Polarisation expected for Spain’s fund market
Carlos Fernández of Inversis Banco likes conviction and independent thinking, but expects market polarisation into very active and very passive funds.
What sources do you use to find new funds?
As a large player in the sector we are part of the “roadshows” introducing new funds to potential institutional big investors. We usually receive news of new funds being launched by the established asset managers because of our close relationship with them. Regarding new asset managers or spinoffs, we are usually up to date also, because of networking, European fund events, magazines…
Do you run an ‘approved list’ or seek out funds more on an ad hoc basis?
We do both things. We maintain an approved list of around 140 funds ready for investment in 46 different asset classes or strategies. But also we try to cherry pick funds when there is not a main category around, or if we are facing a very specific request
What strategies are you seeking new managers in presently?
We are always ready for new exciting investment process and sound teams. Today we are trying to increase our exposure to a group of alternative strategies like mergers and acquisitions. We find it very difficult to find proper strategies in a Ucits framework, mainly because the best managers on this strategy do not want to be there, and also because of the particular issues of liquidity, leverage and so on present in this strategy. We are also looking for CTAs. It is amazing, but despite it being a strategy that could easily be transferred into Ucits standards, there is little interest; only some managers are developing Ucits funds, and we still feel they are too cautious in terms of volatility – losing their main point of interest, as you know, diversification against equity risk.
Is your selection process more quantitative or qualitative?
We follow a traditional quant-qual selection approach. It means that, as a general rule of thumb, we first run a proprietary scoring for each asset class we follow, and them we try to dig a little bit into the managers that are receiving the highest qualifications. So, first we make a filter and them we start a qualitative selection process, mainly focused in trying to understand the investment process from every possible angle and challenging the investment capabilities of the asset management company / managers. If you want to put it in terms of time, we employ nearly 90% of our resources and time in the qualitative process and also qualitative following the managers and their vehicles.
That said, I would argue that we follow a holistic and non-restricted approach. By holistic I mean that we always try to grab every opinion and think about different aspects of the managers / funds we are selecting. For example, if we can challenge their market views using investment ideas from their competition we do it and try to understand their reasons and convictions. By non-restricted we could think about the limits for analyzing funds. We can select funds with short track records or low AUMs. Naturally, we would expose the majority of our clients to these funds, but we can use them for particular vehicles, mandates or institutional clients aware of the risks and particularities of small and short dated funds.