Strategies

Our strategies are backed by clear academic evidence of long-term outperformance. This gives us the confidence to be style consistent.

Value Equities strategy

The Sparinvest value equities strategy aims to generate superior long-term returns through investment in deeply undervalued stocks. Our fund range covers both developed and emerging markets.
Sparinvest was the first Danish investment house to adopt a value investment approach, when the value equity team was formed in 1997. Since then, we have remained focused on serving our clients through disciplined application of our value investment philosophy and bottom-up stock selection processes. We consider stocks through the lens of a long-term investment horizon, and believe in rigorous fundamental analysis to help us uncover the risks and opportunities facing our portfolios. This naturally includes a consideration of environmental, social and governance issues. We believe in being active, engaged owners, using the power of dialogue and voting to work towards enhanced corporate value at our holdings.

With more than 100 years of combined experience in value investing, our team of long-tenured portfolio managers and analysts are curious and critical thinkers, with a passion for analysing stocks to generate and execute investment ideas.

We offer:

  • A fundamental, long-term approach to stock selection
  • A cohesive, long-tenured team
  • Disciplined value investment processes 
  • A holistic approach to risk
  • Serious & considered integration of responsible investment issues 
  • A long & solid track record of style-consistent value investing
     

Value Bonds strategy

Sparinvest S.A. is a UCITS IV compliant Management Company and Sparinvest is a signatory of the UN Principles for Responsible Investment. Underlying Sparinvest’s asset management activities is a pooling structure that provides unique asset allocation flexibility as well as economies of scale (advantageous charges) for all funds accessing it.

Our aim is to be both flexible and imaginative in tailoring our investment solutions to match our clients’ needs and we are open to discussions with you about the best way to achieve this. Our main solutions and options are outlined below but please feel free to contact our International Client Services team to discuss any other ideas that we may be able to help with.

The following investment vehicles provide access to our specialist strategies:

 Mandate options – choose between:

  • An exclusive Segregated Account – Client-defined investment policy delivered by Sparinvest. Client has choice of custodian and option of delegating administration to Sparinvest. A sliding scale of charges applies.
  • A Specialised Investment Fund – Client-defined investment policy but no guaranteed exclusivity. Access to Sparinvest’s pooling structure means asset allocation is built cost-effectively. RBC Investor Services Bank S.A. is custodian and administration is done by Sparinvest. A sliding scale of charges applies.

Investment fund options – Sparinvest investment funds provide another way to access our strategies. All funds comply with UCITS IV legislation and have demonstrable track records. Choose between:

  • ‘I’ Share Class in any of the available currency classes. This is the easiest and fastest option to set up.
  • ‘R’ Share Class in any of the available currency classes. In some of our funds we only offer ‘R’ Share Classes which are intended for retail investors but also available for institutional investors.
  • ‘X’ Share Class in any of the available currency classes. This permits product ‘white labelling’, giving the dual reassurance of Sparinvest’s investment management expertise and the client’s tailoring.

The following options apply to the abovementioned investment vehicles:

Tax options - choose from distributing or accumulating

Currency options – please contact us to discuss

SRI options – choose from:

  • Investing responsibly with strategies that are compliant with the principles of UN PRI. Here the focus for Sparinvest is on fulfilling our fiduciary duty with ESG factors integrated in the investment process as an extra tier of risk management.
  • Investing ethically (Based on our responsibly-invested strategies but with an extra ethical filter that can be based on client’s chosen exclusion criteria)

Custody options – choose from:

  • RBC Investor Services Bank S.A. (our usual custodian)
  • Your preferred custodian
Options specific to Equity investment

Management style – choose from:

  • 100% bottom up actively managed Value
  • Intelligent Quant strategy (currently based on the MSCI world index but can be applied to other indices.)

