In ABN Amro’s fund selection hive
Olivier Couvreur (pictured), head of Manager Research at ABN Amro Investment Solutions, discusses the team’s process and current searches.
Olivier Couvreur manages 32 people and thus heads one of the largest fund research teams in Europe.
The unit only counted three people including CEO Stéphane Corsaletti at its launch in 1998. Run under the brand Asset Allocation Advisors, it was set up for multimanagement purposes to cover the needs of French private bank Neuflize.
2005 saw the incorporation of A.A.Advisors into Dutch financial group ABN Amro. In addition to running funds of funds, the team started to recommend funds for ABN Amro’s private and retail bank.
From 2005 to 2010, the firm developed a discretionary portfolio management business, and as of 2007 funds of mandates structures were introduced and currently represent a third of the group’s assets.
In 2010, the fund selection unit of Fortis Mees Pierson, the private bank of Fortis, was added. ABN Amro Investment Solutions covers traditional long-only funds, liquid alternative Ucits funds, Ucits hedge funds, listed real estate and private equity. Infrastructure might be further considered.
Its buy list actively recommends 150 funds, all asset classes included, with a turnover of 15% to 20%.
Some €20bn of assets are invested in third party funds, representing around 1,500 funds in total, although most assets are concentrated in the top 200-300 names.
Around 300 funds are validated by the team at any point in time. Since 2005, a total of 1,300 funds have received the unit’s green light.
Moreover, the unit holds a specific list and a “focus” list concentrated on 50 funds considered for active bets.
Couvreur says the team’s fund searches look to meet specific investor needs as well as requirements from a due diligence perspective.
“The due diligence process can be very in-depth and take a lot of time. I remember that for a fund we picked into our buy list, we spent some 20 hours in head-to-head interviews with all the analysts working on the fund in addition to the interviews with the fund managers.
“It is crucial to assess the quality of the full team involved in the fund as that helps to understand and eventually anticipate forthcoming events,” he explains.
On the equity side, the team currently is most active researching European and emerging market funds applying a value style. Other areas of interest include Asia ex Japan value and US growth.
“Our bias on growth funds was strong but we reduced it and added value funds to portfolios. It remains an asset allocation and risk management decision. We have stressed a rotation in sectorial and style biases since the start of the year,” Couvreur explains.
“We consider that our growth bias has now become dangerous and hard to predict. Hence, we are trying to have a more balanced style allocation,” he adds.
On the fixed income side, the search is on for SRI corporate debt strategies covering European, US and emerging markets.
“We remain cautious on the fixed income segment. We have had the same allocation for almost two years, diminishing credit risk and high yield exposure. We think a bit of emerging markets bonds.”
Couvreur says the same internal rating is applied to both SRI and non-SRI funds. However, an extra rating targeting specific criteria is added.
For instance, asset managers working with ABN Amro must have signed the United Nations’ Principles for Responsible Investment or an equivalent charter. If not, their funds won’t enter the unit’s recommendation list.
In the alternatives space, the team is currently searching out US and European long/short equity funds.
“The investor rush for alternatives has pushed us to find new strategies in that space, as a few alternative funds have encountered size and therefore capacity issues.
“Strategies that were considered ‘satellite’ before are becoming core. We have enlarged our bucket of both alternative equity and fixed income funds in our recommended list,” Couvreur highlights.
Still, he does suggest that exposure to alternatives comes with a warning.
“We do not always see the decorrelation to equity and bonds they promise and returns have been modest in the past three years. We are still interested in alternatives, but we have not yet seen the opportunity to allocate most of our portfolios to these strategies.”
Olivier Couvreur is head of Manager Research and deputy chief investment officer of ABN Amro Investment Solutions, which he joined in December 2003.
He oversees funds of funds and funds of mandates activities, and is responsible for the manager selection process and the supervision of the portfolio management team.
Previously, he was head of Portfolio Management at AXA Multimanagers in 2001-3, in charge of fund selection and research as well as management of funds of funds. He has also been a senior trader at Ixis Asset Management, conceiving and managing structured products.
His career started at CFM as head of Research in 1992.
This feature was first published in the October issue of InvestmentEurope.