Jens Kummer, leiter des SEB Asset Management Multi-Asset Teams in Frankfurt, im Gespraech

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Jens Kummer is very well positioned to compare mechanistic and discretionary investing.

The multi-asset team of SEB Asset Management in Frankfurt, which he heads, invests €600m in both types of approaches.

Kummer (pictured) voices strong opinions on each approach.

The €600m of assets are split between, on the one hand, model-driven funds of funds that invest only in ETFs and on the other hand multi-asset products that also allocate to active fund managers.

There are three basic models – Balance, Defensive and Defensive Plus, with varying asset allocations.

Kummer says some discretionary managers are very talented. However, high charges threaten to nullify active management’s long-term returns, there is “irritatingly high” manager turnover, and there are too few managers active in some attractive corners.

ETFs may be cheaper, more liquid and unemotional than discretionary managers, but there are not enough adequate products in the interesting markets of local currency emerging markets debt or Danish covered bonds, in Kummer’s view.

In the ETF world, he would like this to change.

Of discretionary fund management, he adds: “In five years‘ time, I would be happy to find the industry had more sustainable business concepts, less of the boom/bust cyclicality, and less rotation of managers between companies. Though I am not saying I think I will find that in the industry in five years.

“Also it is irritating to see so many managers moving. Looking back to the 1990s and early 2000s, there were crises then as well, but the structures of companies were quite stable. Nowadays there is a lot of coming-and-going. The changes can be quite significant, and irritating.”

One manager at SEB AM in Frankfurt stays particularly late in the office, and is also unlikely to leave – it is a computer, which houses the rules that guide allocation and trading.

Alongside his other two human team-members, Kummer appreciates this ‘mainframe colleague’: “Markets at the moment change very quickly, and one main advantage of a quant process is that it does not become greedy or anxious managing money.”

Admittedly, an automated process cannot pre-empt results of Brussels negotiations, for example. But maybe humans do not do a better job.

SEB AM’s fund of ETFs did take a 3% loss on European government bonds over autumn, because its rules-based approach had viewed the asset class as a ‘safe haven‘. It was stopped out of the trade in November.

Still in “protective mode”, SEB AM since rotated into global (ex-Europe) debt and money market products, and has 5% in gold. Currency exposure is to Sweden, Norway, America, Japan and Australia.


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