Regional exposure – choose from:

  • Europe
  • US
  • Japan
  • Pacific region
  • Emerging Markets
  • Any combination of the above

Size exposure – choose from:

  • Small cap
  • Large cap 
  • All cap

Options specific to Corporate Bonds

Credit Rating – choose from:

  • Investment Grade
  • High Yield
  • Whole ratings spectrum

Regional Exposure – choose from:

  • Developed Markets
  • Emerging Markets

We can also offer our Value Bonds strategy as a fixed maturity solution with a choice of maturity date. Ask us for details.

Options specific to Fixed Income

  • Targeted duration options, working to achieve optimal returns within a pre-defined timescale. Any duration is possible;
  • Short, medium and long Danish Bonds (including mortgage bonds);
  • European bonds - long or short duration
  • Emerging Market sovereigns (in local or hard currency)
  • Index-linked bonds
Options specific to Strategic Asset Allocation

Sparinvest's Strategic Asset Allocation expertise is available to clients who seek help in formulating model portfolios designed to match long-term objectives. We offer:

  • 'Off the shelf' solutions based on pre-defined time/risk profiles;

Medium risk 3-5 year time horizon
Medium risk 5-10 year time horizon

  • Bespoke solution with individually-tailored portfolios, based on specific, agreed targets; or
  • 'Create your own’ solution providing access to our unique pooling structure whereby clients can create their own strategic asset allocation, based on our strategies.

Fixed Income strategy

The Danish bond market incorporates a 200-year old mortgage bond market, viewed as one of the safest and best regulated in the world. (Both Mexico and the US are now investigating similar models.) With the special Danish tradition for fixed-income investment, this discipline has always been one of Sparinvest’s strongest cards – and one for which we frequently win industry awards.

Our Fixed-Income strategy is:
  • Minimal trading
  • Consistent interest rate sensitivity
  • Optimized on clearly-defined durations
  • Disciplined and duration-focused
  • A route to Danish Mortgage bonds

Benefits for investors:

  • Minimal trading - because transaction costs eat into bond fund performance, we avoid regular trading based on the release of key economic figures or interest rate predictions. Portfolios are only changed if there are any market anomalies to be exploited. This means cost-savings for investors.
  • Consistent interest rate sensitivity - we understand that investors need fixed-income investments with constant risk profiles as a reliable mechanism to offset liabilities or diversify against riskier assets. We aim to provide well-behaved investments that maintain their position on the duration spectrum.
  • Optimized on clearly-defined durations - we manage on the basis that it is impossible to predict short-term interest rate movements but entirely possible to optimize portfolios for different defined durations. We model on basis of diversification, duration and risk criteria. A clear duration policy also helps to minimize trading.
  • Disciplined and duration-focused - we believe it is possible to achieve good performance relative to the benchmark over time by remaining duration-focused – irrespective of market direction or interest rate movements. Our Fixed Income managers remain disciplined and true to our investment strategy at all times to provide reliable investment vehicles.
  • A route to Danish Mortgage bonds - The Danish government and mortgage bonds market has unique attractions and offers diversification benefits to investors outside Denmark. Sparinvest offers unique expertise and knowledge of the prepayment risks (premiums) involved with callable mortgage bonds.

For a more detailed description of Sparinvest's Fixed-Income strategy, click here.  

Offerings
  • Targeted duration options, working to achieve optimal returns within a pre-defined timescale. Any duration is possible;
  • Short, medium and long Danish Bond strategies to enable investors to access the diversification properties of the Danish fixed-income market which includes one of the world’s largest and best-run mortgage markets;
  • European bonds - long or short duration
  • Emerging Market sovereigns (in local or hard currency)
  • Index-linked bonds.

Click here to download our report on the Danish mortgage bonds market.

Strategic Asset Allocation (SAA)

If I "have noticed anything over these 60 years on Wall Street, is that people do not succeed in forecasting what’s going to happen to the stock market."

Benjamin Graham

Given that markets cannot be predicted, we aim for continuous, well-diversified investment portfolios with a tilt towards known asset outperformance factors. Our constant aim is to maximise the return potential from each unit of risk taken.

