Griffin tells more about the award-winning Griffin Eastern Europe Value Fund and the people behind the running of the fund.
Interview with Griffin Capital Management
- How do you define the approach of your fund?
The fund aims to achieve positive absolute returns on a quarterly basis by uncovering and exploiting valuation anomalies in Eastern European markets where the team has ten years' investment experience. Alpha is generated primarily through bottom-up stock picking using Griffin Research Database. In a hostile market environment the fund manager will attempt to protect capital by raising cash, switching into fixed income instruments and entering selective short positions.
- What are the key characteristics of your strategy
and how are you different from your 'peer group'?
The investment process can best be described as an opportunistic bottom-up stock picking approach with an absolute return bias. Investment candidates are analysed relative to their global peer group using the Griffin Research Database. Its multi-dimensional structure provides maximum flexibility in analysing company fundamentals. Industry-specific models allow a detailed comparison of valuation ratios, operating profitability, cash flow generation and other parameters. A top-down country macro check and stock liquidity are used in determining the size of a position in the portfolio.
The fund is managed actively by using strict selling discipline based on internal price targets which helps free up funds for new investment ideas. The fund will have a high cash level in a hostile market environment or when there are no compelling investment opportunities.
The team adds significant value through stock selection, which is based on a very detailed and disciplined fundamental analysis. Strict selling discipline ensures that profits are locked in and funds are available for new investment ideas. We do not track any indices and therefore can avoid "index dogs". The team has the best track record in Eastern European equities over three and five years.
How do you identify long and short stock opportunities?
And what strategies do you employ?
The entire investment process is based on the Griffin Research Database. This database has been programmed by the fund management team with the assistance of external IT consultants. It has a multi-dimensional structure and provides maximum flexibility in analysing company fundamentals. Industry-specific models allow a detailed comparison of valuation ratios, operating profitability, cash flow generation and other parameters. A DCF module enables the fund managers to run DCF models on every company to establish absolute price targets. The data input and maintenance is performed by the fund managers to avoid data graveyards. Broker research notes and company meetings are used to compare forecasts of external analysts and company managements with in-house forecasts and assumptions. In-house forecasts and company data are constantly updated and amended. The Griffin Research Database facilitates a disciplined and somewhat standardised fundamental research approach and ensures that up-to-date valuations on a large number of companies are always readily available.
- What have your country and sector weighting been like?
As at end May 2004:
Sectors: % Cash 35 Telecom 24 Fixed Income 21 Banks 10 Energy 4 Others 3 IT 2 Materials 1 Total: 100 Countries: % Cash 35 Russia 28 Fixed Income 21 Poland 12 Czech 3 Hungary 1 Total: 100
- What's your performance been like?
Since the fund became long-short from January 2002, the fund has achieved in EURO terms +77.7% (+145% USD). Year to date 2004 is +20.2% (end May 2004). The fund is consistently one of the top-ranking funds over various periods in the S&P Eastern European category.
How liquid is your portfolio?
At least half of the portfolio for Griffin Eastern European Value Fund can be liquidated in one day, the other half within one week.
- What risk controls and measures do you have in place?
The fund manager does not apply any formal risk control systems. Risks are controlled through a high degree of diversification and selling discipline. We define risk more in terms of losing money in absolute terms than relative to an index (tracking error).
When fund managers are convinced of one stock and have done extensive and detailed research (and only then), they are generally taking relatively sizable positions of up to 10% of the portfolio. Fund managers believe that really attractive opportunities do not come up too often and should be taken advantage of to generate outperformance. Those positions are monitored extremely closely.
- What's your background and how are the responsibilities
for running the fund divided between the team?
Both Jürgen Kirsch and Yuli Stein have been managing the fund since launch.
Jürgen Kirsch is manager of Griffin Eastern European Fund and Griffin Eastern European Value Fund. From 1993 until 1997 he was senior fund manager at Mercury Asset Management in London where he had responsibility for research and investments in Eastern Europe. He was manager of the Mercury Eastern European Fund, which under his management became the largest Eastern European fund with net assets of over DM 1 billion. During Jürgen's tenure the fund achieved a return of over 400%, outperforming peer products by approximately 100%. The fund received numerous Micropal and Lipper awards for best performance. Jürgen was voted Fund Manager of the Year by the German magazine Finanzen in 1996 and 2001.
Jürgen began his investment career with the British investment bank S.G.Warburg, London in Corporate Finance. He graduated in Business Administration and Economics at Friedrich-Alexander University in Nuremberg.
Yuli Stein is fund manager of Griffin Eastern European Fund and Griffin Eastern European Value Fund. From 1996 to 1997 he was a fund manager at Mercury Asset Management where he focused on research and investments in Eastern Europe. From 1990 to 1994 Yuli held a number of administrative positions at the United Nations Secretariat in New York.
Yuli graduated with an MBA from Harvard Business School.
What other funds does Griffin Capital Management run?
In Eastern Europe we also have a UCITS long-only fund: Griffin
Eastern European Fund. In Europe we have a UCITS absolute
return fund Griffin European Opportunities Fund.