Seeking non-correlated funds

Paris-based asset manager Primonial AM has rebranded to Stamina AM last December.

The company has over €800m of assets under multimanagement and tallies around a hundred Ucits funds forming its current buy-list that covers all liquid assets classes and geographical areas.

Portfolio manager-analyst Alexis Bienvenu (pictured) has joined the company in 2006 to take part to the build of the fund selection unit.

Before entering the asset management industry by joining Stamina, Bienvenu was not a stranger to financials. Holding a PhD in philosophy, he conducted researches on probabilities and risk from a philosophical perspective.

Through various experiences, he gained expertise in behavioural finance. A couple of features that are no doubt helpful in Bienvenu’s asset allocation work which takes precedence over fund selection itself according to him.

“When we started the multimanagement business, fund selection was our core work. However since the financial crisis of 2008, it focuses more on asset allocation. Back to 2008, even though you were invested in the most outperforming equity funds of the universe, there were no means to escape from the crisis and to avoid impacts,” he explains.

“Being exposed to equities at 10% or 40% makes a much clearer difference than being invested in the A fund rather than in the B fund of the same asset class,” Bienvenu argues.

Stamina’s portfolio manager says the unit invests in strategies with a truly active management and that funds beating their benchmarks by 1 or 2% do not represent an opportunity for the firm’s selection.

When 2% of Stamina Patrimoine, the flagship fund of Stamina Bienvenu manages, are invested in another fund, it represents around €10m invested. Bienvenu explains that the company does not allocate more than 10% of assets in the underlying funds that are forming their funds.

Stamina does not have particular bias on managers’ size he selects but Bienvenu points out that it tends to avoid funds whose size is below €200m.

ETFs account for 4 to 5% of the team’s asset allocation and are being used mostly on US and emerging markets equites. In addition, it does not exclude to use ETFs on the fixed income segment.

But Bienvenu remains a bit worried about liquidity issues on ETFs, even more after markets moves that have happened in August 2015.

“Falls in ETFs’ values seem to have been important last August. If a 10% drop in the value of an ETF is spotted compared to the index it follows, that represents a major risk. But I have not experienced liquidity issues on ETFs yet,” he says.

Among important moves in asset allocation Stamina has done last year, the company massively trimmed its exposure to emerging markets. Same for European govies. However, Bienvenu says the team is very confident in the further rise of European interest rates.

Another move last year has been to buy long put spreads whose maturity was end 2015, in order to hedge Stamina’s biggest funds relative to a potential crisis.

“We have done it on most of our European exposure and lately on US. By protecting our funds through put spreads, we have gained one point in 2015 in the performance of our diversified fund that targeted 5% returns in 2015.”

Bienvenu says Stamina AM allocates much assets in absolute return and diversified funds that are opportunistic and very few correlated to the markets.

“For instance, we are invested in a H20 fund. Playing the Brazilian currency against the Mexican one is not something I have expertise in and H20 does it well,” he tells InvestmentEurope.

The selector currently seeks non-correlated absolute return funds running a market neutral strategy. But, he says, “it is annoying to observe most of those funds have correlation between them. Their processes look alike to some extend even though there is no reason for it.”

Some examples of non-correlated absolute return funds in Stamina’s buy-list include Exane Overdrive and OFI Risk Arb Absolu.

Considering fund selection challenges, Stamina’s portfolio manager-analyst highlights big funds progressively losing their interest, in particular those running alternative strategies.

“Some of them drift when they reach a bigger size. We favour market neutral strategies that only weigh a few hundred million euros and we also like long only funds restricting their capacities,” he adds.

Also he says “markets are driven by global macro-economy and abundant liquidity.” “In some way, it pollutes managers’ stock picking,” Bienvenu concludes.

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