"Crises create investment opportunities", Aurel Bernat, CEO BT Asset Management

Our colleague, Aurel Bernat, CEO BT Asset Management, gave an interview to the publication Bursa about investing in equity funds, the risk appetite of investors and the returns that can be achieved. We have also taken the interview here, enjoy 😊!

BT Maxim is a high-risk fund for those who are exposed to risky assets in the capital markets. Specifically, what are the expectations an investor should have of the fund, in terms of return and risk?

Typically, clients who choose to invest in such funds look for the potential of a high, possibly double-digit return. In this context, they should bear in mind that there may be negative developments in the short term, but if they stick to their long-term investment strategy, they can achieve the proposed return targets. At the same time, they need to understand that in negative times, volatility is usually high and this can be an opportunity to buy at good prices, looked at over the long term.

What are the criteria or methods you use to identify companies with the highest growth potential at undervalued prices?

BT Maxim is a fund with exposure to local stocks listed on the Bucharest Stock Exchange. The analysis department constantly monitors companies on the market, primarily on fundamental criteria (financial results, changes in the market in which the company operates) and technical criteria (timing of an increase or decrease in exposure). When we identify a company with growth potential, we move on to the next stage, which is to propose an investment to the Investment Committee.

According to the description on the BT Asset Management website, a priority of the BT Maxim fund manager is to dynamically adjust the equity exposure in order to benefit as much as possible from periods of growth, but also to avoid some of the declines during difficult market periods. Can you detail some of the strategies or techniques you use to achieve these goals (mitigating losses in periods of market downturns and benefiting as much as possible from periods of upswings)?

BT Maxim is an equity fund in which at least 85% of assets are invested in equities. During periods of market uncertainty, we aim to keep the equity exposure in the minimum range (85%) and keep cash reserves in bank deposits to ensure sufficient liquidity for the fund. The fund's main investments are in large, stable companies that are resilient to periods of crisis. During market booms, we also allocate part of our resources to smaller, dynamic companies with upside potential and a higher equity exposure.

In BT Maxim's portfolio, the banking sector is the best represented - both at the end of November and last year, three of the top five holders were banks, accounting for around 25% of total assets under management. What are the factors that led you to adopt this position in the current context?

Typically, the two local banks listed on the Bucharest Stock Exchange are among BT Maxim's important holdings, as they are representative companies for the local stock exchange. In the last year, we have also substantially increased our exposure on the third bank issuer (n.r. Erste Group Bank), with acquisitions being made at attractive prices. The appreciation of securities in the last period has resulted in an increase in the share of this sector in BT Maxim's assets.

How did BT Maxim fund investors react to the outbreak of the Covid-19 pandemic in February-March last year and subsequently during the recovery from the market falls? How do you explain the trends?

Investor reactions were positive, even above expectations, given the context. We managed to have a high stability of their invested resources and we even saw additional investments amid falling valuations. The explanation comes from the fact that most equity clients had gone through the experiences of the past 2008-2009. Crises create investment opportunities, and those convinced of this continued to be investors.

What advice do you have for someone who has never invested in equity securities before?

When deciding to invest, it's a good idea to diversify your investments. It is also very important to be able to invest on a regular, recurring basis, so that they can take advantage of opportunities that arise and be able to buy at attractive prices at times of negative market trends. Another very important element is the comfort that clients must have with the stock market. Volatility is a good example, we should not shy away from it, but rather understand it as a natural element in a market of supply and demand. But the main starting point remains that investments in equity funds or listed shares are long-term investments.