Tommaso Corcos, chief executive officer of Fideuram Investimenti, the asset management arm of Banca Fideuram in Italy, does not hide his enthusiasm when he talks about the sub-advisory agreement recently made with hedge fund Marshall Wace. The Italian fund house, whose E34bn fund assets are distributed exclusively through its proprietary private banking network, has appointed the London-based hedge fund to run a long-short equity mandate using the full powers granted by Ucits III.
“In markets which become increasingly more complex and volatile, the kind of products that will be most in demand will be those that employ the typical hedge fund strategies generating absolute returns, decorrelated from markets,” he predicts. The first long-short fund, or flexible fund, managed by Marshall Wace was launched in October to be deployed within the fund house’s insurance-linked products and gestioni patrimoniali (discretionary portfolios for affluent and high net worth investors). In 2010, a second retail fund employing the same strategy will be available to be sold off-the-shelves by the 4,300 private bankers of Banca Fideuram.
“We have been strong supporters of the theme of convergence between hedge funds and long-only for a number of years,” says Mr Corcos. “I am highly convinced that the hedge fund world has come out of the crisis strengthened.” However, for private individuals, who have generally been burnt by the illiquidity issues that many hedge funds faced last year, the preferred solution is the replication of a hedge fund strategy in the Ucits III structure, which embeds higher standards of investor protection, liquidity and transparency than offshore funds, says Mr Corcos. “I think you can re-channel a good amount of clients’ money if you can create suitable products.”
The fund house has proved it has no qualms in seeking third-party managers for asset classes which fall outside its core competencies. Earlier this year it appointed hedge fund player GLG-Partners to manage three Ucits III equity funds – US, Europe and emerging markets for a total of €1.5bn – within its gestioni patrimoniali. Goldman Sachs Asset Management (GSAM) has been running a tactical asset allocation product for the firm, a flexible growth fund currently worth E430m, for a few years. Fideuram Investimenti is now planning to sub-advise a convertible fund, which is on the launch pad for next year, anticipates Mr Corcos.
“We strongly believe that it would be just insane to manage everything in-house,” he says. Significant investments were made in the firm’s multi-management team, in charge of selecting funds and awarding mandates, since Banca Fideuram became an open platform in 2005. Earlier this year, the appointment of Mario Bortoli – previously general director at group company Eurizon Alternative – as head of multimanagement, further strengthened the division.
“I don’t see Fideuram Investimenti as a competitor of the BlackRocks of this world,” he says, talking about the third-party products offered by Banca Fideuram. “We are the bank’s financial intelligence centre, which manages certain products but also selects third-party funds and hounds out firms like Marshall Wace to manage a fund for us, in exclusive deals for the Italian market.”
Continued inflows
That the firm survived the financial crisis relatively well has to be ascribed to the full integration of the fund house with its distribution network, the good financial knowledge of its advisers and their close relationship with clients, believes Mr Corcos. At the peak of the crisis after Lehman’s collapse, in the last quarter of 2008, the firm bucked the deepening downward trend of the Italian fund market, registering inflows of €1.5bn. “The solidity and transparency of the firm has been rewarded,” he says. “Our private bankers favoured in-house products because of the absolute transparency on the positions of the individual funds.”
This does not mean private bankers have any hesitation in offering to clients third-party funds, if they are good or valid, clarifies Mr Corcos. “Unlike other bank-owned asset management firms in Italy, we have a very strong diversification between in-house products and third-party products,” he says. For example, of the €8.6bn in gestioni patrimoniali, third-party products and sub-advised funds represent €2.5bn. The firm also created a total return discretionary portfolio, entirely managed by five internal houses, currently BlackRock, Credit Suisse, GSAM, JPMorgan and Morgan Stanley. Each provider has the possibility to choose its own building blocks, within the asset allocation they devise. “We believe that each house knows its best performing funds but we monitor the risk and intervene in case the product selected does not convince us.”
Banca Fideuram’s strategy to push even harder in the high net worth arena has driven its asset management arm to provide more bespoke products and services to this traditionally lucrative market segment. Already one of the top five largest private banks in Italy, Banca Fideuram is indeed making further investments in services, people and infrastructure to meet the whole range of the high net worth client’s needs, from tax consultancy, trust creation to succession planning, explains Mr Corcos.
