Focus on information and transparency
Manuel-Yutaro Rubio, Alternative Investment analyst at Allfunds Bank’s London office, seeks information and transparency.
Created in 2000 with the aim of helping financial institutions gain efficient and secure access to the open architecture investment funds market, Allfunds Bank is present on the ground in Spain, Italy, the United Kingdom, Chile, Dubai, Luxembourg and Switzerland. The bank provides a platform for open architecture distribution services, which currently claim some 450 fund managers and over 35,000 funds, as well as more than 380 clients, including commercial banks, private banking institutions, fund managers, insurance companies and fund supermarkets.
Manuel-Yutaro Rubio, Alternative Investment analyst at Allfunds’ London office, describes the bank’s selection strategy as a process that brings quantitative and qualitative analyses together. This results in ratings of funds to help institutional clients construct their investment solutions.
Allfunds has been providing fund research services to complement its fund services alongside fund dealing and custody and the provision of fund information. The fund research services have been there since the platform was creating, investing time and resources in improving the research capabilities.
“Our selection process is the result of a robust in-house quantitative filtering process that combines several factors, such as returns, risk, capital preservation, risk reward and momentum – and a thorough qualitative assessment of the investment process, team, company and any other key relevant topics,” he says.
The process also leads to demands for information and transparency as key attributes in managers and management groups. The robustness of the investment process and the stability of the team or the company are major requirements too, Rubio adds.
Multi-asset, absolute return and flexible allocation
The Allfunds platform relies on Ucits in response to rising demand from investors for absolute return, multi-asset and flexible allocation product types.
“Investors look more and more at multi-asset, absolute return and flexible allocation types of products. Investors are investing more and more into the ‘absolute return’ space, meant in the broad way we intend it. It must be taken into consideration that our platform deals only with Ucits products,” Rubio says.
In terms of ideas, Rubio points to a number of sources. “We have mixed sources for news ideas. Databases are good starting points but we also receive input from capital introduction brokers, conferences and from our network,” Rubio says.
Asked whether Allfunds takes advantage of an approved list to shortlist suitable solutions for its client base, Rubio says: “We do have an extensive approved list where we expect to find any investment solution for our customers. Albeit we perform specific research if the solution available does not fit into the customer’s needs.”
Red flags: unexpected behaviour
A relevant change in the management team or in the investment policies is what makes Rubio’s alarm bells ring.
“There are several triggers but the most common is a relevant change in the management team or in the investment policies. Besides that, unexpected behaviour, style drift and regulatory issues normally require further indepth assessment by the analyst,” he says.
When assessing risk control skills in managers, Rubio says that Allfunds prefers aweighted approach, which takes into consideration several factors.
“It depends on the type of investment. Long-only managers have a different approach compared with alternative strategies, like absolute return for instance.
The latter should have a sound risk framework, generally embedded within the investment process, that should be reliable for the investors, ie, do what they say. Awareness of other potential risks, moreover in more complex strategies, is a must,” he concludes