In light of today’s negative interest rates and with inflation standing at 1.0-1.5%, taking a wealth preservation approach means drawing on different solutions to complement traditional general account and sovereign bond investments. Our role here at Dorval Asset Management is to support investors in investing in the real economy by reducing the proportion of sovereign bonds in their asset allocation, yet the paradigm change in financial investment stretches far beyond this aspect: just like the direct and indirect effects of the Covid-19 crisis and beyond the health crisis in itself, the sea change in our society is overturning the world we know and turning citizens’ sights to the future.
Jean-Francois Baralon, CEO at Dorval Asset Management, discusses our value proposition: “The financial industry and investment management more specifically have a key role to play in shaping and designing the world of tomorrow. Here at Dorval Asset Management, we pursue an authentic, sincere, engaged and credible approach to openly and fully support this change at our level, with the full backing of all our staff and in line with Natixis Investment Managers’ pledges in this arena. We are committed to "Bringing value to your values" – this promise truly embodies our corporate purpose.”
Stéphane Furet, Deputy CEO and co-founder of Dorval Asset Management notes: “Here at Dorval Asset Management, we take a long-term investment approach, and we firmly believe that we have a pivotal role to play in directing investment to build a more responsible and sustainable economy. We engage with real economy stakeholders to encourage them to adapt their environmental, social and governance practices to support this transition, acting as a responsible investor as we pledge to meet the highest standards with both our clients and partners, as well as with the companies we invest in. Dorval Asset Management’s approach since 2004 has consistently been built on shareholder dialogue, drawing on a practical and collaborative approach in our role as shareholder – further reinforced by our voting policy – as well as in our regular meetings with companies. This Governance approach is firmly rooted in the Manageurs range’s philosophy, which includes the original Dorval Manageurs fund. However, we also look beyond this aspect and include all Environmental, Social and Governance considerations in our non-financial analysis for stocks in our investment universe, and incorporate these aspects into our manager screening.”
Louis Bert, Deputy CEO and co-founder of Dorval Asset Management adds: “Achieving SRI accreditations for our funds reflects our developing strategy, further bolsters our expertise and clearly enhances our close relationships with our clients. Dorval Asset Management remains true to its asset allocation expertise and active investment management skills, which we are now further strengthening with our non-financial proprietary scoring model as we draw on our successful steps to embed our SRI approach firmly across all our investment processes.”
“Our responsible investment approach also naturally applies to the way our company is run, and Dorval Asset Management consistently strives to abide by the principles of loyalty, fairness and transparency with all stakeholders in our day-to-day operations, while also curtailing our environmental footprint. Our CSR program is a lengthy and ongoing process and there is always scope for further progress as we seek to reach excellence, but some of Dorval Asset Management’s initiatives in this area have already proven to be both highly successful and truly unique, such as our sports sponsorship program launched in 2013 as well as the "Great Place to Work" and "Best Workplaces For Women" accreditations achieved in 2020”, states Gaëlle Guilloux, Head of Strategic & Digital Marketing, Communications & Events.
As we shape and design the world of tomorrow and also address today’s unprecedented environment, Dorval Asset Management promotes two areas of expertise that carry SRI accreditations.
1. Our Global Convictions range
Dorval Asset Management’s Global Convictions range, which carries an SRI accreditation, offers a complementary alternative to traditional general account investments and sovereign bonds.
With interest rates low on a long-term basis, institutional and individual investors can enjoy exposure to international equities while keeping risk under control. This wealth preservation strategy draws on an informed analysis of economic and financial cycles, as well as an assessment of ongoing developments in the world environment via our active investment management approach. Dorval Asset Management’s economists and strategists, François-Xavier Chauchat, Gustavo Horenstein and Sophie Chauvellier, single out investment themes they deem to be buoyant and best tailored to the environment.
This innovative and highly diversified approach is built on baskets of stocks, and aims to grow investors’ savings at a pace in line with potential sustainable gains in the world economy.
Our range offers two risk levels tailored to meet each investor’s profile:
- Dorval Global Convictions Patrimoine (SRRI 3) with an investment timeframe of three years;
- Dorval Global Convictions (SRRI 4) with an investment timeframe of five years.
Both these funds have proven to be robust, particularly over this past year. 2020 was expected to be upbeat in terms of the economic cycle and for the financial markets, yet the Covid-19 pandemic then broke out and pummeled the world economy. This situation required our portfolio management team to adjust exposure rates – applying hedging strategies by selling index futures and buying safe haven assets – and adapt investment themes by selling theme-based baskets with the highest risk. We particularly cut back exposure for our Dorval Global Convictions Patrimoine fund in keeping with its more cautious approach and its SRRI 3 risk indicator.
