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France’s Vincent Strauss on the Alibaba IPO and Why Warren Buffett Isn’t the Role Model He Once Was

Jocelyn Jovene, the editor of Morningstar.fr, interviewed Strauss on July 31. Answers have been edited for length and clarity.

Morningstar, 10/30/2014

This article originally appeared in the October/November 2014 issue of Morningstar magazine. To subscribe, please call 1-800-384-4000.  

Vincent Strauss is one of the mutual fund industry’s longest-tenured emerging-markets managers, having invested in developing countries for much of his 35-year career. He is currently the chief executive officer of Parisbased mutual fund company Comgest Group, where he helps run the Gold-rated Comgest Magellan and Comgest Growth Emerging Markets funds. He has a Ph.D. in economics from HEC Lausanne.

1. What would you be doing right now if you hadn’t become a fund manager?
I could not imagine doing another job. Investment is my job, my hobby, and my mistress. I managed to get my wife, my daughter, and my mistress under the same roof…quite an achievement!

2. You have a advanced degree in economics. Does the current generation of young people need such an advanced education?
I do not believe it is mandatory. To succeed in this industry, you need common sense, curiosity, and be hard-working. It may help to have a background in economics, especially at a time when central bankers get lost themselves.

3. To borrow from Warren Buffett, are you currently being greedy or fearful?
We are not that greedy these days. It would be difficult to tell investors that financial markets are dirt cheap. What is currently missing for a lot of companies is top-line growth.

4. Would a rise in U.S. interest rates affect your portfolio?
It should not impact our companies substantially because our companies are net cash or with a low level of debt. The impact may be global with outflows getting out of emerging markets.

5. Are you finding more opportunities in developed or emerging markets?
We tend to be contrarian. In 2009 and 2010, our recommendations were cautious regarding emerging. Today, we are more constructive on emerging-markets equities for valuation reasons and because developed companies desperately need top-line growth.

6. Which are the most promising emerging markets?
Economic growth comes from demographic growth plus gains in productivity. Looking forward, countries on a reform path will attract more attention, as the ideal macro scenario for emerging markets of the past decade does not exist any longer. If [Indian prime minister Narendra] Modi succeeds with his supply-side reforms, a number of companies will benefit.

7. Who has had the most impact on your investing career?
Warren Buffett has been, of course, a master. But no longer. The corporate governance at Berkshire Hathaway BRK.B is subpar and unacceptable. His position a few weeks ago regarding the vote on the pay package of Coke’s managers is shocking. Peter Lynch and Jean-Marie Eveillard have been smart and humble investors for decades.

8. What was your biggest investment mistake?
I made a mistake with Informatics in the late 90’s, a company listed in Singapore providing services in education. They were cooking the books to overstate the profits.

9. What are your thoughts on Alibaba?
One should expect excessive IPO prices for a fantastic business model, but beware what you buy. Investors will not get access to Alibaba’s shares directly. It may be simpler to invest in Softbank in Japan which controls 34.4 % of the outstanding shares.MOP>Vincent Strauss is one of the mutual fund industry’s longest-tenured emerging-markets managers, having invested in developing countries for much of his 35-year career. He is currently the chief executive officer of Parisbased mutual fund company Comgest Group, where he helps run the Gold-rated Comgest Magellan and Comgest Growth Emerging Markets funds. He has a Ph.D. in economics from HEC Lausanne.

10. What’s your outlook for France?
I like to compare my country with Japan: Beautiful countries with good food. Both have too many technocrats with too much power. Our country has all the assets to be a force in Europe. Unfortunately, our politicians over the past three decades were extraordinarily mediocre, hence France is moving toward becoming a “mediocracy”!

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