SharingAlpha: more Top 5 funds picked by selectors

Parvest, Groupama, Payden & Rygel are among the providers of funds identified as top pics by selectors in the latest update on most popular funds provided by the SharingAlpha platform.

Jon “JB” Beckett, a UK-based gatekeeper and author has picked out the following as his Top 5 funds covering a number of sectors and geographies.

FundRating
Nordea Global Diversified Return4.2
Columbia Threadneedle Social Bond4.3
Amundi Global Aggregate Bond3.7
JPM European Dynamic4.5
Payden & Absolute Return Bond4.2

(*A rating of above 3 implies that the fund is expected to generate alpha. The rating is the aggregate of ratings for three individual factors; people, price and portfolio )

“Having researched and selected funds for some time (now well into my second decade) I have met and assessed over 2,000 fund managers and consider myself a student of different fund research approaches. It has led me to an approach that to some may appear quite simple;

  • Empirical approach, performance through specific periods
  • Bias towards qualitative factors over past performance
  • Avoid supertanker funds
  • Combine sector breadth with high conviction
  • To rate and hold funds for longer than 12 months
  • Look for ideas that have not been over-bought or too exposed to hot money
  • Use ESG opportunities where attractive
  • Where possible, try to pick up innovative boutiques over large conglomerates
  • I try to think about the economic robustness of a strategy and the sorts of factor sensitivity the fund will be exposed to
  • Then consider if I am being adequately rewarded for the level of risk, liquidity and time horizon”

“Nordea Global Diversified Return Fund: It is hard to say anything new about the Nordea team that hasn’t already been said. I conducted my initial due diligence back in 2015 when the Stable Return strategy was still less than £4bn in size. We then seeded this sister sterling version and to this day remains one of my highest conviction DGF ideas. What I like is the breakdown of factors and of course that balancing approach that seeks to be market neutral: when most multi asset funds take large directional and factor bets. I like how Nordea use Alpha15 to incubate new strategies for potential future inclusion. Granted, there have been growing pains such as the poor performance of the cross-asset beta strategy and collapse of the low volatility strategy through 2016, I am also keeping an eye on the size of the combined strategy and was heartened that the team soft closed Stable Return. 2016 then has reduced my ‘hit rate’ on this fund but I fully believe that the ’60:40 naive portfolio’ will underperform in 2017.

“Columbia Threadneedle Social Bond Fund: Ethical Bond funds deserve more investment. What Columbia Threadneedle’s Simon Bond brings to this space is genuine impact investing, experience, backed by Threadneedle’s respected credit research team and additional governance from the advisory committee. The Big Issue tie-up and fee sharing with two flat share classes only add to the appeal. Bond himself is frank that he doesn’t expect to beat the wider sector but does aim to match the median. University funding, social housing all feature. There is a liquidity premium involved with many of the deals unrated/unlisted but the portfolio is also reasonably diversified despite its focused approach.

“Amundi Global Aggregate Bond Fund: The Global FI sector has long been overlooked by investors in favour of Strat Bond and HY funds. Amundi is also probably the biggest, quietest story in London. The London Amundi aggregate unit led by the likes of Myles Bradshaw, the asset allocation process looks innovative, the risk budgeting sensible. The fund captures good yield while investing in a broad range of I-grade global credit, with a European bias.

“JPM European Dynamic Fund: Finding good European equity strategies is difficult, I like Jonathan Ingram’s team approach because it dynamically allocates between growth and value style stocks based on relative valuation and Quant models. A rules-based approach is itself a good answer to the difficulties of market timing. It’s not dissimilar to say Ian Heslop’s Old Mutual GEAR fund but instead of say 300-400 stocks, the portfolio is much smaller, focused and to my mind agile.

“Payden & Absolute Return Bond Fund: Whilst the philosophical case for an absolute return cum multi-sector approach to bond investing is appealing; finding a compelling strategy is far more difficult. I inherently dislike retail Strategic and Absolute Return bond funds because they attract too much hype and hot money. Therefore finding quieter institutional stories appeals to me as well as diversifying away from Sterling bond risk. Payden & Rygel is one example, $80bn of assets invested in SWFs and pension funds, P&R is a partnership that deliberately avoids the retail herd and prides its institutional client base. Led by the charismatic Brian Matthews (CFO and senior partner) what you get is a fairly conventional, experienced approach with a large chunk of agency and non agency ABS and MBS, managed within prudent credit and duration thresholds and with tail risk hedges for the unexpected. Supported by Scott and Brad, key man risk is well mitigated with a top-down committee process. Return profile is akin to what one used to expect from mid maturity UST/investment grade, with lower downside and lower headline returns than those employing more credit risk.”

 

Pablo Nortes Planas, member of the Tressis S.V. Investment Committee and mutual funds analysis department, has picked out his Top 5 also.

FundRating
EdR Emerging Bonds4
Pictet Agora4.3
GAM Star MBS Total Return5
Magallanes European Equity5
Groupama Avenir4.4

(*A rating of above 3 implies that the fund is expected to generate alpha. The rating is the aggregate of ratings for three individual factors; people, price and portfolio )

“EdR Emerging Bonds: This is a very distinctive emerging markets bond fund. Usually, managers tend to bear in mind their benchmark, however Jean Jacques Durand, portfolio manager of said fund, doesn’t consider it at all. Maximum exposure to a country can be up to 20% of NAV, something that has been clearly visible in the case of Venezuelan positions. JJ’s fund is a conviction driven fund, which takes the expression of “best ideas” to the next level: names such as Argentina, Turkey and Kazakhstan have important weights in the portfolio. Jean Jacques usually invests in hard currency and both fundamental and momentum factors are determinant in the investment process.

