Clinton or Trump? ‘No impact on our selection’ says EdRAM’s fund analyst

Only a few meters separate the Elysée Palace, the residence of French president, from the Paris offices of Edmond de Rothschild Asset Management (EdRAM).

Six of the strong 25-EdRAM’s multi-management team, which manages a total of €11.6bn in assets (as of 31 December 2015) and reports to Pierre Bonart, head of Long-Only Multimanagement, are based there.

The Paris multi-management unit includes fund analysts and managers Gerald Grant (head of the team), Olivier Quinty (pictured), Caroline Veyre, Dimitar Atanasov, Pascal Chrobocinski as well as Remi Taillieu. Grant and Quinty also sit within EdRam’s investment committee.

Half of the team’s work focuses on dedicated funds for ultra-high-net-worth-individual families of Edmond de Rothschild’s private bank while the other half consists of partnerships (allocation advisory, guided architecture) with various entities such as Boursorama and Cardif.

A specificity of the Paris unit is to challenge equity managers on the stock selection and the aggregate geographic exposure of the revenues of their funds. Within the managed funds in Paris, some 40% of the equity fund bucket have been in European equity funds, of which half have a small/mid-cap bias.

US (s)election

US equity funds are also well represented in EdRAM’s buy list with 17 funds, excluding internal funds and a license with Edgewood IM.

“Six of these funds are focused on US small/mid-caps, seven on large caps and the four remaining are all caps. Whoever the winner of the election is, we feel well furnished with our US equity fund selection,” EdRAM’s senior portfolio manager and fund analyst Olivier Quinty tells InvestmentEurope.

Forecast scenarios based on the victory of each camp have been built nevertheless.

“If Hillary Clinton wins, the focus will be on her capacity to apply her program. Governing with a divided congress will not make it her easy to implement it. Everything will depend on the Senate which if it switches to Democrat majority could counter-balance the power of the Congress. Thus, equity markets will be reassured and presumably rather up.”

“In both scenarios, the Fed will hike rates and the dollar will appreciate against other currencies. Regarding the perspectives for the respective sectors, Clinton’s program lets us believe that moderate pressure would be on the healthcare sector and on the energy sector due to her favourable stance on renewable energies. Also, she wants to spend €275bn over five years in infrastructure. We shall pay attention of sectors such as catering and computing because a $12-hour salary could squeeze margins in these sectors,” Quinty notes.

For him, a victorious Trump would eventually face a Democrat Senate as the main hurdle.

“Trump favours much business and this stance will benefit to the US domestic market, especially small and mid-caps. Energy and infrastructure sectors will probably be the winners if he is elected,” the EdRAM’s fund analyst says.

Amid the US equity strategies of EdRAM’s buy list, the Hermes US SMID fund, which has one third of its portfolio invested in US financial services’ stocks, earns the favors of the team.

“We believe the US banking sector recovery will be a real theme to play whoever the next US president is. Banks are likely to benefit from the supposed Fed rate hike that will occur in December.

“Also, our in-house US value equity fund, which is more a large caps fund, is well positioned to play the theme,” Quinty suggests.

He argues that the fund selection of the EdRAM’s multimanagement team “will not be impacted by the outcome of the US presidential election“ as it covers both growth and value styles with a large bias on domestic small and mid-cap companies that will obviously be impacted by the decisions taken by the new US president, whether it is Clinton or Trump.

Fund research

Regarding the fund research, three funds have been integrated to EdRAM’s buy list in September. Two of them were because of the ECB’s corporate bond purchase program drying up the bond market.

The JP Morgan US Short Duration fund has been added to three US high yield short term bond funds that include the AXA US Short Duration High Yield and the Muzinich Short Duration High Yield funds.

The AXA Global Flexible Property fund has also made its entry in the list. “The AXA Global Flexible Property is a diversified fund that keeps an absolute return profile. We seek an exposure to the real estate debt with the liquidity we would have in an equity fund. It returns 2% on average since the start of the year,” Quinty says.

As for the sovereign bond bucket, EdRAM counts on its in-house fund and on the Jupiter Dynamic Bond fund, “a barbell strategy that holds a third of govvies and focuses on AAA-rated bonds but also selects B and BB-rated securities.”

The third fund having entered the team’s buy list has been the BNP Parvest Aqua fund managed by Impax Partners.

“Thematic funds fit the demands of EdR group’s private bank which was looking for a water management theme fund. Other current researches in the thematic space include new technologies. We closely look at Pictet’s fund, Pictet Robotics,” explains Quinty.

Ongoing active researches concern infrastructure funds providing exposure to the energy sector as well as quantitative funds, especially European quant income strategies.

In addition, a social responsible investing overlay is currently being implemented into the fund selection process.

“We have sent asset managers SRI surveys and we have started to select SRI labelled funds such as Sycomore Sélection Responsable. We wish to extend as much as possible this process but it shall not harm the fund performance. So far, Sycomore AM has demonstrated it is not,” Quinty says.

In total, the 25-EdRAM multimangement team monitors 3,000 funds and conducts 400 due diligences per year, leading to a buy list of around 200 funds for the group.

Adrien Paredes-Vanheule
Adrien Paredes-Vanheule is deputy editor and French-Speaking Europe Correspondent for InvestmentEurope, covering France, Belgium, Geneva and Monaco. Prior to joining InvestmentEurope, he spent almost five years writing for various publications in Monaco, primarily as a criminal and financial court reporter. Before that, he worked for newspapers and radio stations in France, in particular in Lyon.

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