Our Strategic Asset Allocation strategy is:

  • Focused on client goals
  • Optimized for client's risk budget
  • Continuously invested
  • Widely diversified
  • Tilted towards outperformance factors
  • Regularly rebalanced

Benefits for investors:

  • Focused on client goals - together with our clients we aim to formulate realistic investment goals and create a bespoke strategic plan to reach them.
  • Optimized for client's risk budget - The starting point for the strategy is to establish the individual investor’s risk tolerance and investment time-frame. We can then use knowledge of long-term historic asset correlation and volatility patterns to construct optimal, efficient portfolios.
  • Continuously invested - as consistently-accurate market timing is impossible, we remain continuously invested. This has the dual benefit of minimizing transaction costs and ensuring that investors are in place to benefit from the substantial upswings that often follow steep market declines.
  • Widely diversified - we aim for a wide diversification of assets, organised in such a way that they should generate the maximum possible return for each available unit of risk in the client’s overall risk budget.
  • Tilted towards outperformance factors - We work with academically-proven outperformance factors* – currently value, small-cap and momentum investment.
  • Regularly rebalanced - we view regular rebalancing as essential to keep the portfolio in line with client goals.

Offerings

Sparinvest's Strategic Asset Allocation expertise is available to clients who seek help in formulating model portfolios designed to match long-term objectives. We offer:

  • 'Off the shelf' solutions based on pre-defined time/risk profiles;
  • Bespoke solution with individually-tailored portfolios, based on specific, agreed targets; or
  • 'DIY solution' providing access to our unique pooling struture whereby clients can create their own strategic asset allocation, based on our strategies.

Where an optimal portfolio for a client requires exposure to an asset class that Sparinvest is unable to deliver, we will use style-based returns analysis to find the best investment partner to provide it.

* Studies by Fama and French supply evidence of the outperformance of value and small-cap styles. The discovery of outperformance from momentum strategies is attributed to Jegadeesh and Titman.

Intelligent Quant.

Years of academic study have concluded that equity investment with a tilt towards certain outperformance  factors - specifically value, small cap and momentum* - can lead to excess returns over the longer term. Even more interesting is the fact that value and momentum strategies are negatively correlated, meaning that a combination of these two factors within a portfolio could become even more interesting over time.

Sparinvest's Intelligent Quant strategy is:

  • Designed to capture the full beta potential of a given index
  • Tilted towards proven excess return factors
  • Designed to exploit negative correlation
  • Designed for ESG improvement
  • Lower cost
  • Available as a tailor-made solution 

Benefits for investors
:

  • Full beta potential - The strategy offers full exposure to the performance of a given index at a level of tracking error that can be adjusted according to preference. This means that investors don't miss out on index returns.
  • Proven excess return factors - Sparinvest manipulates the index exposure to create an emphasis on proven long-term outperformance factors. Investors benefit from having a portfolio tilted towards the excess return factors identified by investment academia - using value, small-cap and momentum overlays.
  • Exploits negative correlation - The fact that value and momentum strategies are negatively correlated has the effect of increasing the overall performance of a portfolio or decreasing its risk.
  • Designed for ESG improvement - Where there is a choice of stocks fulfilling the investment objective of the fund, the one with the higher ESG score is preferred. The long term intention is to consistently improve the ESG score of the portfolio over time. Although it is as yet unproven academically, we believe that this is also a potential long-term outperformance factor.
  • Lower cost - This strategy is neither fully active, nor fully passive and therefore offers charges that are lower than our 100% bottom-up stock picking funds.
  • Tailor-made solutions - we currently run this strategy based on the MSCI World Index but can easily transfer it to any other equity index

Sparinvest currently runs one fund based on its Intelligent Quant strategy.
 

Studies by Fama and French supply evidence of the outperformance of value and small-cap styles. The discovery of outperformance from momentum strategies is attributed to Jegadeesh and Titman.