“Pictet Agora: Pictet Agora is a long short equity absolute return fund. The investment team, based in London, construct a market neutral portfolio based on absolute performance of companies versus the market. The main ideas are based on merger and arbitrage situations, restructuring opportunities and distress securities, but they only invest in cases where the upside is clearly above market expectations.

“GAM Star MBS Total Return: This fund is a credit portfolio that invest solely in US. The risk management is based on three main parameters: credit risk, interest risk and prepayment risk. With that in mind, they create a portfolio of around 80-100 securities in which the allocation between FRN and MBS depends on those factors and duration ranges from 3 to minus 3. Apart from managing these risks the portfolio manager uses different types of assets, from agency RMBS to non agency, CMBS and ABS, deciding whether to invest either in the nominal bond or STRIPS. This process has allowed the manager to build an impressive track record since before the financial crisis.

“Magallanes European Equity: Based on value investing and a pure fundamental approach, the management’s team track record is very impressive in their prior firms (Santander, Aviva and Sabadell). Now, as an independent investment boutique, Iván Martín and his team manages a conviction portfolio of around 40 stocks that is already outperforming MSCI Europe by more than 7% annualized in less than three years. Their main positions are concentrated in the industrial sector and midcap companies are prominent.

“Groupama Avenir: This small/medium size company’s investment fund does not differentiate from their peers in investment process, but it does on consistency of returns. Based on fundamental approach, the management team selects companies mainly between €1bn and €5bn market capitalization. However, there is an investment thesis that predominates over others, and this is the digitalization of the economy and innovation. Industrial and technology companies base the core of their portfolio. There is no kind of restriction geographical or sectorial wise.”

 

Juan del Corro, head of Investment Performance Attribution at BBVA Asset Management, has used his considerable analyst experience to select his Top 5.

FundRating
BNPP Plan International Derivatives5.0
HSBC GIF India Fixed Income4.9
Skandia/OM UK Sel MidCap ICVC4.9
Templeton Global Total Return Fund4.9
Parvest Equity Japan Small Cap4.8

(*A rating of above 3 implies that the fund is expected to generate alpha. The rating is the aggregate of ratings for three individual factors; people, price and portfolio )

“In order to select the funds whereby they are more advisable to invest, my method is the next one. It is necessary to breakdown in the following phases, the first one a quantitative phase to study thousands of funds and the second one, the qualitative phase, projected for the study of a limited number of funds.”

“Below I breakdown in deep the phases mentioned before:

  1. The first phase consisting in a quantitative analysis of thousands of funds divided per Morningstar categories. Based on multivariate techniques I select its profitability in diferent time frames. Those funds that in different “temporary windows” keep constantly in the best clusters per category are chosen. I use for this quantitative stage R programming to do web scraping and statistical analysis.
  1. The second step, a qualitative phase, only for the funds chosen in the quantitative phase. In this phase in which after testing its veracity with several ratios a qualitative studio should be made in a particular basis for each fund.

“A brief description of the funds that I have chosen with the best ratio Ranking/Hit Score in SharingAlpha

“BNPP Plan International Derivatives: This fund offers diversified exposition and leveraged to international markets. I really like it due to its independence to the markets, very useful when you find that the global markets are expensive to diversify your asset portfolio. The fund is independent from market timing or stock picking.

“HSBC GIF India Fixed Income: This is a good fund to access the Indian fixed income market, with a very acceptable risk/return ratio. This fund invests in investment grade, non investment grade and unrated assets guaranteed by the government or government agencies

“Skandia/OM UK Sel MidCap ICVC: This fund offers a solid investment for UK mid-cap shares predominantly companies of FTSE 250 Mid Index. In the seven/ eight years since the fund manager Richard Watts led the portfolio management responsibility and passed an early difficult period the fund in my opinion is the best in its category, being a constant good performer over its peers and benchmark.

“Templeton Global Total Return Fund: Being a total return fund it takes part in the general evolution of the markets with a great flexibility in the asset allocation. Its strategy is relatively aggressive compared with its peers, with a higher volatility justified by its return. This return is a mix of currency, interest rate and credit markets.

“Parvest Equity Japan Small Cap: The fund is managed by Shunsuke Matsushima from Sumitomo Mitsui Asset Management although it is distributed by Parvest/BNP. One of the more consistent funds in its category, it invests in securities of small companies in Japan or operating in said country.

“Other funds of interest: azValor Internacional FI and Cobas Selección FI. Guzman de Lazaro and Garcia Parames were fund managers of Bestinver Asset Management for more than 20  years. From 1993 to 2014 (the year when they left Bestinver) they got a yearly average return of more than 15% against 7.8% from the index return in the Spanish market. From 1997 in the Bestinver Internacional fund they got a yearly average return of 10.5% against 2.9% from the reference index (MSCI) . Once they left Bestinver, they both created their own independent asset management companies aZValor and Cobas, respectively. Despite only a few months of history and based on the value investing philosophy, in the long term due to their seniority and knowledge of value investing, I expect they will get excellent results.”

Further information on SharingAlpha is available from www.sharingalpha.com.

Latest monthly updated lists of top rated funds and providers, as identified by users of the SharingAlpha platform, as well as details of a CAIA competition opportunity, are available via the Community section of the InvestmentEurope website.

ABOUT THE AUTHOR
Jonathan Boyd
Editorial Director of Open Door Media Publishing Ltd, and Editor of InvestmentEurope. Jonathan has over two decades of media experience in Japan, Australia, Canada and the UK. Over the past 16 years he has been based in London writing about funds and investments . From editing the newsletter of the Swedish Chamber of Commerce in Japan in the 1990s he now focuses on Nordic markets for InvestmentEurope.

Read more from Jonathan Boyd

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