Pan-European Summit Lausanne 2017: fund selector review

Pierre-Yves Dittlot (pictured), co-founder and chief investment officer of Monaco-based TC Stratégie Financière, reviews last InvestmentEurope’s  Pan-European Summit Lausanne, that occurred at the Beau-Rivage Palace on 26-28 April 2017.

In the current context where markets and the economy are strong enough for investors to justify risky asset allocations, we must also take valorisations in consideration.

In addition to the fact the Pan European Summit Lausanne 2017 took place in a beautiful location and was impeccably organised, it enabled fund selectors to draw new investment ideas from both active managers and ETFs.

The event was also a good opportunity to compare fund selection and asset allocation approaches as well as constituting key networking time.

Several strategies from well-known asset management companies were presented over three days. The common target of these strategies was to generate income in an environment where bond yields have shrunk dramatically.

For equities, asset managers presented varying approaches and country exposures. We have analysed three emerging market, three US, one Japanese and one European equity fund. What we have found to be the most interesting part is the variety of approaches fund managers have adopted.

The Ossiam and Barclays ETF relies on a US smart beta strategy with a cyclically adjusted PE ratio as a key valuation driver within a sector rotation strategy. So far, the results of this approach have generated sustainable alpha.

Old Mutual Global Investors put forward their North American stock picking strategy. The fund was launched in 2014 and has generated good results thus far. Assuming that oil prices remain in a $40 to $55 price range, First Trust shows an attractive investment strategy in US energy infrastructures.

This investment sector has strong entry barriers, stable revenues and attractive dividends for investors. Furthermore, First Trust’s approach to focus exclusively on non-cyclical companies, provides a defensive bias as opposed to selecting investing vehicles out of the whole MLP universe.

In the emerging market equity category, Brandes and Eurizon stood out.

On the one hand, Eurizon offers an interesting emerging market equity strategy that seeks to provide a more efficient way to track the emerging market equity benchmark, than an ETF does. The fund’s main features are strict cost optimisation and good performance tracking over time.

On the other hand, Brandes presents a value-investing strategy; the DNA of the company. Also, Brandes has the advantage of a long track record through an US vehicle.

We also met with Tokyo Marine Asset Management, the largest insurance company and the second largest asset manager in Japan. They introduced us to their Japanese equity strategy. Concentrated around 30 – 40 stocks, the fund manager takes both a bottom-up approach while also relying on some tactical macro positions.

Ballie Gifford presented their European equity strategy: the Baillie Gifford Pan European Fund. Their aim is growth with a long term view. The turn-over of the fund is low.

Nordea Asset Management focused on their Global Climate and Environment Fund. We felt that these are interesting themes with a thorough investment process.

On the bond side, we looked at the Emerging Market Corporate Bond strategy of Aberdeen and at the High Yield strategies of Lord Abbett and Principal. Both funds seek Income via an in-depth bond picking approach.

Finally, we must also mention RWC and its global convertibles fund, the global flexible conservative fund of MFS, that is called MFS Meridian Prudent Capital (launched in March 2016) as well as the diversified Growth Fund of First State.

It is obvious from the above that the investment ideas we gained and reviewed during this seminar are of varying natures. They are allowing us to consider new solutions to optimise our asset allocation strategies according to the risk-return pairings specific to each asset considered.

Hence, we have been able to lengthen the list of the funds we monitor. Three or four of the above funds will probably even make our short list!

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