Tim Peeters, managing partner – wealth advisor at Miles Ahead Investment Company, an Antwerp-based multi-family office guiding wealthy families and companies in managing investment portfolios and supporting corporate finance transactions, specialises in commodities and value investing. In an interview with Piyasi Mitra, he discusses critical aspects of navigating market volatility, the fund selection process, and the importance of balancing portfolios to achieve strong, long-term performance.
Q: What do you consider the most critical aspect of your role as a fund selector specialising in commodities and value investing?
As commodities are cyclical, the ups and downs of most commodity and value segments of the market can create huge volatility in a portfolio. A fund selector’s key role is to analyse portfolio holdings and allocations to understand fund behaviour. This helps them choose funds that, when combined, will perform well and deliver
strong returns in the expected market environment. The most difficult part of a fund selector’s role is to give each fund the right portfolio weighting in a given market situation. Furthermore, weightings and allocations to the selected funds can change over time due to changes in the market environment. For example, we helped our clients select the better energy funds in 2021 and 2022. While the market turned negative in 2022, clients’ portfolios could deliver positive returns if the weighting to energy was well chosen. This balancing exercise is a key to creating strong performances over the years.
Q: Could you explain the fund selection process at your firm, particularly when evaluating opportunities in the commodities sector?
Funds will be ranked mathematically based on their performance over specific time frames. A portfolio’s lacklustre results in a particular period don’t necessarily reflect poorly on the strategy or fund managers. Sometimes specific segments in commodities have years of underperformance versus the broader market. In fund selection, you need to prepare for the future. In the example above, given on energy funds, we researched about good managers years before we invested in them. We talked to the management teams of the funds which performed well relative to their competitors, although absolute returns weren’t necessarily good in those years. The key is to select funds based on their relative performances and the know-how of the fund managers.
Q: How do you distinguish a successful portfolio manager from an average one, especially in the context of value investing?
It’s a combination of quantitative and qualitative analysis. A successful manager demonstrates strength in specific market conditions. While it’s easy to perform well in a rising market, true skill is shown in down markets. Therefore, we evaluate past performance across various market periods.
On the qualitative side, fund managers’ knowledge would be tested by cross-checking the info gathered from other sources or fund managers and their own research of the sector and holdings in the fund. The larger our interest in a specific fund or manager, the deeper our research into the allocations done into that fund. As
a fund manager dedicates more time to the largest stocks in her or his portfolio, we will dedicate more time to a fund if it’s up to becoming a key holding in some client’s portfolios.
“A fund selector’s key role is to analyse portfolio holdings and allocations to understand fund behaviour, helping them choose funds that, when combined, will perform well and deliver strong returns in the expected market environment.”
Q: Given the current market conditions, do you agree that aggressive portfolios will outperform defensive ones?
Not at all; we prefer defensive ones as the yields on the fixed income are still quite attractive versus the expected equity market returns. A barbell strategy with a huge defensive allocation and a selection of funds which can perform well on the equity side would possibly deliver a better outcome.
Q: What role does ESG play in your fund selection process, particularly for commodities investments?
Clients give us the mission to search for better-performing funds in the portfolio, not to have labelled funds. Some funds which don’t pay huge amounts to be labelled ESG are more responsible than some with the label, so we rather investigate the holdings of a fund to check if the manager selects his assets to be futureproof.
To give you an example of “labels-are-just-labels”, we already detected a fund with an ESG label having one of its core holdings in a Chinese firm producing cameras to monitor Chinese detention centres. Our request for details from the specific manager remained unanswered, but the holding disappeared from their portfolio.
We select funds handled by fund managers with real brains to select good, undervalued and sound companies rather than managers looking to have their fund ticking some boxes.
“Our preference is for defensive portfolios over aggressive ones, particularly given the current attractive yields in fixed income compared to anticipated equity returns, with a barbell strategy potentially offering a balanced, better outcome.”
Q: Which macroeconomic factors will most significantly impact the European asset management industry over the next 12 months, and how do these factors influence your investment strategy in commodities and value stocks?
The changes in interest rates will drive new flows into commodity and value stocks. We have already witnessed the movement in gold prices since the start of the year. These flows will probably impact other segments of the commodity markets in the time ahead. We’re still increasing our fund research on other segments such as the
energy and metals markets, as commodities are cheap versus the broader parts of the market.
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