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Last updated 22 hours ago
Jan 17 2012 | 9:08am ET
Switzerland-based Varus Capital Management saw its returns slip 0.20% in December but Varus’ euro share class was up 20.7% for the year.
According to Bloomberg, the Varus Fund ranked in the 99th percentile of its peer group in 2011. The fund enjoyed nine positive months and even its down months weren’t so very down—its biggest loss came in April, when it slipped 0.4%. Its biggest gain, on the other hand, in January 2011, was 7.38%.
Varus, founded by Absolute Capital Management vets Stefan Heieck and Frank Siebrecht, ended the year with an average net exposure of 21.8% and gross exposure of 87.8%. In its latest monthly statement, the fund, which specializes in German mid- and large-cap companies, provided its outlook for 2012—along with an accompanying soundtrack.
Heieck and Siebrecht reiterate their real estate theme from 2011 in expectation of rising rents in most major German cities.The accompanying song is ‘Schaffe, Schaffe Häusle baue’ (roughly, “Work, Work, Build a Little House”) by ‘60s German pop star Ralf Bendix.
Varus also expects to see management changes and consolidation in sectors which have yet to recover from the 2009 crisis. “We believe restructuring cases will be back in focus of investors, once the economic development becomes again more predictable. Aperam, Beiersdorf, Carrefour, Celesio, HeidelbergerDruck.” The tune is Bob Dylan’s “The Times They Are A’Changin’.
The fund expects the German export and luxury segment to slow “on a weaker wealth creation effect.” Companies that benefited most from Chinese demand in 2011 will miss it in 2012, as a result of the Chinese debt crisis. The song? David Bowie’s “China Girl.”
Jim Morrison may not have been referring to companies breaching their covenants when he sang “This is the end,” but Varus’ managers think he could have been. They expect deteriorating business momentum in Q1 and Q2 2012, followed by the impact on cash positions, will cause several firms to breach their covenants leading to more capital increases.
Fund managers also see “interesting undervaluation” and M&A potential in Europe, amid falling corporate profit expectations—“Aixtron, Dufry, Lagardere,ThyssenKrupp.” All of which will take place to the tune of Moby’s “Signs of Love.”