Vontobel’s CIO on life after Rajiv Jain and M&A concerns

7/5/2016, Citywire Selector

Investors should steer clear of large M&A deals as history has shown they rarely result in a positive outcome for investors, according to Vontobel's chief investment officer Matthew Benkendorf.

Speaking to Citywire Selector, Citywire + rated Benkendorf, who runs several funds including the Vontobel Fund - Global Equity fund, said the proposed merger of healthcare company Bayer with agro-chemical company Monsanto had led him to sell his holding of around 1.5% in Bayer.

'The Bayer move was unfortunate, the stock was cheap to begin with, which is why we owned it.  We thought that they were headed in the right direction clearly with a fairly strong business and the market is significantly discounting that,’ he said.

‘These things are distracting. Not only do they destroy value when they happen, they are very distracting in the interim. The Bayer one is very unfortunate. It is getting bigger. It was difficult for us not to continue on it.’

Benkendorf said firms should focus on improving value rather than launching difficult takeover bids and trying to get bigger. He added the lack of information about the deal between Bayer and Monsanto had made it very difficult for shareholders of both companies to make decisions

'Dealt a strong hand'

Benkendorf was named as chief investment officer and took over the management of many of his funds from Rajiv Jain, who left Vontobel Asset Management to set up his own investment boutique. With Jain having officially left last month, Benkendorf insists he has not made significant changes to the fund's or investment processes.

‘It's been easy because Rajiv Jain left a great legacy behind him and shoes for me to step into. We have a great, well-embedded investment philosophy and process that carries out that investment philosophy that we put in place back in 2002.’

‘I have been dealt a very strong hand to begin with. My job is to continue, it would be very foolhardy for me to do things differently or try and put a different spin on it. It would be strange if I did so because I have been a part of this for so long.’

Linguistic advantage

One of the funds Benkendorf took on after Jain's exit was the Vontobel Fund Emerging Markets Equity fund. Its largest country holding is India at 23.9%, while Benkendorf holds 17.4% of the fund in technology and said India’s technology sector has a linguistic advantage over China’s.

‘India today as an opportunities set is so rich because of history. The English language has helped a lot. There are a lot of smart people in China with engineering background and those skills. There is also a strong cultural push towards education’

‘But the English language is a tremendous advantage. There could be a very large robust It services sector in China theoretically but the English language has enabled India to have a strong foothold globally with a very strong human resources base there.’

The Vontobel Fund - Global Equity fund returned 25.6% in US dollar terms in the three years to the end of June 2016. This compares to a 22% rise by its Citywire-assigned benchmark, the FTSE World TR USD, over the same timeframe.

By Dalvinder Kular
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