Focus on Allianz European Growth Equity Fund

A renewed stability in the team allows us to be more positive on this fund.

The team responsible for the Allianz Europe Equity Growth fund is of high quality, led by the experienced and well respected Thorsten Winkelmann and has regained some composure after several changes since 2017.

This justifies raising the rating from “Average” to “Above Average”.

As a result, some of the fund’s cheapest stocks are rated “Bronze” by Morningstar analysts, while the more expensive stocks remain rated “Neutral.”

Winkelmann leads this high caliber team of 12 people, mixing experienced members with talented but younger members.

It has undergone several changes since 2017, but is now back on a stable footing.

Until 2017, Winkelmann led this team alongside the equally experienced Matthias Born, who, however, left the company in 2017 together with Martin Hermann.

In the same year, the team’s remit expanded with the launch of a global product, while the team’s original experience was in European equities.

Further changes to the team took place in May 2020, with the Global Growth team being formed by merging this European Equity Growth team with Allianz’s Global Equity team.

While this added global equity experience and analytical resources to the team, four members of the former Global Equity team left the team in 2020 and 2021.

However, the team has been strengthened with two new hires in 2019 and one in 2021; According to Winkelmann’s hiring policy, these are young people who are trained in his philosophy.

Although staff turnover and team reorganizations have weakened our belief, we are now reassured that Winkelmann has guided the team towards greater stability and we believe it is now well resourced.

The strategy’s approach is well established and proven, employing a process that uses a well-defined quality growth approach to stock selection.

The pure bottom-up approach relies on finding companies that are structurally capable of generating superior earnings and cash flow growth that the market has not yet fully priced in or that have fully priced in an action.

While strict adherence to these quality growth characteristics does not go without valuation awareness, this strategy’s portfolio may be valued higher relative to its peers and benchmarks, which it was from late 2020 to May 2022.

The adherence to these quality and growth traits is reflected in Morningstar’s style box, where the conviction portfolio of 50-70 stocks is at the far right of the growth column.

The benchmark-independent and purely bottom-up portfolio construction method can result in different sector allocations.

The technology sector was a clear team favourite, while few stocks in the financial sector met the approach’s selection criteria and the team has shown significantly less enthusiasm for stocks in the defensive consumer sector in recent years.

During this time, the portfolio may also exhibit a small-cap bias.

The performance of this strategy was exceptional during Winkelmann’s tenure.

The distinct quality growth profile and high-conviction portfolio can sometimes face headwinds, such as in the first five months of 2022.

The longer-term record remains impressive, exceeding all relevant criteria on a risk-adjusted basis.

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