CORE
Understand risks, identify opportunities
CORE stands for Corporate Ownership Risk Reward Evaluation — a tool that we developed in-house to analyse equities as accurately as possible, weighing up opportunities and risks from the perspective of long-term investors who are led by the fundamentals.
First of all, we determine the quality of the company in question by looking at its competitive situation, its growth potential, its financial leeway and its management. We then draw success indicators from this analysis. A particularly important factor for us is the expected development of free cash flow — that is to say, the amount of a company's profit that, in simple terms, is left over for shareholders for dividends or share buybacks, for example.
We then compare our expectations of the future cash flows with the current stock market price and ask ourselves: Does this adequately reflect the long-term value of a company? Might the equity be valued favourably when measured against our expectations, or is it too expensive? A good company does not necessarily have to be a good investment.
RATES
Keeping an eye on the full potential
RATES stands for Risk Reward Analysis and Tactical Evaluation System – a tool that we have developed internally to assess the attractiveness of bond investments as precisely as possible. We do this by analysing the various yield components of a bond individually.
Firstly, we use RATES to gain a precise picture of what we consider to be the most important drivers for the bond markets, such as interest-rate movements in the various currency areas, which in turn are influenced by local central bank policy or the bond issues of countries that use them to finance their budgets.
From this, we then derive various scenarios for the coming 12 months, a period that is deliberately chosen to be short. We do not make point forecasts but rather define a relatively broad forecast corridor.
We then look at some dynamic effects, such as the shape of the yield curve. At the end of the analysis, we then define the so-called “sweet spot”, i.e. what we consider to be the most attractive point on the yield curve in a currency area – and therefore also the most attractive bonds
RED
Being aware of the impact on humans and nature
RED stands for Review and Rating of External Damages – our in-house assessment of sustainability aspects. We use this to understand the ecological and social footprint of a company and derive potential opportunities and risks.
In order to best assess a company’s impact on humans and nature, the most important sustainability factors are analysed – both quantitatively and qualitatively. These include greenhouse gas emissions, energy, water, employee matters and compliance with international standards. The focus of the assessment is on how a company manages its negative impacts, which can influence the long-term development of a company.
We expect companies to deal with the consequences of their activities in a responsible manner and actively counteract any negative impacts. This also includes setting appropriate climate targets and upholding generally accepted values. As an active owner, our mission is to accompany companies on this journey and work towards making improvements.