production facilities will pose a particular challenge in a restructuring, while the relocation of production to new locations and the adjustment of the workforce are often cost-intensive. The balance sheet is yet another aspect in the analysis of restructuring investments. A good balance sheet is needed in order to offset potential exceptional write-downs with equity capital. Severance payments or investments are commonly required if restructuring measures are to be implemented quickly and fully. Often, a new management team with special expertise in adjustment processes will be of great assistance.

An example of a successful realignment 
One real-world example of a successful restructuring is the printing press manufacturer Koenig & Bauer. Due to the declining market for print media, volumes have fallen for machines in the field of ​​newspaper printing. The company had too much capacity and was not flexible enough to absorb the low volumes. Consequently, the profitability took a hit and an adjustment of the cost structure was unavoidable. The good success prospects for the company were underpinned by a very healthy balance sheet structure alongside an innovative product portfolio in the field of packaging and security printing. Furthermore, the management was resolved to focus consistently on the adjustment processes, as painful and challenging as they were. A board member with experience in restructuring was also appointed. Following high exceptional depreciations, the company has successfully increased profitability year after year. Today, the company is out of the restructuring phase and is once again concentrating on organic sales growth. For the intrepid investors, an early commitment paid off, with stock that has more than quintupled in value over the past three years.

How can investors benefit 
A great deal of research, expertise and analysis is needed in order to identify companies whose restructuring measures have a high chance of success. Such stock picking of potentially undervalued companies demands precise knowledge not only of the general market situation but also of the sector and product landscape, among other areas. Moreover, in order for such an investment to be meaningful and promising, the balance sheets, restructuring measures, quality of management and growth potential must all be sufficiently examined and tested.

Two funds that have always enjoyed great successes in this regard are the MainFirst Germany Fund (ISIN: LU0390221256, unit class A) and the MainFirst Top European Ideas Fund (ISIN: LU0308864023, unit class A). These are managed by Olgerd Eichler, Alexander Dominicus and Evy Bellet, three fund managers and experts with a total of over 60 years of experience in a range of market segments, which has enabled them to invest consistently in underrated companies that have later gone on to yield profits of over 100 percent. 

  10 years of steady performance – what is the formula for success?

Since the 1990s, Europe has found itself in a low-interest phase with interest rates decreasing even further during the global financial and economic crisis of 2008. Only now are they beginning to rise again with a very moderate increase. However, it is unlikely that they will reach their former heights – at least in the near future. Investors nevertheless want to generate positive returns. How can this be achieved? 

One answer is provided by Olgerd Eichler, fund manager at MainFirst. Eichler manages, among others, the MainFirst Top European Ideas Fund, which is currently celebrating its 10th anniversary. During this time, it has achieved consistent performance without significant setbacks. At present, Eichler expects the economic recovery that began in 2012 with the defensive stocks to continue in 2017, above all with cyclicals. This catch-up effect was already apparent in the second half of 2016, when sectors such as the automotive industry demonstrated good performance. Nonetheless, the skillful selection of high-growth companies is essential, as not all companies develop equally.

That is why Eichler and his team conduct targeted stock picking. The aim is to identify companies with high growth potential – ‘young SAPs’, so to speak – and to invest in these over the long term. This holds regardless of sector, country and market capitalisation, purely on the basis of the expected performance of the respective company. The basic requirements for the successful implementation of this approach are extensive experience, disciplined and detailed analysis, rigorous selection procedures, and excellent knowledge of the markets and sectors.

Indeed, before the team includes a company in the portfolio, it must undergo a root and branch review – or rather, a review of balance sheets and profitability. Other important criteria are the quality of management, planned further developments, strategic objectives, growth projections and the general market situation. This information is drawn not only from reports, but also validated in direct discussions with the management.

A stock is included in the portfolio only when the fund management team is convinced that there is a high performance potential, in some cases even more than 100 percent. These ‘high-flyers’ are acquired for the long term to enable the full potential of their performance to be properly tapped.

In the ten years since its launch, this strategy of the MainFirst Top European Ideas Fund has led it to outperform the benchmark by a total of 70 percent, despite numerous challenges such as the aforementioned global financial and economic crisis in 2008 or the EU debt crisis, and has achieved an accumulated performance of 101 percent (as of: 31.05.2017, share class C, ISIN: LU0308864965, performance of the benchmark STOXX EUROPE 600: 31%).

  The 5% strategy – Fund overview of MainFirst Absolute Return Multi Asset

With the MainFirst Absolute Return Multi Asset, Fund manager Adrian Daniel has considerable scope to invest in equities, bonds, currencies and commodities worldwide. To date, his active use of this range has seen great success.

  French elections influence investment opportunities for government bonds

Frankfurt am Main, 06 March 2017 The current forecasts for the presidential elections in France have significantly increased the risk premiums of French government bonds over the past months. This creates attractive opportunities for investors, as the bond markets have already taken the risks of the French presidential election into account and currently offer good chances for high yields. "Investors are worried about an election victory of the eurosceptic Le Pen. However, with regard to current election forecasts, we consider this view to be one-sided," explains Adrian Daniel, fund manager of the MainFirst Absolute Return Multi Asset. Especially the poll results of the independent candidate Emmanuel Macron (En Marche!) offer attractive opportunities for the current high risk spreads with French government bonds.

