C WorldWide Asset Management (previously Carnegie Asset Management) was created in 1986 as part of the Carnegie Group. The company was spun out of Carnegie Investment Bank in 2009 and the name changed in 2017. C WorldWide is 80 percent-owned by private equity fund Altor Fund III and 20 percent-owned by employees.
Today, C Worldwide manages around $20 bn in global equities for institutional clients in the Nordic region, the UK, Canada and Australia. Its main portfolios are highly concentrated, with just 30 stocks held. The investment approach is bottom-up stock-picking and concentrates on stocks above $10 bn market cap, while the average market cap is nearer $100 bn. The focus is on companies generating free cash flow and earnings growth. In addition to the concentrated global equity strategy, the firm has an ethical and long/short version of the same strategy plus several more specialized strategies, including global healthcare.
Bo Knudsen is managing director and global portfolio manager at C WorldWide in Copenhagen, Denmark. He has worked with portfolio management of global equities since 1989. Prior to joining C WorldWide in 1994, he worked for five years as a global portfolio manager with Danske Capital in Copenhagen and ultimately held the position of head of international equity investments. In 1998 he joined Nordea Investment Management as executive director and head of equities, and rejoined C WorldWide in 2001 as global portfolio manager.
HOW DOES C WORLDWIDE FIT INTO THE DANISH INVESTMENT MANAGEMENT WORLD?
We’re in the growth or growth-at-a-reasonable-price camp. I see a global competitive landscape; there is a very well-developed institutional investor base in Denmark’s capital. Copenhagen and the Nordic region more generally are very globally oriented, which is why we look for companies worldwide, because local stock markets are limited in terms of market cap. We have a truly global perspective: early in my career I looked only at Danish equities but to understand Maersk, for example, you have to understand the world. Denmark is a small country, but we live off exports and international relations, so a global outlook is an important characteristic of the industry in the Nordics.
YOU HAVE ASSETS UNDER MANAGEMENT OF $20 BN. WHAT PROPORTION IS IN EQUITIES?
All of it. We have 73 percent in global equities and some Asian and Nordic strategies. The majority of our assets are segregated accounts.
WILL ASSETS UNDER MANAGEMENT GROW?
A healthy business is a growing business but our number one priority is our existing clients. We think we can further grow assets in our global strategy, but we will take up the dialogue with our existing clients as they have opinions about our capacity. We are selectively introducing new products that fit our core DNA. It is important to have a growing business to retain and attract employees.
WHAT IS THE DIFFERENCE BETWEEN THE C WORLDWIDE GLOBAL EQUITY FUND AND THE C WORLDWIDE GLOBAL EQUITIES ETHICAL FUND?
The ethical fund started back in 2000 – we were one of the first to focus on ethical investments. It was basically a negative screen but over the years we have integrated ESG into the way we operate. We have worked with GES International [now owned by Sustainalytics] since we launched the product. Quite early on in Scandinavia, there was a push for ethical investments and now there are strong tailwinds across the world supporting a more sustainable investment agenda. Many of our new segregated client relationships over the past five years have ethical constraints.
WHAT DOES THE C WORLDWIDE OFFICE IN SWEDEN DO? ARE ALL THE FUND MANAGERS BASED IN COPENHAGEN?
There are global fund managers in both Copenhagen and Stockholm, but Copenhagen is generally the first point of contact. A general invitation goes out as we have a shared calendar but global healthcare equities and Swedish equities are of particular interest to our investment colleagues in Stockholm.
ARE THERE ANY GEOGRAPHIC OR SECTOR SPLITS WITHIN THE GLOBAL EQUITIES TEAM?
All portfolio managers look at investments through a global lens because we want to have portfolio managers who can compare a Brazilian utility with a Swedish pharma company. These capabilities are best developed when you are exposed across sectors and geographies. At certain times in your career, you can have a particular focus or specialty, but we do not monopolize.
I tend to look more at financials, but I am obliged to include everyone as it is key to finding those 30 stocks we invest in, and we decide as a team. We highlight the pros and cons and have a collegiate approach. The better educated we are and the more globally aware we are, the better decisions we can make. Not that many firms out there have our cumulative experience.
HOW MANY STOCKS DO YOU HAVE IN YOUR INVESTMENT UNIVERSE?
We look at stocks under $10 bn and have a universe of 700 names that we think are interesting and have unique characteristics. We use both quantitative and strategic screens to help our analysis. The particular characteristics we look for are better identified by industry and company-specific knowledge so we look for companies that have strong tailwinds – a strong leading position in their industry, for example, and a sustainable position in the company’s competitive landscape. A company of interest would likely have a higher return on capital and return on equity as a result of its strategic positioning.
HOW DO YOU INCORPORATE ESG INTO YOUR INVESTMENT PROCESS?
