Quality and active management on Popular Gestão de Activos list
Popular Gestão de Activos, the asset management arm of Banco Popular Portugal, currently manages €254.40m, 95% of which is invested in actively managed funds.
With only 5% of its total AUM invested in tracker funds, Popular Gestão de Activos brands itself as an asset manager which strongly believes in active management and favours the qualitative side of the selection process.
Paulo Gonçalves, manager of the Financial Assets team, says that the fund selection process begins with a quantitative screening which is aimed at reducing the number of funds that end up on the qualitative screening list.
“From that first quantitative shortlist, we then move onto the qualitative phase of our selection process, which is the most important one,” Gonçalves explains.
From the qualitative screening, Gonçalves builds an ‘approved list’ of fund management houses from which funds can be selected on an ad hoc basis thereafter.
Despite a buy list has been set up, the manager’s hunt for good funds does not end there.
“Normally we find new funds for potential investments through presentations made directly by the fund manager, the product specialist or the client relationship manager of each fund management house and also through presentations made in some professional events like the InvestmentEurope Pan-European fund selector summit and other similar events,” he says.
Income equity and income allocation funds clients and managers
While yields remain low on bonds and the ECB is busy pumping money into the economy through its recently launched QE programme, Gonçalves’ clients show great appetite for income equity and income allocation funds.
“Over the past years, Portuguese investors have had very high interest rates on their Portuguese bond investments and also in their time deposits. With the recent drop of Portuguese interest rates, they are trying to find different sources of regular income.
“For this reason, we are seeking new managers in flexible, absolute or total return bond funds, as we are very worried with the prospects for traditional bond funds after the normalisation of monetary policy of central banks,” he says.
Manager qualities and red flags
Consistency in performance, investment style and investment process is the key box that managers or management groups have to tick to fall into Gonçalves’ favourite list.
“We like to understand the performance of the fund and if the fund is doing what is supposed to do in any specific market environment,” he explains.
On the other hand, the red flags for funds / managers are drifts in the performance of the fund from the investment style that they presented to us before our investment decision and also changes in key personnel in the management of the fund if we are not informed about the contingency or continuity plan for the management of that fund, Gonçalves says.
As per risk controls, the manager says that Popular Gestão de Activos takes the traditional approach.
“We all seek the traditional risk controls. We require that every manager uses the VaR; however the most important risk control for us is the managers’ liquidity control positions to make sure they are able to sell their positions in a timely manner if required. We prefer funds that implement soft and hard closes to subscription due to capacity constraints and funds that try to protect the liquidity and the performance of the fund,” he concludes.