Aktia Invest eyes equities as clients eye risk-off
Antti Vesa, head of research at Aktia Bank’s subsidiary Aktia Invest, suggests that clients are still looking to take risk off the table, while Vesa himself is looking for equity managers further afield.
Aktia Invest is part of a group that has its roots in basic deposit savings in the 19th century. Since then, the group has grown to become a full service organisation, for both retail and institutional clients.
Its AUM of €2.2bn as of 30 June suggests it has a 4.8% share of the total investment funds market, according to the industry holding figures published by the Bank of Finland for the end of August.
Vesa notes that it is ”predominantly in actively managed funds as this is where manager research and selection add most value”.
How do you find new investments?
We use several sources to find new funds. The three most common sources are:
1) Most of the ideas come from the quant screens we run. We have a database with tens of thousands of funds that we go through using different quantitative criteria to get the short list of funds.
2) Manager meetings. We have hundreds of manager/sales meetings a year and from time to time, they want to introduce their new products or products that we have not gone through previously.
3) Finally, we follow industry news flow for fresh ideas.
Do you run an ‘approved list’?
We operate an open architecture platform. Therefore, we maintain a recommendation list that covers funds in equities and in fixed income.
We also work on an ad hoc basis to complement the list. The recommendation list works 95% of the time.
Sometimes the recommended fund does not fit into clients’ portfolios well, so then we go through our database to find a more suitable solution.
Research can be ad hoc also in cases where the client wants, for example, to invest into a country, style or manager that is not covered by us.
What strategies do your clients want?
The focus is on taking the risk off or at least trying to identify the nature and amount of risk on a portfolio level.
This is so the appetite is not that much on any single strategy, but more on the services we provide regarding portfolio construction and risk analysis.
Where are you seeking new managers?
On the equity side, we are looking for new managers for the US, Emerging Markets and India. In fixed income, we look for European High Yield.
Explain your selection process
Our selection process is both quantitative and qualitative. Our process starts with quantitative screening.
The first step is to filter down the universe using quantitative criteria. This usually brings the number of funds down to 5-15 names.
Then we gather as much information as we can easily obtain from the funds to check if there are some that we can leave out from the analysis.
Next, we interview the managers to get an understanding of the team, philosophy, process, portfolio characteristics, and so on.
We also check this qualitative story with our proprietary quant models just to make sure that the numbers and stories match.
After the interviews, we usually pick a couple of managers to whom we send our RFP.
We go through the RFPs together with operational due diligence and then decide which fund(s), if any, we will recommend.
After that, we regularly meet the manager or have conference calls to go through the performance and possible changes in the fund.
What are the key attributes you seek?
A clear and structured investment process, a well-resourced and experienced team, a clear sell discipline and operationally sound organisation.
What are your automatic red flags?
Changes in the team/organisation and strange or unclear explanations about the performance.
What risk control skills do you seek out in managers?
The managers should always know both the intended and the unintended risks in the portfolio.
The ability to look at the portfolio from different perspectives can be crucial.
What changes do you see to high-net worth individuals’ fund investments?
We focus on institutional clients, but would assume that a more institutional approach becomes more common among the HNWIs, also in terms of analysis-driven portfolio construction instead of marketing-driven investing.
We would assume that traditional institutional issues such as counterparty risk become more common.