ESG is fully integrated into our investment process. We prefer companies with a long-term orientation and sustainable business model, and ESG is a natural part of that analysis. It should be called GES because governance is the driving force of ESG. Good corporate governance, driven by management with a long-term orientation, motivates the right social and environmental priorities.
ARE THERE ANY SECTORS YOU CAN’T INVEST IN?
We can invest in tobacco in our core portfolio but not in our ethical portfolios. We do not invest in companies that have a significant proportion of their sales in defense-related products. All our institutional clients have restrictions around defense.
DO YOU VOTE YOUR PROXY?
We do if we are permitted to do so by our clients.
WHAT IS YOUR AVERAGE HOLDING PERIOD?
Usually more than four years.
WHAT IS YOUR ACTIVE SHARE?
It has never been less than 90 percent and is currently about 95 percent.
BUYBACKS OR DIVIDENDS?
We like companies that pay back either through buybacks or dividends. Although we like both, we prefer dividends, which have a more direct obligation and are a good discipline.
WHAT IS YOUR AVERAGE POSITION, AND YOUR LARGEST?
Our average position is around 3 percent and our largest is 8 percent.
CAN YOUR DISCUSS SOME OF YOUR EUROPEAN HOLDINGS?
Unfortunately, there is a problem in the world with diabetes. Novo Nordisk is the global leader in innovative products that help treat both diabetes and obesity, and that will be a driver in the future. Novo is treating diabetes in a more efficient way and the underlying business is growing. Plus it has the best technology/solution and is coming up with interesting new product launches.
Nestlé is a stock we have held for 30 years. We like the long product cycles of the core products Nestlé sells. We also think the company is good at adapting to the big changes in the consumer goods sector and adapting to the needs of the millennial consumer. Nestlé is planning to be in business for another 100 years and we like the true long-term orientation of the way it conducts its business.
CAN YOU DISCUSS SOME OF YOUR US HOLDINGS?
Home Depot is a very well-run company that is now enjoying tailwinds as the US housing market normalizes. We experienced the biggest downturn in US housing since WWII during the financial crisis and saw a big fall in activity, but now we are seeing house prices moving up and activity growing. We expect a continued normalization of the housing market, and Home Depot is exposed to that. It is very focused, with disciplined capital allocation, generating free cash flow and paying back shareholders.
Visa is enjoying the move from cash payments to electronic payments and is well exposed to this generational shift. It has the relationships borne out of the banking system and has the global reach and brand. It’s also bigger than Mastercard (more than double the size) by number of transactions and so has scale benefits – being a big platform is an advantage.
YOU RECENTLY ADDED AMERICAN TOWER. WHY WAS THAT?
It’s a platform company owning 170,000 communication sites across the world. To be able to transport data in this digital society, you need a physical network of antennas where mobile operators can rent space on the towers. And American Tower isn’t just in the US – it has a very strong position in India and other countries. With the boom in global data traffic, it is much more lucrative for a mobile operator to rent space with others rather than setting up and maintaining its own sites, and American Tower benefits from this need for mobile operators to cut costs and be efficient.
DO YOU HAVE TO MEET WITH MANAGEMENT BEFORE YOU BUY A STOCK?
We meet management as we think governance is key. We don’t just emphasize meeting with management, however – we also talk with people who know the company well, independent analysts across the board who have experience and history with management. We do not invest in many companies, so we have a rigorous due diligence process. Focus is our strength.
HOW DO YOU PREFER TO MEET MANAGEMENT?
We like to see managers in different environments as we also want to evaluate what they do. The key is long-term capital allocation. You can meet a very charismatic CEO, but it is not enough; you need to evaluate his or her actions. Success in investing is also evaluating how the firm allocates capital, so that it creates shareholder value over the next five to 15 years.
HAS MIFID II AFFECTED YOU?
Yes it has, and we embrace the increasing levels of transparency it has brought. We do not know about all the consequences yet – it is early days.
WHAT ARE SOME OF THE BEST COMPANIES AT IR?
There is so much great work going on out there, particularly among larger-cap names. Japanese company Hoya is a bit unusual. Japan is on a journey when it comes to improving investor relations and Hoya has been very good at explaining its complex business in the last 12 months.
DO YOU HAVE ANY TIPS FOR COMPANIES ABOUT HOW THEY SHOULD COMMUNICATE WITH C WORLDWIDE?
Take the long-term strategic perspective. We can read about the last quarter ourselves so we only want to hear about it from you in the strategic sense of whether the latest developments support the strategy – so give us a five to 10-year perspective.
WHY SHOULD CORPORATES TARGET C WORLDWIDE?
Because we are long term and take large positions.
Gill Newton is a partner at Phoenix-IR, an independent investor relations consulting firm that also operates CorporateAccessNetwork
This article originally appeared in the Summer 2019 issues of IR Magazine and Corporate Secretary