Sentiment is negative on Hungarian securities

Daniel Moricz and Tamas Cser, portfolio managers of the Concorde Columbus fund believe the Hungarian forint will weaken, OTP Bank will do well long term, Hungarian securities are undervalued on the negative sentiment regarding Hungary. There are undervalued stocks on the market, the fund invests in these types of assets. The article was published on in Hungarian language. Was edited and translated by Gabor Balint.

How did you decide the name of the fund would be Columbus? It could have been Amerigo, Vespucci or Vasco Da Gama…
Tamas Cser (T.Cs.): We wanted to establish a fund which for the most part invests in international securities – the name of the explorer matched that purpose perfectly.


Daniel Moricz (D.M.): We figured we wanted an explorer that was a risk-taker. When this fund was established its profile was somewhat different. We used to manage assets for pension funds. They were the major shareholders of the fund.

The market for pension funds has completely changed every since. Who are the investors of the fund today?
D.M.: Well, the main investors are our private wealth management clients. They invest for the long run. They are aware of the fact that to achieve higher return they need to take higher risks as well.

On the anniversary of your fund Concorde 2000 you analyzed the investment behavior, pointing out to the fact that investors were selling when the market was down, buying when the market was up. Do different types of investors have different attitudes regarding investments?
D.M.: We did these calculations for the rest of our funds as well. I figured the difference between the time and the money weighted return was not significant in case of our private wealth management clients that hold or funds in the long run.  We actually got a hold of all of our clients in October 2008 to inform them we were going to increase the risk of their portfolios.

ProfilesDaniel Móricz:Was born in 1976. Graduated from the Corvinus University of Budapest. Made partner of Concorde Asset Management Ltd. In 2007.Tamas Cser:Was born in 1982. Graduated from the Corvinus University of Budapest in 2006. Start working at Concorde Asset Management in 2004.

Did they give you the green light?
D.M.: Well, yes, most of our clients did.

According to the prospectus, your fund is global, fundamental and may invest in derivatives as well.

T.Cs. We invest in undervalued assets and we buy when the market sentiment is negative. We use a global approach so the portfolio can be well diversified.


Do you invest in Hungarian securities as well?
D.M. It is a Hungarian forint denominated fund. When we see no investment opportunity, we invest the cash in Hungarian government bonds. We have also bought corporate bonds of Hungarian companies in the past couple of years.

The goal is to invest between 50-90% of the assets in equities (and the rest of the assets in fixed income instruments)

So basically, the fund invests in equities and bonds. What about derivatives?
D.M. We have spread positions as well (we are long one instrument and short another)

You have positions like that?
D.M. We have absolute and relative positions in the fund as well. We believe Japan has an unsustainable level of debt and their currency might weaken and yields on Japanese government bonds may also rise… they have in been in decline for the past 10-15 years.

That’s what the technical analysists call trading against the trend. You seem to be doing that.
T.Cs. Well, yes, whenever we have a fundamental view on a given asset.

Warren Buffett also applies that approach.
D. M. Investors usually do not like illiquid small cap stocks. We have a special Central European based knowledge that can work in our favor.


What’s your view on equity markets?
D.M. Equity markets peaked in 2000 and have been in a downtrend for the past 10-15 years. If we had to choose an investment for 10 years, it would definitely be equities and not bonds. That does not mean that in some five years stocks will necessary be higher.

Our readers are usually interested in major Hungarian stocks, like OTP. Do you guys have a view on these companies?
D. M. Sure. We can’t afford not to have a view on these assets. When we are long a euro denominated equity index we have to decide if we want hedge the currency risk or not. We believe the Hungarian forint will weaken long term.

What was your best and worst investment?
T.Cs. We lost money shorting Volkswagen stocks but on the other hand learned about risk management a lot.

What about your best investments?
D.M. Well, our portfolio is very well diversified. We made a huge profit from buying Graphisoft stocks, Fondul Proprietatea shares and Magnolia corporate bond.