By Ulrik Falkenstrøm, COO & Vicepresident
MEGATREND INVEST

Hvordan er din risikoprofil? Foretrækker du en lav risiko, som medfører et begrænset eller lavt afkast, eller er du risikovillig og går efter et højt afkast? Det er typisk det valg du skal træffe, når du står med muligheden for at investere i enten traditionel eller alternativ investering. Det er der ingen tvivl om, men ikke desto mindre er det måske nok en anelse mere nuanceret.

Alle vil naturligvis gerne have det højst mulige afkast, og det er der gode muligheder for, når man vælger alternative investeringer. Samtidig skal man dog være opmærksom på, at det aldrig bliver risikofrit. Men der er mulighed for at minimere risikoen ved at træffe de rette valg og sikre en spredning af både den samlede investeringsportefølje og den del, der eventuelt afsættes til alternativ investering. Her er 4 gode råd i forbindelse med alternativ investering:

Vurdér eksisterende trends og vær kritisk og selektiv i dit valg. Nogle teknologier og områder vækster lige nu. Bioteknologi, sundhed og eksempelvis også et område som kunstig intelligens er oplagte. Hold også øje med nystartede virksomheder indenfor disse områder. Uanset hvilket område, du foretrækker, har det bæredygtige også høj fokus, og alt tyder på, at dette område får endnu større præference fremover. Ja, det er næsten umuligt at forestille sig, at det ikke gør, for en stor del af den yngre generation tager ansvarlighed og bæredygtighed som en selvfølge, og det vil selvfølgelig påvirke efterspørgslen.

Et potentielt højt afkast af alternative investeringer kan være fristende. Men det mest fornuftige er at sikre en fordeling af investeringsmidlerne på traditionelle og alternative investeringer. Et godt råd er, at ca.10% placeres på alternative (unoterede aktier) og resten på det traditionelle område (obligationer og noterede aktier). Du kan læse mere om porteføljespredning i artiklen af Søren Rytoft fra MEGATREND INVEST.

Det gælder som med alt andet, at lægger du alle æg i én kurv, er risikoen for tab også større. I forbindelse med din alternative investeringsdel er det derfor vigtigt at få spredt dine investeringer ikke bare på de rette virksomheder, men også på flere forskellige. Det reducerer risikoen yderligere.

Uanset hvilken porteføljefordeling du vælger, er professionel rådgivning af stor betydning. Her er det vigtigt at læne sig op ad rådgivere med en stor viden, og rådgivningen skal derudover også være baseret på stor og solid praktisk erfaring.

I MEGATREND INVEST investerer vi i de allerbedste kapitalsøgende danske iværksætter- og vækstvirksomheder. Vi investerer kun i ansvarlige og bæredygtige virksomheder inden for 9 udvalgte megatrends i verden. En investering i iværksættervirksomheder er forbundet med en risiko, men ved at sprede risikoen på mange nøje udvalgte investeringscases, reduceres risikoen markant.

Det ser vi som den bedste strategi med hensyn til at fremtidssikre og få det optimale ud af en alternativ investering.

05.08.2020

The Council for Return Expectations has just published a new report, in which they make some suggestions for future returns across asset classes. The report is used by pension companies and banks to compile investment forecasts and is a good starting point for an overview of recommendations and opportunities right now. The Council sets societal expectations for returns in available asset classes over the next ten years and is a useful tool for investors.

The report is particularly interesting because it compares the different asset classes available on the Danish market. The report is published twice a year and indicates an average of 4 different international expectations for the global financial markets. Based on the recent report, the expectations are as follows:

Expected annual returns in 1-5 years and 1-10 years term:

Source: Council for Return Expectations June 2020

When composing your portfolio, it is always important to spread your risk across several of the above asset classes. The very low-interest rates and the consequent low return expectations should be carefully considered before deciding what to invest in.

Equities have shown great momentum and have returned after the Covid-19 dive into the markets, and now it is at record levels. The skyrocketing in equities is now probably due to a lack of alternatives due to the low-interest rate level. Therefore, the high level of equities must be followed closely because the effects of corona can still have a significant impact on future financial results.

Asset classes with higher risks such as EM shares and private equity should be included in a diversified portfolio. It is up to the individual investor’s risk appetite to determine how much they can invest in these asset classes.

