Quandts manager relies on stocks and gold

Frankfurt Many investors asked themselves this question during the Covid-19 crisis: Why have share prices recovered so quickly and are now even back on record?

Stefan Keitel, the head of HQ Holding in Bad Homburg, has an answer: “Exogenous shocks such as Brexit or the corona pandemic generally only have temporary negative effects on the stock markets. The capital markets look right through these crises and the economic system has strong self-healing powers, so no sustained price slump is to be expected. “

The head of asset management for the multi-billion dollar family branch of Harald Quandt is confident that the record run on the stock exchanges will continue for a while. “Ultimately, the central banks’ low interest rate policy is the decisive factor for the continued boom on the stock exchanges,” the manager said in an interview with the Handelsblatt. The combination of the “transparency” of investors in the crisis and the unprecedented liquidity support from central banks – coupled with the lack of investment alternatives – will ensure further price gains in 2021 as well.

Keitel therefore has no concerns about the sharp rise in share prices. “A high price-earnings ratio (P / E) doesn’t always have to be an alarm signal,” says the 51-year-old manager. In the past you got nervous with a P / E ratio of 20, but today you live in a different world due to the interest rate situation. “What is supposedly expensive can become even more expensive,” says Keitel. “From today’s perspective, a ten percent increase in the Dax 2021 is quite realistic. Government bonds are no longer an alternative to stocks from a return point of view, ”he explains his optimism.

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Keitel has now been with the Quandts for around 160 days, previously he worked for a long time at Dekabank in Frankfurt, the central asset manager of the savings banks. HQ Asset Management, the alternative investment manager HQ Capital and the multi-family office HQ Trust are grouped under the umbrella of HQ Holding.

At the asset manager HQ Asset Management, Keitel relies on artificial intelligence (AI). The new fund HQAM European Equities was launched in December. The fund’s largest holdings at the end of last year were: Roche, Nestle, ASML, LVMH and Unilever. The largest overweights are Zurich Insurance, Swedish Match and Halma.

Technology stocks at risk

However, there are certainly risks in the current year, as pointed out by the Feri Group’s asset managers, for example. Higher corporate taxes and stricter regulations are on the economic policy agenda of the US Democrats. The major US technology stocks would be particularly affected by more regulation.

Due to the huge market capitalization of the tech sector, price losses in this area could send the overall stock market into a sharp correction – which of course should rub off on European and German stocks. Asset manager Unigestion has announced that fourth quarter earnings are now being announced. Given the high expectations of investors, the experts there fear disappointments and corresponding price losses.

Keitel also sees risks, but only in the medium term. “There will be no change in direction at the central banks in 2022 either. After that, the risk of realignment increases when the economic cycle points upwards again more strongly and more sustainably, ”says the strategist. It is precisely this improvement in the economic situation that could then lead to price corrections on the stock exchanges.

According to Keitel, gold should not be missing in any depot. Measured against current prices, there is even more to it due to the central banks’ permanently expansionary monetary policy. “I think even $ 3,000 per troy ounce is possible in the future,” says Keitel. In any case, this asset class should be covered with a physical backing, as is the case with gold ETFs, for example.

The asset manager Wisdom Tree sees increased potential for rising inflation in the coming years – which mostly supports the gold price. He points to the burden of increasing national debt. You often meet the younger, less wealthy population groups. This raises the question of whether 2021 will be another year of social unrest. As a hedge against geopolitical risks, gold could once again become an important asset. The forecast is at $ 2,340 an ounce in the fourth quarter of 2021. The troy ounce is currently trading around the $ 1,870 mark.

Alternatives asked

Keitel also expects challenging times in the long term. “In the next ten years, there will generally be a tendency to see lower returns, be it for stocks, bonds or alternative asset classes such as private equity. Active investment management is all the more important. ”There is no getting around alternative investments such as private equity, infrastructure and real estate. Depending on the customer profile and the acceptance of illiquidity, the share should be between ten and 40 percent of the assets.

Hedge funds could offer a substitute for bonds, but are in little demand due to the lack of a sustainable track record. Infrastructure and private debt, i.e. investments in loans, delivered mid-single-digit returns, private equity between ten and 15 percent. The 20 to 30 percent previously common in the top quartile are generally no longer achievable with investment funds.

Keitel is a little more cautious when it comes to credit risks. There he sees dangers if there is another stress test in the market. The risks of lending by private funds could then result in broader bad debt losses. The risks are currently no longer priced appropriately, perhaps also because so much money is flowing into the asset class due to the returns that are still attractive in relative terms. This also applies to high-yield bonds. Keitel was surprised by the rise in the price of Bitcoin, but virtual currencies still played no role in asset management, and they are certainly not an asset class.

More: The Quandts’ asset manager sets up funds for ecological and social issues.

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