Aligning Interests
AppleTree Capital LLP is an awarded independent financial advisor, specializing in Emerging Markets and Absolute Return strategies. Recently, we profiled the firm and spoke to Managing Directors, Michael Nicoletos and Dimitris Apistoulas who provided us with a detailed insight into the inner-workings of the award-winning company.
Established in 2010, AppleTree Capital was launched by its two founding partners, Michael Nicoletos and Dimitris Apistoulas. Prior to AppleTree, the two co-founders worked together in Greece’s top broker (EFG Eurobank Securities) covering Eastern Europe and advising institutional investors and high net worth individuals.
Following the Lehman events of 2008, the two co-founders, who had identified many of the early signs of the impending crisis and advised their clients accordingly, decided to launch their own asset management company.
After six years of successful operations and a record year in 2015 (net return of AppleTree Capital’s flagship fund: +35%), AppleTree Capital moved its HQ to London embarking in a new effort to diversify its portfolio of products and gain critical mass.
“Here at AppleTree Capital, we focus primarily on Emerging Europe, a niche part of the Emerging Markets world, which is often overlooked by the traditional Emerging Markets funds.”
The two founding partners, with a joint experience of more than 30 years in research and investing recognize the challenges of successful investing and the volatility that this entails.
“Emerging Markets have tremendous potential and equally interesting challenges,” Michael and Dimitris argue.
“AppleTree Capital’s core mission is to deliver superior risk-adjusted returns for investors who place their trust in us to navigate their investments while adopting best industry standards. This is ensured by our commitment to transparency and by cooperating with renowned business partners in every step of the way.”
“AppleTree Capital’s core mission is to deliver superior risk-adjusted returns for investors who place their trust in us to navigate their investments while adopting best industry standards. This is ensured by our commitment to transparency and by cooperating with renowned business partners in every step of the way.”
The founding partners shared their experience during the early days when they were trying to set up their own asset management company in the aftermath of the global financial crisis.
“Many of our potential investors had suffered during the financial crisis as they were caught into products or fund structures that failed to protect or to provide them with adequate transparency in times of extreme turmoil. We never believed in complex structures or “fine-prints.” Attractive returns can be achieved with simple, comprehensive structures that above all ensure transparency and liquidity. We vouched to set up our company and funds adopting best practices even though we were a small start-up firm and costs were substantial.
We do not regret for a second the fact, that at the time, we decided to set up a structure with higher costs for the sole purpose to reassure investors that the structure of their investment would be safe.
We consider investors as our partners, and in turn, they continue to place their trust in us on good times and on bad times. Aligned interest is a standard line in our industry. However, we believe that few companies indeed adhere to this simple yet fundamental rule. We prove our commitment to it, every day.”
Asked to comment on their investment approach, Michael and Dimitris gave us some insight on the inner workings and their investment methodology.
“Having worked and invested in emerging markets for years, we have established a good understanding and a constant stream of information from the ground which we use to generate ideas and enter into thematic trades with attractive risk/ return characteristics. Mispricings are more common in this part of the world as many of these markets are overlooked by the larger players, creating opportunities for arbitrage. Extensive valuation work, road trips and keeping tabs on political developments that might signal significant changes in economic policy, are our main tools.”
But, nothing ever works like clockwork, both argue. Moreover, the key is to remain focused when things do not turn out as expected. Investing in these markets is a long game and patience is vital.
“We have had good years and bad years, and this is something that we have learned to live with, as we are active managers, investing according to our conviction. In some cases, our convictions have been correct, but the timing has been wrong. In other instances, we have been just wrong. But what matters at the end, is that our investors know that we always do our homework, our views are communicated to them, and our interests are fully aligned. Moreover, because of our hedging strategies, when markets turn sour, our portfolios tend to outperform significantly.”
“We are truly Alternative Asset Managers, in the sense that we are very flexible, changing the portfolio’s net position from long to short swiftly according to our conviction. We see things from a topdown approach, looking for the catalysts that can affect countries and sectors within our geographical universe. We then proceed with extensive analysis of our preferred exposures (trickling down from long or short on countries, to sectors and specific names) to implement our strategy, reflecting our view of the world. This is what really made a difference this year and distinguished our performance from the competition. We were amongst the first to identify that Turkey was stuck between a rock and a hard place and kept our conviction even though it was working against us during the first three months of 2018. At the end and despite the initial “pain” we were proven right. We hold a similar conviction on Greece after the recent rally in prices. So far, it is not working as expected but having done our homework, we hold our conviction that investors are way too complacent.”
In 2018, AppleTree Capital’s flagship, the Violet Emerging Markets Fund yielded a net return of +10.28% in USD terms during 2018 vs. a -18.90% drop of its benchmark, the MSCI EMEA.”
Moving forward, Appletree Capital hopes to build upon the success which it has accumulated since its inception, which includes being selected in Acquisition Intl.’s 2018 Global Excellence Awards, where it was righteously awarded the accolade Emerging Markets Financial Adviser of the Year – 2018.
Company: Appletree Capital LLP
Address: 104 Lancaster Gate, W2 3NT London, United Kingdom
Email: info@appletree-capital.com
