Kilian Kentrup, Entrepreneur Partners: “Cultural understanding is an important advantage when using direct contact with management to interpret business decisions”
Kilian Kentrup (pictured), manager of the Trias L/S Fund at Zurich-based Entrepreneur Partners, says he uses fundamental and news flow-driven proprietary screening tools, bottom-up research, regular direct contact with management and field trips to identify long and short equity and equity-related security investments among some 400 listed companies in Austria, Germany and Switzerland.
GFM: What is the history and background of your company, principals and funds?
KK: Entrepreneur Partners, founded by three partners in 2008, is a wealth management company located in Zurich offering services to wealthy entrepreneurs, executives and institutional clients. It offers sophisticated asset management services, including two long/short funds.
The second long/short fund on its platform, the Trias L/S Fund, was launched in May this year. It targets absolute returns by investing in equities and equity-related securities. The fund’s manager, I previously spent six years as an analyst and portfolio manager at a Swiss hedge fund boutique, co-advising the Rhine Alpha Stars Fund. The fund currently has assets of EUR12m, and we are aiming to reach EUR30m by the end of this year.
GFM: What is the structure of your fund?
KK: The Trias L/S Fund is an open-ended vehicle domiciled in Vaduz, Liechtenstein, for qualified investors (collective trusteeship). The fund’s administrator provides daily NAV calculation, as well as daily liquidity to investors. The Trias L/S Fund offers euro and hedged Swiss franc share classes.
GFM: Who are your main service providers?
KK: Our fund administrator is IFAG in Vaduz, the custodian bank is Liechtensteinische Landesbank, and the auditor is PricewaterhouseCoopers in St. Gallen in Switzerland.
GFM: What is your distribution strategy and targeted client base?
KK: The fund was launched with Swiss and German private clients. It is also an interesting investment vehicle for institutional clients in Europe as well as in the US.
GFM: What impact has the recent global financial crisis and economic downturn had on your business?
KK: Obviously, the overall environment has been more challenging, but as regards performance, I was able to seize opportunities and achieve double-digit gains for my sub-portfolio of the Rhine Alpha funds in 2009, 2010 and 2011.
GFM: Please describe your investment process.
KK: The investment process tries to capture opportunities based on the global macro picture. The strategy combines bottom-up, fundamental stock analysis with momentum-driven trading. The investment universe comprises around 400 listed companies in Austria, Germany and Switzerland.
GFM: How do you generate ideas for your funds?
KK: We use fundamental and news flow-driven proprietary screening tools, fundamental bottom-up research, a network of brokers and analysts, regular direct contact with management and field trips.
GFM: What is your approach to managing risk?
KK: Risk management is key. Daily liquidity needs for investors are matched with the liquidity of the fund’s investments. We maintain strict stop-loss rules for strategic core positions, with maximum losses of 5, 10 and 15 per cent, and 5 and 10 per cent limits for tactical trading positions.
GFM: How has your fund performed?
KK: The Trias L/S Fund has returned 1.7 per cent since its launch in May. The fund was down 2.6 per cent in May, but gained 0.41 per cent in June and 2.41 per cent in July, and it was 1.5 per cent in the first four trading days in August. We are targeting an annual return of 15 per cent with 12 per cent volatility.
. The fund is targeting an annual return of 15 per cent with 12 per cent volatility.
GFM: Are you looking at any particularly attractive opportunities right now?
KK: Our current top picks on the long side include IVG Immobilien, Wacker Chemie, Heidelberger Druck, Aareal Bank and Immofinanz.
GFM: What developments do you expect to see in your investment sector or industry field in the coming year?
KK: I anticipate a shift back into the euro, driven by three factors. Firstly, for Europe’s politicians it will be vital to create feasible frameworks to better serve people living in Europe, thereby bringing back trust and attracting investors. Secondly, austerity measures and growth initiatives will show their first results. Thirdly, bond yields for currently struggling economies will return to lower levels as the crisis begins to fade. Interest rates will eventually slowly move up and more money will be allocated to stocks.
GFM: How will these developments affect your firm and the performance of your funds?
KK: Generally, the allocation will shift from bonds to equities, and European equities will come into focus again in the near to medium-term future. Obviously this will create great opportunities for the fund, which we aim to seize to generate a superior return.
GFM: What do investors currently expect from managers, and how do you deal with those expectations?
KK: Investors are looking for managers that can avoid big losses and generate returns even in volatile markets. I focus on fewer stocks, and seek alpha through stocks that are driven by events minimally correlated to the overall market, on both the short and long sides of the portfolio. Additionally, daily liquidity gives comfort to investors, ensuring that the fund applies strong liquidity and risk management.
GFM: What differentiates you from other managers in your sector?
KK: I was born and raised in Germany, studied in Vienna and lived for more than six years in Switzerland, where I worked for a European equities hedge fund. It gives me a good understanding for the three cultures, an important advantage when using direct contact with management to interpret business decisions.
GFM: How do you view the environment for fundraising over the coming 12 months?
KK: We are quite optimistic. Investors are looking for entrepreneurial investment opportunities targeting superior returns.
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