I have in a previous post written about allocation to different asset classes. LINK. At the time, I concluded that a distribution in the traditional asset classes for both equities and bonds should make up 70-80% of one’s portfolio.

That said, it is also my position and recommendation that both real estate and private equity (unlisted stocks or alternative investments) should be included. Properties have a very small correlation to other of the mentioned asset classes and are a long-term investment. Private equity has a potentially high return without being notably correlated with other equity products. The chosen distribution will, of course, also be affected by age, where you are in terms of investable funds, and how high a risk you want to take.

MEGATREND INVEST is a venture company that invests in sustainable companies within specific megatrends. Our starting point is alternative investments in the form of unlisted shares with a view of investing in startups, where potential companies are carefully selected based on thorough due diligence. We believe that the companies we invest in will perform better than average based on active co-ownership. Our business is targeted at sustainable investments within specific megatrends with a future perspective. Investing in unlisted shares in sustainable entrepreneurial companies is the same as investing in the ideas that will ensure the development of our planet for many years to come.

Read the rapport from the Council for Return Expectations here.

Knowing where different shares types differ is essential to create a robust portfolio with diverse investments.

Owning stock is the same as owning a share of a company. Thus, when you buy a share, you become the co-owner of the company in question. The ownership entitles a part of the company’s share capital and, as a rule, gives voting rights at the company’s general meeting. A stock can be listed; that is, it is registered that you bought this particular stock, and it gives you access to accounting and other information from that company.

Some companies have divided their shares into several classes of shares, typically Class A- and Class B-shares. A shares often have a higher number of votes than B-shares, and in contrast, B-shares may have a higher dividend than A-shares.

An unlisted company is not traded on a stock exchange, which is why the marketability is significantly lower than on the stock exchange. Therefore, the buyer has to find a seller to buy the share and vice versa when selling.

The price of an unlisted share is often an expression of the company’s intrinsic value divided by the number of shares with a deduction or surcharge depending on whether it is a purchase or sale. As there is no market price to evaluate the company’s value, the intrinsic value of the company is often what the share price is based on. This is usually calculated only once a year in connection with the closing of the annual accounts. The price can also be set based on expectations of the company’s future earnings and the limited possibility of marketability of the share. This method can give a value that differs markedly from the intrinsic value.

The return on shares consists partly of stock dividends from the company and partly of changes in price over time. Dividend is an expression of how much of the company’s profits are paid to shareholders. The size of the dividend is decided at the company’s general meeting. The change in price is an indication that the value of the stock fluctuates over time.

The determination of an unlisted share’s trading price can fluctuate significantly in relation to net asset value, depending on how earnings expectations in the company in question develop. These expectations are affected by the general economic situation and the development of the market in which the company is located. In the worst case – if the company goes bankrupt – the investor can lose the entire amount invested. Risk can be divided into company, market, and currency risks.

Company risk is the risk associated with the individual company and can, for example, be earnings difficulties, dependency on particular customers, key people, or other challenges.

Market risk is a risk common to all companies or groups of companies engaged in the same area. These are external events or changes that affect all companies within individual industries or in a single country. For example, it can be cyclical movements, interest rate developments, or political factors that change the market situation in a particular industry.

Exchange rate risk is the risk of fluctuations in the exchange rate of shares traded in another currency. Consequently, the exchange rate risk is not present for unlisted shares traded in Danish kroner.

When investing pension funds, be aware that special rules apply to how you invest your savings. There is the following ceiling on how much you can invest in unlisted shares:

• 20% of pension assets under DKK 2 million saved in the same bank
• 50% of pension assets between DKK 2-4 million saved in the same bank
• 75% of pension assets over DKK 4 million saved in the same bank. Also, the individual investment must be at least DKK 100,000, and the investor must not own 25% or more of the capital of an unlisted company.

Contact us for further advice on this.

The tax treatment of return on equity investments differs depending on the type of funds you use for investment. There is a difference in the taxation of return on shares, which comes from investing in free funds, pension savings, child savings, or corporate assets, respectively. Shares are not suitable for investing funds in the corporate scheme. The tax treatment may vary and change depending on your tax circumstances or as a result of changing tax rules. We recommend contacting an adviser about the tax consequences of an investment.

