Selector seeks team spirit, consistency
Fernando Cristino Coelho, head of Espirito Santo Activos
Financeiros, voted best fund manager in Portugal in 2010, reveals
his fund manager selection strategy.
When it comes to selecting the best fund or fund manager, Fernando Cristino Coelho, CEO of Espirito Santo Activos Financeiros (ESAF), knows exactly what he wants and what is not welcome.
“We look for consistency in the past, the type of team, the type of technology, at the decision-making process. We do not like star companiesl a company where there is one star manager who decides everything,” he says.
This approach appears to have paid off, with the company winning several Morningstar awards in recent years including best global Portuguese fund manager in 2010.
ESAF, part of the Banco Espirito Santo (BES) group, manages its own investment, real estate and pension funds and picks third-party funds for wealthy private clients and institutions.
It manages about €20bn in consolidated fund business in Portugal and internationally, with operations in Spain accounting for about €3bn of business, a management platform in Luxembourg, a small asset management company in the UK and asset management operations in Brazil and Angola.
Funds check list
A team of fund selection managers has established a set of procedures including a check list that helps them get an initial view of potential funds to invest in or recommend.
They also scrutinise the quality and range of a target fund manager’s analysis and data, risk and compliance processes, and whether a fund is properly audited.
If the target fund’s statistics look good, ESAF will ask for a meeting with the manager.
ESAF puts a premium on direct contact with the fund manager or management team.
This is very important, Coelho says, making a parallel with the way ESAF’s own managers regularly meet their own clients.
“If we ask for a meeting we don’t want to speak to a salesperson. For us, it’s important that the actual manager shows his face.”
ESAF tracks potential managers for up to a year before it makes any investment and looks at what additional services the managers might offer ESAF itself.
It also likes to see fund managers put their own money in the funds they promote. Coelho says ESAF needs to be fully confident about the quality of a fund’s management if it is going to put its brand on a product built by a third party such as a fund of funds, or on a pension fund portfolio that includes both third-party funds and its own funds.
The team’s clients are institutional fund managers, pension funds managers, funds of funds managers, private banking managers and internal clients.
When selecting a fund, the selection team looks for managers with knowledge of specialised markets or assets that they do not have in-house.
“We don’t have specialist knowledge to invest in China, so we look for a fund manager that invests in, or has skills in the country. If we want special convertible bonds, we will go to a special convertible bond fund. If you want a Eurobond fund we have our own managers,” he says.