Investment

The aristocratic family achieve top quartile performance during the pandemic

A branch of the aristocratic Seilern-Aspang family of Austria, also known as Graf Seilern Und Aspang, has preserved its wealth and reputation by backing the very same growth companies which are posing a competitive threat to family businesses across the world.

Their performance means Seilern Investment Management is the only boutique in London to generate a top-quartile return from 100% of its funds in the year to April – a period of immense sensitivity to clients, due to market volatility.

We all understand the importance of quality growth. We all work as a team. And that is essential to deal with events, if we are facing external problems in the years ahead

Since then, its American fund has traded higher than the start of the year, with the rest not far behind. Its core World Growth fund has returned 241% since launch in 1996, against 105% from the MSCI World index. 

All three of its London equity funds have a five-star Morningstar rating, as does a balanced vehicle. Its total funds are $2 billion, including several family office mandates. 

The reputation of the Seilern-Aspang family stretches back over centuries. Many of its members have been prominent within the Austrian political and financial establishment.

In 1713, in an early strike for equal opportunities, Chancellor Johann Friedrich von Seilern paved the way for Maria Theresa to succeed her father as empress of Austria by devising a legal technicality known as a Pragmatic Sanction.

Peter Seilern-Aspang, founder of Seilern Investment, where he is chairman and CIO, began a career at Vienna-based Creditansladt Bankverein in 1973.  

He says: “Family businesses create trust, although it’s also important to bring in outsiders and a share of the profits to those who succeed.”

His brother Francis Von Seilern-Aspang is a director as well as an adviser to family businesses at a trust business in Liechtenstein, where he is on good terms with the royal family. 

Francis’ son Tassilo Seilern-Aspang is head of research at Seilern and set to succeed Jean-Michel Boehm on his retirement as chief executive this year.

Last week, Family Capital warned US family businesses are facing a competitive threat from high-quality growth companies able to take advantage of technology, demography, scale and economics.

They include companies like Alphabet, Mastercard, Stryker, Accenture, Tyler Technologies, and Ansys which are among Seilern Investment’s favourite global stocks.

It likes businesses with a strong franchise, capable of paying back debt from cash flow over two years, if they so choose. Peter Aspang-Seilern has learned to be equally suspicious of debt, which can carry an immense burden in a deflationary environment. 

Seilern Investment likes to be able to project earnings forward over five years. It deals on certainty. Aspang-Seilern vetoed Apple and Microsoft as investments some years ago, because he could not be sure where their growth would materialise at that point.

Seilern runs tight portfolios, comprising no more than 25 stocks. The turnover is low, but Aspang-Seilern likes keeping good stocks in reserve.  West Pharmaceutical is a relatively successful new entrant.

Seilern’s determination to stay true to quality growth is important. It marks a contrast with many asset managers, who like to switch into cheaper shares when presented with opportunities to take profits.  

On 12 March markets were in freefall. But Seilern-Aspang held firm. He noted a surge in liquidity and told the media then: “Investors with cash and strong nerves should look across the valley.”

As the four months of 2020 came to a close, no more than a quarter of the 160 firms ranked by FE Analytics had a majority of funds in the top quartile. 

Seilern’s 100% record was ahead of the 86% record from twelve funds run by Comgest of France, in second place, and 83% from six funds led by Troy Asset Management.

An FE Analytics table of larger managers in the UK, with far more funds to handle, saw Baillie Gifford achieve a 68% top quartile record ahead of Wellington Management (48%) and Columbia Threadneedle (47%). 

Time and again quality growth delivered the goods. In early April Columbia’s head of global equities, Neil Robson, said: “High-quality growth companies look best placed to prosper over the long-term.”  

Cautious investors who once favoured value because they liked a bargain have moved into passive funds. Low interest rates are keeping value stocks on life support, but this does not encourage too many buyers.

What could bring the quality growth party to an end? Peter Seilern-Aspang sees potential disruption at the macro level due to countries taking on debt to deal with the impact of coronavirus, although he believes quality growth will handle this kind of situation best. 

Many of the debt problems of the banking system in 2008 have been transferred to the public sector. There are also risks from the developing trade war between China, the US and elsewhere, as politicians play to the gallery to distract from their problems back home. 

To protect its position, Seilern Investment likes to invest cross borders. It avoids emerging economies, including China, It invests in countries where it can understand the local language to avoid deceit and misunderstandings. 

Seilern-Aspang puts stress on the strength of his internal research: “We all understand the importance of quality growth. We all work as a team. And that is essential to deal with events, if we are facing external problems in the years ahead.” 

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