First gathering in Barcelona
Some 30 delegates serving the financial hub of Barcelona had the chance to hear about the ideas and strategies outlined by five asset managers at InvestmentEurope’s first
event in the Catalonia capital, which took place 2 June.
Mike Gibb, equity specialist and co-head of Global Wealth Management Distribution at Legg Mason, started the roundtable speaking about European long/short
Gibb, who is also an equity product specialist of Martin Currie, a Legg Mason affiliate, explained how combining bottom-up stockpicking with a macro overlay can generate alpha and deliver absolute returns in variable market conditions.
The asset manager does bottom-up stockpicking through fundamental research that allows a good understanding of companies, products, threats and challenges, Gibb said.
Additionally, it uses a “unique” macro framework to identify market turning points, which provides investors with a “great opportunity” to access Europe’s potential growth without the currently associated volatility, he said.
Martin Currie’s long/short strategy has been applied to the Legg Mason Martin Currie European Absolute Alpha fund portfolio, which has 32 stocks in the long book and 21 stocks in the short book in order to generate alpha.
Ronald Schneider, head of CEE & EM Debt at Raiffeisen Capital Management outlined the need for selectivity when approaching emerging markets.
Despite a challenging scenario for some emerging markets, regions such as CEE have performed much better, benefitting from lower energy costs and the support from EU structural funds, while being further deleveraged.
Also, CEE is very much integrated into the European supply chain, Schneider said; the region’s exporting countries have been benefitting from economic growth across the region, but particularly in Germany. Thus, emerging Europe has moved from being considered high vulnerable in 2007 to less vulnerable side by 2015, he said.
Schneider, who has been responsible for the management of Eastern European bond funds at Raiffeisen for 14 years, said Eastern European bonds, had been “a difficult asset class” particularly during the global financial crisis and, more recently, during the Ukraine crisis. However, performance could be maintained, despite volatility in currency exchange rates.
Erik Rubingh, director and head of Systematic Strategies at BMO Global Asset Management, spoke about equity style investing. “There is empirical evidence of equity style investing persistence and we think styles will perform in the future,” Rubingh said.
But there are also negative effects from styles, such as time varying effects and the fact that sometimes styles are highly positively correlated – value and size for instance – which reduces diversification as an argument for taking exposure to both.
Styles can also be highly negatively correlated, when, for example, value and momentum go in opposite direction, which “could be good for diversification but it could also mean that you could end up with a portfolio that trades a lot but essentially has exposure to nothing,” Rubingh said.
In order to benefit from positive returns while avoiding the downside, BMO uses a methodology it calls “True Styles” which makes styles more independent, Rubingh added. This methodology targets selected styles for portfolios such as the F&C Global Equity Market Neutral Strategy.
Targeted investing styles at this fund are value, size, momentum, low volatility and GARP (growth at a reasonable price), he said.