Allianz targets managers on style drift, transparency and reporting
In easier markets, some managers got used to bending mandates and providing less than complete explanations to investors. Manuela Thies at Allianz Global Investors talks about restoring high reporting standards
Manuela Thies is a firm advocate of understanding, and getting, what she expects in investments.
This may sound like a self-evident and a logical pre-condition for investing now – and it is for the director and head of the €7bn RCM Multi-Management unit, part of Allianz Global Investors in Frankfurt.
But these principles were not always evident during the crisis, when many investors misunderstood or failed to check what managers were putting into their portfolios, or how ”flexible” the strategies of target funds were.
In the alternatives industry, for example, this led to some nasty surprises, large redemptions and the gating of up to one third of all hedge funds at the peak of the crisis.
Some managers who had claimed to invest in the most liquid markets suffered from severe illiquidity.
Others, who claimed to invest in “non-correlated” classes, strayed in their strategy (so-called “style drift”) and correlated to mainstream assets in late 2008.
Such occurrences upset investors, frustrated their end-clients, and arguably provided some of the sharpest lessons of the whole crisis.
Thies emphasises it is crucial to know, understand and then monitor what target funds do – and just as importantly, to refer this back to what the manager said before.
“What we do not like at all is a lack of transparency from managers in general, where fund managers change their investment strategies or key decision makers and we do not get the information in time. We also don’t like it when they do not stick to their investment process or increase risks.”
When putting her clients’ money to work, Thies is a justifiably exacting investor. Good performance is a given. In return for allocating, her team also expects:
• Outstanding expertise in their respective market or asset class
• Transparency, which includes direct access to managers for rating interviews and update meetings (including onsite visits), updates on all aspects relevant to the fund (such as changes to portfolio managers, analysts and strategy), pricing information and monthly or ad hoc allocation details
• A unique investment process and/or fund strategy, and
• Adequate risk management.
With 24 products in the stable, figures on current positioning are generalisations. However, overall asset class distribution is about 40% in each of equities and fixed income, and 20% in alternatives that encompass absolute return and Ucits-compliant hedge fund strategies, commodities and property.
Thies measures the net performance of her unit’s global equity fund of fund against the same-basis returns of single manager, global funds.
This is only fair from a client’s perspective, in her view, and allows prospective investors to see where they would benefit from allocating to multi-manager, despite the extra layer of charges that might otherwise deter some.
Her team’s global equity fund of fund – called Best-In-One World – has been in the first quartile of the global equity large caps blend peer group, as monitored by Morningstar over one-, three-, five- and ten-year periods.