Spreads of French government bonds widen

While the yield on Obligations Assimilables du Trésor (OATs) was still at 0.1 percent in the third quarter of 2016, it is now at 0.9 percent despite the fact that the European Central Bank is still purchasing French bonds worth 14.2 billion euros every month. Compared to German Bunds, the spread has expanded from 25 to 70 basis points over the past six months. By way of comparison, the interest rate difference has averaged 39 basis points over the past 25 years.

According to Daniel, the election is a binary event: with Macron and Francois Fillon of the Republicans there are two presidential candidates who would promote structural reforms, especially for a more flexible labour market. Le Pen's uncertainty about the Eurozone thus countered by the chances of reforms, comparable to the German "Agenda 2010". As the production gains are gradually weakening in Germany, a change in politics could possibly turn France into the new European economic leader.

Le Pen's chances of winning a run off are uncertain

"Le Pen currently leads the poll results for the first round, but the polls suggests that this lead is not expected to reach an absolute majority in the first run." On this basis, the MainFirst fund manager predicts a run off between Le Pen and Macron. The polls confirm that for the second round Macron is 18 points ahead of the right-wing populist. And even in the rather unlikely event of an election victory by Le Pen, it remains to be seen how far her campaign promises to weaken the EU could be put into practice. "A majority in the National Assembly could block these plans," Daniel says.

Read the full article of our fund manager Adrian Daniel 

Your press contact

Edelman.ergo GmbH 
Corinna Zawodniak 
Senior Editor 
Tel.: +49 221 912 887 52 
E-Mail: corinna.zawodniak@edelmanergo.com




(Mannheim 01/25/2017) MainFirst is pleased to announce the renewed reception of the German Fund Award (Deutscher Fondspreis) in the category of “German Equity” for the MainFirst Germany Fund A (ISIN LU0390221256). 

The concept behind the success of the top fund manager Olgerd Eichler is the investment in often undervalued German medium-sized companies. The selection of individual titles is based on strict selection criteria such as solid balance sheets, above-average profit growth and excellent management. The goal of the fund managers Olgerd Eichler, Evy Bellet and Alexander Dominicus is to achieve an attractive value development for investors in the long term.

The German Fund Award is given to companies who distinguish themselves through their particularly outstanding investment results. The selection of the best funds in each category is carried out by the renowned Institute for Asset Management (IVA), which evaluates active management performance on the basis of a specially developed portfolio and risk analysis.

If you have any questions regarding the product, please contact: MainFirst Asset Management, phone: +49 (69) 78808 143 or email: fonds(at)mainfirst.com  or visit the fund page of the MainFirst Germany Fund.



  Investors in Germany heading for a serious returns problem

Frankfurt am Main, 17 November 2017 For German investors, the chances of achieving a sustained growth in value will deteriorate dramatically if their allocation of assets remains unchanged. This is the conclusion of independent financial adviser MainFirst in a recent study. Accordingly, and considering only the current market environment, the average German will in future achieve a return of only 1.5 percent if they do not change their allocation of assets. Adjusted for inflation, the performance of their portfolio could even be in the red, at -0.3 percent.

Portfolios of German investors dangerously orientated towards interest income

“The development is alarming,” says Thomas Meier, investment expert at MainFirst. For Germans, asset value allocation may have provided attractive returns in recent years, but only thanks to an unprecedented boom in the interest rate markets. “According to our calculations, the current allocation of assets of German households has enabled an average increase in value of 2.8 percent in the past decade – over the past 20 years, value growth was even as much as 4.1 percent per year. However, in the light of the persistently low interest rate phase, those days are over,” emphasises Meier. The average German portfolio has been strongly oriented towards insurances, default guarantees and classic deposits, with a weighting of around 78 percent. The outcome: With an unchanged investment strategy, Germans will reach their savings goals only later – or they will have to significantly increase their savings.

Shares – a key driver of future return

Meier is convinced: “German investors can only counteract this development through a change in asset allocation. Without a significant increase in the allocation to equities, which still has the most attractive performance potential in the long run, it will not be possible to achieve their savings targets. In the context of pension provisions, this increase in value is too low to be able to maintain their standard of living in old age – especially as those provisions are being eaten up by inflation.”

Your press contact

Edelman. ergo
Corinna Zawodniak
Senior Editor
Tel: +49 221 912 887 52
Email: corinna.zawodniak@edelmanergo.com


About MainFirst Asset Management

MAINFIRST ASSET MANAGEMENT is an independent European multi-boutique with an emphasis on active management. The firm manages mutual funds and individual special mandates. With its multi-boutique approach, it focuses on investment strategies in selected asset classes, namely equities, fixed income and multi-asset. Experienced portfolio management teams develop strategies with a high active share and individual investment processes. The firm thus combines the expertise and flexibility of focused investment teams with the strengths and clearly defined processes of a broad-based international platform. MainFirst Asset Management forms part of the MainFirst Group, with approximately 180 employees in the locations Frankfurt, London, Luxembourg, Milan, Munich, New York, Paris, and Zurich. 

For more information (including legal information), please visit www.mainfirst.com