My experience as a long-short manager and as a precious metals and resources investor sharpened my sense for global macro issues, market behavior and questionable business behavior, says Matthias Bachmann, Chief Investment Officer of Lumen Capital, in an interview.
Matthias Bachmann, which investment philosophy is Lumen Capital Switzerland applying?
We consider all asset classes in conjunction with structural thematic themes. We focus on liquid investments. We pursue an active investment style within a dynamic investment allocation framework. To avoid conflicts of interest, we use do not use proprietary products in the implementation.
Our view is unbiased, the investment style long-term in nature as well as agnostic regarding «value» or «growth». The goal is a steady return after inflation and costs.
What do you specifically mean by this?
We select securities that offer attractive and sustainable return potential. In equities, we invest in companies with a leading market position and pricing power. Strong operating performance leads to high returns on capital employed and substantial free cash flows, a key aspect of value creation in our view.
In addition, we consider companies that may become industry winners due to superior technology or transformative acquisition, ie. disruptors. Such investments offer multiple upside potential.
«This experience sharpened my sensorium for market behaviour and questionable business conduct».
Very important for us is the assessment of a company's management and its corporate governance. In this respect, my previous work helps me enormously.
How come?
I offer a rather unusual career path. I learned the equities business at the newly merged UBS in 1998. In addition to the privilege of advising clients, I later also managed portfolios for many years. Be it as a short seller or as an investor in precious metals & commodities.
This unique experience sharpened my sense for global macro issues, market behavior and questionable business conduct. In addition, I have been teaching economics & law at the Gymnasium Zürich Oberland in Wetzikon for the past three years.
This experience was incredibly enriching because as a teacher you must be convincing in three dimensions at the same time: professionally, pedagogically and psychologically.
«In addition, we maintain a regular exchange with Lumen Capital in Singapore.»
This results in the following advantages for our clients: a systematic analysis and investment process, comprehensive understanding and empathy for their situation, and the knowledge of which instruments are ideally suited for successful implementation.
How does Lumen Capital Switzerland differ from other independent wealth managers?
Threefold. The expertise of the team is very complementary. My experience helps in idea generation, structured analysis & investment process, portfolio construction and risk management. This allows us to present diverse and sound investment solutions to the clientele.
In addition, we maintain a regular exchange with Lumen Capital in Singapore (LCI) and benefit from their Asia expertise. Another important partner of ours is Cynos AG. Their expertise in compliance and risk management is an important success factor for us.
«An important partner of ours is also the company Cynos»
Can you describe the relationship with Lumen Capital in Singapore?
LCI and Lumen Capital Switzerland are legally two independent companies. LCI employs half a dozen people in its investment team. This allows them to do broad and deep analysis work. We benefit in several areas: Asia expertise and in-depth knowledge of emerging markets, access to exciting investment managers and products, and complementary expertise in fixed-income instruments.
Can you give us an example of how this collaboration benefits customers?
On the one hand, it concerns the company Geberit. LCI gave me access to a provider of a private debt product for financing in the European real estate market. Since last fall, the manager has pointed out in detail challenges including credit defaults.
As a result, we were able to reduce or sell positions in Geberit shares at substantially higher levels. The recent second-quarter 2023 results have confirmed these addressed challenges. However, Geberit remains a high-quality company that exemplifies our investment philosophy.
I, on the other hand, was able to give the Singapore team access to an exciting product in litigation finance. The constant exchange of expertise enables us to offer added value to our clients.
«There is often an asymmetric risk profile in banks»
Do you also recommend investing in Swiss bank shares (if so, which ones)?
Within banks, there is often an asymmetric risk profile among the key decision-makers because the incentive systems are set up incorrectly. As a result, these banks do not create steady value across cycles. From a Swiss perspective, the private bank Julius Baer now has the opportunity to emerge from the UBS-CS situation as a winner and to raise its market position as well as its revenue and profit levels to a significantly higher level.
The bank has made progress in its operational discipline after past missteps. The private client business offers stable and steady earnings and generates attractive returns.
«We must embrace the competition»
How do you assess the chances of success for the Swiss financial center – compared to Singapore?
I remember 2008/09 when many experts predicted a sharp contraction. That didn't turn out to be the case, as several factors, such as political stability and calm fiscal and monetary policies, make Switzerland an attractive financial center. But we must not become complacent.
We must embrace tougher competition. High levels of expertise, customer service, performance and regulation are not self-evident, but they are important drivers for future success.
Matthias Bachmann joined Lumen Capital (Switzerland) as Chief Investment Officer (CIO) in July 2022. After obtaining a degree in Economics & Business Management at the University of Basel, he started his professional career as an equity specialist at the then-UBS Investment Bank in the late 1990s. Between 2007 and 2012, he was co-founder of MainFirst Switzerland and subsequently responsible for the positioning of the Swiss branch in various functions. Further stations thereafter were Craton Capital as well as Rothschild Bank. Between 2020 and 2023, Bachmann completed a Master LfM in Economics & Law at the University of Zurich and was a lecturer at the Kantonsschule Zürich-Oberland in Wetzikon ZH.
