Tareno AG

Tareno Global Water Solutions Fund Februar 2020

Tareno Global Water Solutions Fund February 2020
Markets picked up positive momentum over the first weeks of February with major indices, as well as the Tareno Global Water Solutions Fund, hitting fresh all-time highs. Around the middle of the reporting period, markets started to roll over. The surprising success of Sen. Sanders during the first round of polls and the corona “infodemic” led to heavy selling and a flight to quality that pushed interest rates of major economies to levels not many participants would have expected to see. Amid a highly fluid situation such as the corona virus spread, fundamental data are of little help as they are mostly backward looking. Stocks started to price a substantial impact on the global economy, with (so far) only few experts mentioning a potential recession. We have learned from conversations with companies in our portfolio, that the impact of the disruptions due to the closing of factories in China is hard to quantify.
The earnings reports we got during February painted a mixed picture and in some cases failed to meet expectations. Companies positioned in the industrial vertical saw declines in orders due to capex being delayed in the wake of uncertainties around the usual suspects: trade tensions, Brexit, and geopolitics. The good news is that the majority of the companies confirmed their outlook for 2020. The construction vertical is supported by the persistently low interest rates and the heightened expectation of further central bank easing. On the commercial side, hospital and healthcare projects could see a boost. The municipal vertical is likely to see a continuation of the uptrend. Capital spending for water and wastewater infrastructure is unlikely to face cuts near term, as projects are usually planed on 3 to 5 year horizon.
The uncertainty that currently dominates the market affects the water universe as well. We decided to reduce our exposure to industrial names with a cyclical profile. We invested the proceeds in companies with defensive characteristics, mostly utilities in the US and the UK.
Best regards
Stefan Schütz
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Stefan Schütz leads the equity research team consisting of 6 analysts, and is responsible for the European and US industry sector. He has over 20 years of experience in equity research and asset management. Stefan Schütz started his career in the finance industry in 1997 at Bank CIC. He joined the Tareno Investment Team shortly after the inception of the Tareno Global Water Solutions Fund in November 2007. Stefan Schütz is Certified International Investment Analyst (CIIA).