The shutdown of the world economy following government decisions came as a shock on an entirely unprecedented scale, yet hefty fiscal and monetary support was swiftly announced, prompting the portfolio management team to conclude that the dent was drastic, but temporary with the scope to be readily reversed. Funds revisited the US tech sector in March, while in April we then focused on key sectors of northern Asian economies in response to the recovery in China. Our portfolio management team also targeted the speedy recovery in the highly resilient construction sector. With vaccines becoming available, our funds took exposure to stocks that had most suffered from social distancing as well as small- and mid-caps in Europe.
In our view, the range currently offers the right response to today’s environment as economies gradually continue to open, with vaccines making it to market and interest rates remaining low for the long term. Our Dorval Global Convictions Patrimoine and Dorval Global Convictions funds therefore kick off 2021 with this cyclical positioning, while ensuring ongoing broad geographical and sector diversification.
- Dorval Global Convictions Patrimoine is rated category 3 on the risk-return scale.
- Dorval Global Convictions is rated category 4 on the risk-return scale
2. Dorval Manageurs Small Cap Euro
Our second investment expertise provides investors with the opportunity to engage and invest responsibly in listed French and European SMEs and mid-sized firms via our Dorval Manageurs Small Cap Euro fund, which has just obtained the French government Relance accreditation and the SRI label.
Companies need to resume their investment in production and bolster their capital to boost growth and address the challenges of the future by ensuring that they can offer competitive products and services.
Small- and mid-caps have been dealt a bad hand over the past more than two years, as geopolitical tension pushed investors out of this asset class from September 2018 onwards. These companies’ business was then further dented by the Covid-19 crisis as these firms are more exposed to the European economy, which was hampered by the most stringent lockdown measures. Our portfolio management team particularly witnessed this effect on earnings per share (EPS) growth projections, which plummeted in 2020 for small- and mid-caps much more than for large-caps, with declines of respectively around 45% and 24% (Source: Factset at 12/10/2020).
Despite this EPS nosedive, small- and mid-caps’ lengthy period of underperformance pushed down valuation multiples, and here at Dorval Asset Management, we believe that this situation offers a window of opportunity on the asset class, as economies gradually begin to open again, with economic activity progressively set to return to normal on the back of progress notched up on vaccines.
Against this challenging backdrop, small- and mid-caps have drawn on their responsiveness and flexibility to adapt and should derive the benefits from the brightening macroeconomic outlook expected over the months ahead. Greater exposure to the local economy, which has been a hindrance over recent quarters, should turn to their advantage for the near future on the back of:
- The €750bn European stimulus package currently being adopted, which is an unprecedented move in terms of both its amount and arrangements, with the EU 27 pooling their debt: small- and mid-caps should benefit more than large international groups.
- Lower risk on the euro/dollar rate in our view – small- and mid-caps are more exposed to domestic economies in the euro area and hence less subject to exchange rate difficulties – which could have an impact over the months ahead.
- Determination across Europe to relocate certain industries, which was further intensified by the Covid-19 crisis.
EPS for small- and mid-caps are expected to soar by close to 50% for 2021 – double the pace for large-caps (Source: Factset at 12/10/2020) – on the back of these factors as well as efforts by small and mid-sized companies to adjust their set-ups to address the current situation.
The Dorval Manageurs Small Cap Euro fund boasts the following key features:
- It meets French and European companies’ funding needs and draws on their growth potential.
- The fund’s accreditation offers a response to investors’ civic considerations and engagement, supporting them as they bring meaning to their investment, and driving a more sustainable economic recovery.
- The portfolio’s make-up complies with French equity savings plan (PEA) and French SME equity savings plan (SME PEA) criteria, and therefore supports French and European companies’ development.
- The fund invests at least 75% of its assets in European shares issued by companies that meet two criteria i.e. fewer than 5,000 employees, along with annual revenues of less than €1.5 billion or a balance sheet of below €2 billion.
Dorval Manageurs Small Cap Euro aims to outperform its reference indicator, the MSCI EMU Small Cap net total return, calculated with dividends reinvested over the investment timeframe, by combining fundamental analysis of eligible companies with an assessment of environmental, social and governance (ESG) opportunities and risks.
Dorval Manageurs Small Cap Euro is rated category 6 on the risk-return scale