The first half of 2021 has seen the capital markets continuing to reward fundamentals above sentiment, a trend increasingly supported by the spectre of inflation noted in our recent update "Is Inflation Here to Stay?". This is good for SKAGEN and most of our funds are performing well above their respective benchmarks at the mid-year point.
While I consider a price-driven strategy to lie at the root of successful investing, I am perhaps less engaged than some by esoteric discussions of investment style. Indeed – and at the risk of being accused of heresy by my colleagues – I have to confess that I find the value versus growth discussion can occasionally be one of those intellectual exercises that is perhaps of more interest to the investment industry than to many investors. In SKAGEN we are an active manager. This means, after our clients, our people matter most. In choosing an active fund manager, it is vital to have a manager who is trustworthy, skilled and adaptable, who states clearly what they are trying to achieve, can explain and attribute what they are doing, and can demonstrate that their success is repeatable. This is what we have in the current generation of SKAGEN portfolio managers. They are men and women of character and principle. Along with all their colleagues they are highly committed to the funds that they run and the clients that they serve. They co-invest alongside our clients and their incentives are highly dependent upon the results that they achieve. And it remains my signal task to accord them the greatest possible opportunity and freedom to succeed.
Despite the evident capabilities of the current SKAGEN team, a period of good fund performance affords opportunity to consider strengthening the firm, assessing talent gaps, succession plans, and importantly bringing on the next generation. Fund management, like the local energy industry here in Stavanger, weighs heavily towards experience and average employee ages and tenure are on the high side. This is something that we in SKAGEN are looking to redress with student programmes and a focus on younger talent. It is exciting to observe that SKAGEN's sustainability team is entirely composed of younger colleagues and, to be certain, the desire to achieve ever more sustainable outcomes is very strongly felt amongst the next generation of investors.
This focus on diversity matters. The investment industry's own post-graduate body, the CFA Institute[i], states clearly the importance of inclusion and diversity:
"Inclusion & diversity (I&D) is critical to the future of the investment management industry. An inclusive environment ensures equitable access to resources and opportunities for all. An inclusive culture that leverages diverse views will be an important element in determining a firm's success."[ii]
In addition to age, gender is an important diversifier. SKAGEN is indeed fortunate to have a strong advocate and role model for female investment professionals in our Chief Investment Officer, Alexander Morris. Alexandra's leadership of female advancement has led to SKAGEN being amongst the founder signatories to the recently launched Women in Finance Charter[iii] here in Norway. This scheme, that originated in Great Britain in 2016, aims to engender a better gender balance in finance through explicit and measurable commitments. This is progress.
Next week, at the start of my summer vacation, I will make my pilgrimage to Southern Norway and my yearly practice of re-reading "Kilden" (or "Markus the Fisherman" in English) by the Norwegian author Gabriel Scott. This year I will also add the memoirs of Otto Norland[iv] on the recommendation of a friend and former colleague. A Norwegian, Norland followed a career in English banking rising to become a partner of Hambros Bank before their demise. Like Norland, I have managed to keep a foot in both countries, so I am looking forward to seeing my countrymen and women through another's eyes. And, in a break with tradition, I have added a French author, with Laurent Binet's "Civilizations". This ambitious work, complete with Vikings, offers a counter-factual history in which the Incas and the Aztecs invade medieval Europe to cast off the yoke of the inquisition and feudal rule. I suspect there are more than a few English people with similar hopes for the summer football campaign; although, even here, there are Vikings waiting.
Such summer rituals are important and mark the passage of time; however, for a second year, I will feel the absence of my English family. Seeing friends and family in-person is vital to the human spirit. This is equally true in the workplace and so, after nearly one and a half years of limited face-to-face contact with colleagues and clients alike, in SKAGEN we are beginning to open for more regular interaction. We are keen to return to the office while retaining some of the flexibility experienced during the periods of working from home. This is the new normal and we welcome it. We see also that in-person client meetings remain vital to the SKAGEN offer and are an important part of establishing the strong bonds of trust that exist between us. Therefore, after summer, we have plans for more – as well as more engaging and relevant - client events and activities. It is something we can all look forward to.
God sommer to you and yours.
[i] The mission of the CFA Institute is to lead the investment profession globally by promoting the highest standards of ethics, education, and professional excellence for the ultimate benefit of society.
[iv] The Magic of Merchant Banking – My years in the City of London by Otto R. Norland