Considering the ethical approach
Swedish CB Asset Management’s ethical approach results in a particular selection of funds, say portfolio managers Marcus Grimfors and Alexander Jansson.
CB Asset Management’s Save Earth Fund was launched in 2008 as the first Swedish fund of funds investing in environmental funds. This focuses investments in up to 12 actively managed funds and ETFs in sectors such as renewable energy, water management and clean tech. Performance is measured against the MSCI World index.
The company’s other products, CB Hedge and European Quality Fund (with its Lux Sicav and BVI share classes), adopt the same philosophy.
Key portfolio managers at the company are CEO and founder Carl Bernadotte, Marcus Grimfors and Alexander Jansson (pictured). Launched in 1994, CB Asset Management is still a lean operation, with only management done in-house. Assets under management currently stand at about €60m across the active funds.
Grimfors says potential new investments come from a variety of sources including Lipper, Morningstar, Google and business contacts.
“We build the investment universe of the fund through a comprehensive screening of the market, in which we try to define all available funds and strategies and also best in class managers in different regions, countries and/or sectors,” adds Jansson. “Using this process, we have built up a database of 150 funds. CB Asset Management: Q&ADo you run an ‘approved list’ or seek out funds more on an ad hoc basis?
Marcus Grimfors (MG): We are free to choose funds from all over the world if they meet the criteria. In a dynamic universe where new funds are launched an ‘approved list’ could quickly become obsolete.
Alexander Jansson (AJ): To guarantee the quality of our universe we perform a criteria check. For the funds to be eligible they have to meet or criteria. They have to provide appropriate liquidity – daily or in some cases monthly. AUM must be enough; we will never hold more than 25% of the underlying fund.
We have to ensure the fund improves the diversification of our fund’s holdings, i.e., not buying the same exposure through different managers. And [we require a] track-record of at least three years to secure the investment strategy and the ability of the fund/managers to meet different market conditions – exceptions can be made under some circumstances.
What strategies do your clients have greatest appetite for now?
AJ: We have seen most inflows into our European long-only fund, European Quality Fund, which has also attracted interest from institutional investors. In general, we notice that investors today focus more on risk (e g standard deviation and draw down). We also see some signs that the appetite for emerging markets has come down a bit, which may be correlated to the lower risk appetite.
What strategies are you seeking new managers in presently?
MG: Environmental hedge funds are very few [in number], but could be a good way to protect investors’ money in a bad environment for renewable energy stocks.
AJ: We do also think there are great opportunities for skilled managers to add alpha in the segment as it is under-analysed, with obvious quality names, as well as names that are less so. We are also looking at adding a new manager/replacing an existing one in the water segment.
Could you explain briefly your selection process?
AJ: There are three different steps in the selection/allocation process.
We have built a quantitative model in which we can monitor the investment-critical variables of our shortlisted funds. The model provides us with data of the fund’s performance, standard deviation, alpha, beta, correlation with Save Earth Fund and relevant index – sector index and MSCI World – draw down, etc. To get the optimal composition we focus on the fund’s correlation with our portfolio and to reduce the risk, i.e., beta, standard deviation and draw down.