Andy Nigg joined Bank J. Safra Sarasin in 2018 as head US & Global Sustainable Equities and is responsible for Sustainable US portfolios. Prior to this he was at Vontobel for 20 years in a variety of roles. He was senior portfolio manager and head of the Equity and Commodity Strategy within the Multi Asset Class department. Before that, he was responsible for the Global Equities Team. He managed Global and North American equity portfolios and funds. Prior to joining Vontobel, Andy worked as portfolio manager at UBS (’94 – ‘98) managing US and Canadian equity funds and portfolios. He started his career at the Retail Banking division of Hong Kong Bank of Canada in Calgary. Andy is a CFA Charterholder, holds a Swiss Banking School (now Swiss Finance Institute) degree and earned a Bachelor of Commerce from the University of Calgary, Canada.  Today, -his main focus is on US equities.

Safra Sarasin Group – Sustainable Swiss Private Banking since 1841

As an international group committed to sustainability, J. Safra Sarasin is well established through its banks in more than 25 locations in Europe, Asia, the Middle East, Latin America and the Caribbean. A global symbol of private banking and wealth management tradition, the group emphasizes security and well-managed conservative growth for its clients. At the end of December 2018, it managed total client assets of CHF 165 billion ($165 bilion) and employed about 2,200 staff, with stockholders equity of CHF 5.1 billion.

You have a great deal of experience in investment management in Zurich – what’s changed since you started?

The means by which information is distributed. When I started, we all had fax machines, we got huge piles of mail every day. 10 years ago, I would have said email. Today social media has taken on a massive role.

Although we have a long-term investment approach, the pressure for short-term performance has changed massively since the 1990s. Now it is weekly reports vs. quarterly or yearly.

Where is the head office from an investment management point of view?

Most of the investment management teams are in Zurich. That’s where I am based.

Are all investments sustainable? Which sectors are uninvestible?

All investments for – the funds and mandates managed in the team are sustainable. For the rest of the bank, approximately two thirds of the assets managed are sustainable. But even if investments are not sustainable, we use resources to reduce risk. Some sectors are uninvestible: nuclear energy; GMO agriculture; defense; tobacco; adult entertainment and coal. Some areas are harder to invest in. For example, utilities and energy names have higher hurdle rates than healthcare investments.

Do you vote your proxy for foreign shares?

Yes. We engage with companies via proxy voting and we engage directly if we think their rating could be better, or if they risk being downgraded.

AUM in your team?

$1.8 billion in equities. The teams comprises global, US, European, Swiss and thematic equities. However, we also manage portfolios for private banking

Screens used?

We look at a company’s sustainability score. We use MSCI, other sources of data as well as our own screening methodology based on our investment process. MSCI’s ESG division is doing really well. They have a leading market position.

Investment style?

Blend.

Active share?

For the US fund – around 80%. Higher in the global fund, lower in the Swiss fund. Our active share in the US would be higher than 80% but we have big positions in MSFT and AMZN that are also large benchmark weights. We aim to have a high active share but want to control our tracking error as we want to manage our risk.

Investment horizon?

No pre-determined time frame but I aim to keep turnover low to keep costs down. There is little evidence that high turnover  creates better performance. I like to hold a stock for as long as possible. MSFT was a top ten holding 12 years ago when I was at my previous employer and I now hold it here.

Largest position?

MSFT is our largest position in the fund -. 4% overweight against a stock’s weight in the benchmark is as large as we can go. I’ve therefore had to reduce my MSFT position on occasion as it has exceeded our 4% rule.

Buy backs or dividends?

Not something we really focus on. Most US CEOs like buy backs as they believe it supports their stock price. And I suppose it does help when you know there’s always a buyer in the market. I guess the aggressive buy backs in the US (helped by tax reform) have made it a more attractive market from a supply demand perspective than European markets which don’t do buy backs to the same extent.

Discuss some holdings:

MSCI – it’s been a holding since I joined JSS. We like its market position which is incredibly strong. Most benchmarks are MSCI. While many in the investment industry have suffered from the shift from active to passive, MSCI has benefited. It is used by passive and active managers and there are new benchmarks to track these new styles. It has done a really good job and is a super profitable business. It has a really good MOAT. It would be a difficult sell to get managers to ditch MSCI and use other benchmarks. Although the CEO has been there a long time, they are very good at catching new trends such as ESG. So, they are on the ball and it is a field that will continue to grow. The only headache I have with it is valuation – it’s difficult to say it’s a cheap name.

Conoco Phillips – Within resources, energy is the only place I have exposure to and only one in five companies would pass the ESG hurdle. The company clearly differentiates itself from peers in terms of sustainability. Energy is a funny sector as CEOs have made themselves, but often not investors, rich. They drill and get bigger and hope to get bought by someone. There is little focus on true value creation. The sector overall has poor returns and is not of high quality. COP took the decision early on to focus on free cash flow and not grow for the sake of it. It’s a cyclical business but COP can be profitable when the oil price is low. It is one step ahead of the competition and did well in 2H 18 unlike many of its peers as it is positioned for the new world. Other energy names have now embraced COP’s approach. As a result of this, we could hold COP for a long time. It’s a difficult sector in a challenged area so I’m not overweight energy in the fund, I am well below the benchmark in terms of carbon exposure.

Any recent sales and why?

Estee Lauder is a great company with a fantastic global position, but we trimmed the position when it got close to its price target. With worries over trade discussions and slowing global growth, if things get worse, Estee Lauder is the kind of name that becomes riskier. I can always add back to the position if it gets beaten up.

Do you have to meet management before you buy a stock?

We do a lot of due diligence which includes an attempt to speak to a company. For example, Colgate is a name we bought for the fund) this year. I’ve not met them yet this year (although I have met them in the past). So although it was not necessary to see the CEO, our consumer analyst (who also happens to be the co-manager for the US fund) had a call with IR. We also spoke with analysts and industry consultants. We try to understand the business fundamentals, so it is a -thorough exercise to initiate on a new name. However, as a general observation, I like attending meetings as I always learn something.

MiFID II – has it affected you even though you are in Switzerland?

MiFID II has changed the way research is paid in Switzerland too. It has made some US brokers/analysts a bit more reluctant to visit Europe.

Best companies at IR?

Reg FD changed the ballgame. Companies are more careful about what they say and how they communicate. Tractor Supply has done a really good job of consistently coming over here and providing good access, the same can be said for Chubb. FedEx come regularly, rain or shine and I value that consistency. Some companies are opportunistic – for example, US home builders have been visiting more frequently before the GFC, less so after. Companies in the $5 – $20 bn. market cap range tend to be more open. Good luck trying to talk to some of the mega cap tech names! When you contact them with a question, they refer you to their annual report.

Companies are increasingly quantitative in their targeting efforts and as Switzerland has the lowest level of ownership disclosure, it is sometimes not prioritized as highly as it used to be.

Do you have any message for companies considering whether or not to come to meet investors in Switzerland?

Look at the whole asset base managed in Switzerland. You can see our fund holdings, but we provide ideas for the private bank as well.

Switzerland remains a very important financial centre.

Any tips for companies about how they should communicate?

Make sure that information you want investors to see can be found easily – e.g. slide decks, conference call details etc. Because of MiFID II, direct access is now more important.

Why should corporates target Bank J Safra Sarasin?

We are not short-term flippers. We meet companies, are well prepared and once we make a decision, are engaged longer term and that aligns with what management is looking for. The asset base in Switzerland is pretty good so companies tend to get more bang for their buck than they might think.

 

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