Archives » 2007 » Issue 52 (July/August)

Increasing numbers of mergers are arming distributors with a more global reach, so why would managers settle for one country access?

Trust is the most important aspects that clients look for in their

financial advisors. If only the advisors knew this, writes Ted Wilson

With the onset of a new legal framework, hedge funds have finally been opened up to the Spanish market. Many local players are touting the new offerings as being the best in Europe – perhaps even the world – as they learned from the mistakes of others. Paula Garrido reports

— Voisin: departmental autonomy

Now the merger of Ixis and Natexis is complete, the new company

is looking at expanding in the alternatives sector. Chief executive

Pascal Voisin talks to Yuri Bender about rationalisation and diversity

While the lion’s share of assets handled by Natixis Asset Management are overseen for institutional clients, with money market funds the most popular of all the products, it is the retail and third party distribution businesses which make a bigger impact on the bottom line.

Financial institutions have always understood the importance of having the right staff – provided they don’t leave for a competitor. Elisa Trovato finds out how some are tapping unusual resources to keep the pool of talent at its best

Direct route headaches

They say that home is where the heart is. To most of us as individual investors, our homes also make up a large part of our assets. Property has long been a recognised investment vehicle and its characteristics are familiar to us.

However, as an investment opportunity, its attractions have in the past diminished somewhat because, until now, the only way to reach this market has been directly i.e. through buying bricks and mortar. Direct property investment can be a difficult option for investors as it is fairly illiquid, requires significant upfront capital and can provide ongoing management headaches.

As core satellite investing – which offsets a passive core with some more aggressive ‘satellite’ investments – makes headway in the mass affluent and high-net-worth space, Elisa Trovato reports on how new players entering the market are offering their own take on the concept

Implementing a core-satellite approach often involves rethinking business models on the asset management side.

Well-executed active management has the potential to add value relative to a static asset allocation implemented through index funds. Francois Passant at Vanguard Investments, explains the importance of asset allocation, the case for indexing and role of active funds in core-satellite portfolios

Nick Phillips of GSAM outlines options for investors considering actively managed European equities

Steep economic growth in emerging economies such as China and India has ensured that commodities funds remain in favour – but there’s no direct link to share prices. Simon Hildrey reports

So-called exchange-traded commodities have hit the headlines of late, not always for the right reasons. However, with massive new inflows over the last year, how will it cope with the new demands? Martin Steward reports

Each month in PWM, nine top European asset allocators reveal how they would spend E100,000 in a fund supermarket for a fairly conservative client with a balanced strategy

“During the past month, our balanced portfolio suffered from our equity exposure due to the recent market correction. Our positions taken on European equities, as well as corporate/emerging high yield bonds, contributed negatively to performance. This was mainly due to the fall in Chinese equities after news on brokerage’s tax increase. Fortunately, in this context, our holding on Japanese and Asian equities appeared resilient. Thus, we decided to increase our stake on Japan convinced by strong fundamentals and supportive momentum.”

“Although we still believe in continuing growth, some elements in our portfolio were conceived to minimise the risks of a potential drawdown. Therefore, we uphold a 10 per cent cash position, hoping to buy cheaply after a possible consolidation. This is backed by our further defensive positions, which in total make up more than 30 per cent of the portfolio. We have added Threadneedle’s Asia Fund and have deselected Aberdeen Asia Pacific due to a beginning performance lag. Reduced by five per cent, but still our core European equity fund is the Coreolan Europe.”

“Despite another strong month for equity markets, we still believe we are now entering a difficult seasonal period for the equity markets. Short-term sentiment indicators suggest the markets are due a pause. A healthy market correction, which could be caused by any event that causes global de-risking and profit taking, could be soon approaching. With this in mind we continue to de-risk the portfolio, moving 2 per cent out of JO Hambro Continental European equity and increasing our allocation to Credit Suisse Target return fund.”

“In May we made a single change in our portfolio: we sold GLG Capital Appreciation fund and substituted it with Alliance Bernstein Global Value fund. There hasn’t been a change in the asset allocation of the portfolio, as our long-term view on markets growth hasn’t changed. Actually, the substitution in the portfolio derives solely from fund picking. We are still monitoring the market, looking for new funds that could be inserted in our portfolio, especially from smaller and more specialised fund houses.”

“The allocation is now 45 per cent equities, 45 per cent alternatives and 10 per cent fixed income. In May, we increased the allocation to the JPM Emerging Market Alpha Plus Fund. We also increased the allocation to European equities by again reducing bond exposure. We also increased the allocation to alternatives and invested 5 per cent of the portfolio in the JPM Highbridge Statistical Market Neutral Fund. Both the Emerging Market Alpha and Highbridge funds are already soft closed, underlining the need to react quickly to new fund launches before they close to new money.”

“Our balanced portfolio remained basically unchanged, except for a slight decrease of the French equity weight in favour of the pan-European equity. A new holding in European equity was added during May: JOHCM Europe Select Value, a continental Europe portfolio, managed in a pretty conservative way by a very experienced fund manager. We do not expect any dramatic change in the portfolio, except maybe some more aggressive bias at some point, if emerging markets were to experience a significant setback.”

“In our last review, we mentioned the technical doubts behind the second quarter rebound, despite a medium-term environment still supportive for risky assets, especially equities, with strong risk appetites, plentiful liquidity and low inflation implying no necessary painful monetary restraint. We therefore had taken some profits on equities in favour of our alternative exposure. We keep this stance unchanged this month, while we continue to advocate a fairly balanced mix of styles with a specific focus on the quality of corporate earnings. We also continue to prefer large caps to small caps.”

Dario Brandolini, head of quantitative management, RAS Asset Management Based in: Milan, Italy “Short-term perspectives seem good although in the long term we expect a turnaround or at least a global slowdown of the equity markets. For this reason we are quite neutral on the equity side with some tactical positioning in more speculative themes as energy (BlackRock MLIIF Energy) and commodities (JB Commodity Fund). On the other hand we maintain some hedging positions in alternative or market-neutral asset classes (JPM Highbridge and CAAM Volatility equities). We maintain a portfolio with less risk remaining fairly cautious.”

“The economic outlook and valuations suggest positive returns for equities and bonds over the next 12 months. However, the disparity between expected returns is low. The risks to a benign outcome for the economy are rising (higher interest rates) and some complacency is evident (takeover activity, narrow credit spreads). Cash yields offer more meaningful competition for investment flows and aggressive asset allocation is not advisable. The US economy should enjoy a soft landing and the global economy continues to generate healthy growth in corporate profits.”

Five industry heads met in Luxembourg to discuss what challenges the new stringent regulatory environment presents for transfer agents, distributors, fund houses and central securities depositories