Aktia’s Grönberg: Clarity of process crucial amid risk appetite return
Robert Grönberg, manager selection Fixed Income at Aktia highlights the growing importance of absolute return, whilst maintaining a clear investment process.
With a market share of 8.8% in mutual funds and life insurance, Aktia is one of Finland’s leading fund managers. Until recently, its asset management function consisted of the sister companies Aktia Asset Management Ltd and Aktia Invest Ltd. These merged in January this year, to form Aktia Asset Management.
InvestmentEurope recently caught up with Robert Grönberg, who attended the Pan European Fund Selector Summit in Lausanne. He is in charge of fixed income selection for Aktia, where he oversees AUM of €800m in third party fixed income funds.
His key sources for new potential investments are Bloomberg, Morningstar as well as news, seminars and manager meetings. “We also try to be as open as possible to managers that in some way can show a sufficient track of performance.
For example, if the fund is newly launched – has a short track record – we are open to analyse a composite track,” he says. At the same time, he also seeks out funds on an ad hoc basis or approved list, including basic asset classes such as € investment grade, local currency EMD, US high yield and others.
His selection process is both qualitative and quantitative, he explains. “First, we start by trying to define as exactly as we can what we are looking for.
Second, we are defining or constructing a peer group. We then conduct quantitative studies and interviews. In this part our aim is to understand the investment process, or the ‘product promise’ of the manager and possible tilts the manager has.
We then send out requests for proposals and due diligence questions. The investment committee then either approves or disapproves the fund before it becomes a recommendation. Finally, monitoring the fund after investment has been done is of course an essential part of our process.”
According to Grönberg, key features a fund manager or management should reflect are clarity of the investment process, sufficient resources and an excellent track record. Automatic red flags are non-satisfactory performance, a portfolio manager leaving or changes to the investment process.
When it comes to accountability in terms of risk assessment, his review process is very much dependent on the specific asset class. “If the fund has an explicit stated tracking error rule, we evaluate if the fund´s performance has been in line with this.”
“On a more detailed basis, if the fund uses leverage, we want to understand both the gross (Ucits) leverage as well as the economic leverage of the fund. In addition we conduct questions on counterpart risk (Isda + CSA annex). We also use time on operational front-office workflows,” he explains.
Despite the recent volatility, Grönberg notes a growing demand for local currency emerging market debt products. Clients are also increasingly looking towards absolute return strategies as an opportunity to respond to uncertainties.
Moreover, when asked about the key changes in investment behavior over the past couple of years, he highlights that high net worth individual (HNWI) clients are increasingly open for more benchmark unaware products.
According to Grönberg, this reinforces the need for clarity. “With absolute return strategies attracting more attention, transparency, risk reporting and more detailed contribution has gotten even more attention lately,” he says.
Despite the fact that his clients continue to be allergic to long duration and are increasingly interested in absolute return strategies, Aktia currently has no direct involvement in pure hedge funds. “We prefer onshore structures,” he concludes