This is part four of a four-part interview with Philippe Desurmont Chief Investment Officer and Portfolio Manager of SMA Gestion. The interview is part of ValueWalk’s Value Fund Interview Series.

Throughout this series, we are publishing weekly interviews with value-oriented hedge funds, and asset managers. All the past interviews in the series can be found here.

Interview With The CIO Of SMA Gestion
Interview With The CIO Of SMA Gestion

SMA Gestion is the asset manager of insurance company Groupe SMA. The firm manages in excess of €20 billion and its leading fund has outperformed the Eurostoxx 50 index by an average of 5% per annum net of fees since its inception 2005. This impressive performance places the fund in the top five best-performing European equity funds since 2010.

The interview has been divided into several parts and is downloadable as a PDF at the bottom of this page. Stay tuned for the next interview in the series.

Interview With The CIO Of SMA Gestion [Part 1]

Interview With The CIO Of SMA Gestion [Part 2]

Interview With The CIO Of SMA Gestion [Part 3]


Interview With Philippe Desurmont CIO Of SMA Gestion [Part 4]

Continued from part three…

According to your July tear sheet, around 11.5% of the fund was invested in three European pharmaceutical giants. What do you find so attractive about this sector?

Several years ago the fund invested in ROCHE (Switzerland), Novartis (Switzerland) and Sanofi (France) at substantially lower prices and still holds these industry giants today. These pharmaceutical companies are good examples of businesses that meet our investment criteria. Their profitability is very high (with free cash flow greater than or equal to 20% of turnover!) and their outlooks remain attractive in the medium term.

Their valuation is very reasonable at present due to comments made by Hilary Clinton regarding strengthening the supervision of the health sector in the US if she is elected president. We believe these fears are overblown and will prove temporary.

The choice of three companies rather than one diversifies our risk associated with one drug. Do you remember in 2004 Merck lost more than 40% of its value after the announcement of the recall of its flagship drug Vioxx anti-inflammatory? These are the kind of risks we want to diversify away from.

Do you think there are still plenty of interesting opportunities to be found in European equity markets despite the region’s macro troubles?

Because of the polarization phenomenon in the market between companies that are ‘interest rate proxies’ and the rest, we now find very few stocks to buy that meet both our quality criteria and valuation. We have however identified investment opportunities among unloved and in particular among those engaged in a restructuring process (these types of investments don’t exceed 25% of the portfolio). These include TELECOM ITALIA (Italy), GfK (Germany), Premier Farnell (UK), Stallergenes (France) and Vallourec (France).

Overall, we are very confident in the prospects of our portfolio.  It’s comprised of companies that have higher returns and better fundamental quality (competitive positions, management quality, etc.) than the market and yet is cheaper than the market average.

That’s all we have time for today. Thank you very much for taking part in ValueWalk’s interview series.

Thank you for your interest in SMA Gestion.

See full interview with Philippe Desurmont below