Love can be a fickle thing. Our partners at Wholi fell in love with their name, but as they said themselves, others loved it first. That’s why they changed their name to Hey Planet.

Hey Planet’s mission has been clear from the start. Create a sustainable food system that reduces the toll on the planet. Conventional farming, global warming, and increasing populations don’t mix too well. Hey Planet brings a solution to the table without turning the world upside down.

Health & Food is one of the nine megatrends that we focus on in MEGATREND INVEST, and Hey Planet is a stellar example in this category.

Take a look at their new website and follow along for great deals, as they rid old inventory and bring forth new and even better products.

SolarSack just won a Danish Design Award 2020 in the category Save Ressources! A big congratulation goes out to you! It is truly deserved and well done!

If you haven’t read why SolarSack won, you can understand why here.

SolarSack is not the only great company that won an award this year. A big congratulations go out to the other winners as well. Danish Design Awards gave awards to companies and projects such as Too Good To Go, Ørsted (360 VR Space Safari), Lego Education Spike Prime, E-ferry, and more.

SolarSack is nominated for a Danish Design Award 2020 in the category Save Resources. We are incredibly proud of SolarSack and do understand why the Danish Design Award finds the solution elegant and excellent.

Here is what the jury said about SolarSack:

View the nomination here.

The recent equity market selloff caused by the expanding Covid-19 virus and the OPEC Russia initiated oil price reduction, has impacted everyone. The impact of Corona is, especially in Europe, currently changing the everyday routines of many people. The anxiety in the population and the drastic measures initiated by governments combined with the uncertainty of how long this will continue, brings even basic changes to many people.

The equity volatility has been massive and the question where and when do I reinvest my money is one of the questions which are very difficult to answer.

The basic argument of portfolio diversification is key to maintain the value of your portfolio and will minimize the impact of market meltdowns. This is key in keeping the overall risk on your portfolio within limits and at the same time be invested in companies with innovative products on the long-term. Not by any means will it keep you out of trouble when financial markets go into panic mode, it will only mitigate your losses. The basic asset classes are equity and fixed income. Additionally, you can invest in derivatives and alternative investments covering a lot of different possibilities.

Unlisted stock in mature start-up companies is one of many diversifiers available to investors. For a long time, the asset class private equity, has only been available to institutional investors. MEGATREND INVEST is among a number of companies offering investments in sustainable private equity to family offices and private investors. The benefit of private equity is that correlation with listed equity is low. Correlation, in the finance and investment industries, is a statistic that measures the degree to which two securities move in relation to each other.  One of the main reasons that private equity is less correlated is that liquidity is much lower. Contrary to listed equity you do not have access to real-time quotes on private equity as well as an abundance of company information to influence pricing.

Data Source: Bloomberg
Correlation is a measure that describes the linear relationship between, in this case, two asset classes. The closer to value one the two asset classes are, the more simultaneous they move.

The numbers above are sourced over a 10- year period ending in December 2019.

The availability of mature growth companies with established cash-flows are spread across many sectors.  We concentrate on companies with a proven concept and investing in these companies promotes ideas, which will bring our world forward during the next decade.

If you compare the performance of private equity and listed equity across a 5-year, 10 year and 20-year period, private equity comes out on top. The annualized performance averages between 9,8% and 13,1% between MSCI World Index and the Global PE index.

The optimal portfolio construction between listed equity, fixed income securities and private equity/venture capital measured in relation to risk/return (standard deviation 10%) would be 30% fixed income, 60% listed equity and 10% private equity/venture capital. History indicates many reasons why investors should include private equity/venture capital into their portfolio and yet only a minority does so. 

In order to purchase private equity/venture capital, you must be categorized as an accredited investor fulfilling demands setup by the FSA in any investors home country. There is a significant risk when investing in private equity such as limited liquidity and longer tie-up periods. 

MEGATREND INVEST is a Copenhagen based well consolidated provider of capital between investors looking for alternative investments and start-ups and growth companies seeking capital. Our investment companies must conduct a responsible and sustainable business based on 9 leading megatrends in the world. This benefits the company and the society and contributes to an investment in the future focused on sustainable products and solutions.

Søren Rytoft, Senior Investment Advisor

2020.04.16