US energy, LatAm and performance stats reviewed
US energy, Latin America and performance statistics are among the topics commented on by fund and asset selectors in this latest round-up of views.
RISK – BUT WITH ADDED SUPPORT
Name: Christian Hille
Title: Head of multi-asset
Company: DWS Investments
Global shares are up sharply this year. Is it time to be ‘risk-on’?
What would be better is to see a bit of recovery now and more money coming into risk mar- kets, but supported by a diversity of investors. Fundamentally we are still stock pickers, but at the moment markets are so macro-driven, we would prefer to be invested in something we can take off immediately if we have to.
[The multi-asset team] is acting similarly to hedge funds in as much as the proportion derivative Delta 1 index [instruments] against diversified stocks and bonds we use in our portfolio is 50:50, or 60:40. People who have not yet come back into the market are waiting for a setback in markets. We believe, because of liquidity reasons, if you see an accident happen, it makes it even more painful.
WEATHERING THE STORMS
Name: Nicolaas Marais
Title: Head of multi-asset investment and portfolio solutions
What conclusions do you draw from the final effects of the 2008-09 crisis disappearing from funds’ three-year performance stats?
Past performance is a low contributor [to future returns], although it is how most people pick managers. Even if you have passed a three-year period, performance is a minor part of the selection process. The focus should be on the investment process.
Can a manager articulate how he extracts value in a market through different cycles? And does he have an ‘edge’ such as an analytical advantage, or capacity, or technical skills? What gives me confidence the process is repeatable? In down times, managers with strong processes will retain their mandates because clients understand what they do.
We would also ask, does the manager function in a part of the market that is less efficient, or where there are fewer competitors? Looking at man- agers’ performance in crises gives an insight into how a manager articulates a problem and shows whether he sticks to his process.
LESS PAPERWORK, MORE ACTION
Name: Andreas Grünewald
Title: Board member
Company: Vorstand des Verbandes unabhängiger Vermögensverwalter (Germany)
What topics are on the association’s agenda?
One is how to define ‘dependence’ and ‘inde- pendence’, and when one should be able to call oneself ‘independent’. We view the term ‘independent’ more stringently than Germany’s regulator (BaFin), and some clarification is required. Investor protection is very important, of course, and it is of fundamental interest to the independent wealth manager.However, the obligations regarding documentation becomes ever more extensive. A client does not wish to study numerous multi-page documents, and can feel rendered incapable of managing his own affairs by the regulator.
It is high time for a rethink. The best investor protection is economic education, at school. Things must be improved urgently in this regard, so investors can then recognise possible conflicts in the sale of investment products, and what is suitable for them.