Fund selection is based on one-to-one meetings not rankings, says Schroders’s Belleri

Investment ideas are often generated from fund presentations or regular one-to-one meetings, rather than fund databases and rankings, says Matteo Belleri, portfolio manager in the team responsible for discretionary portfolio fund selection at Schroders Italy.

Belleri has talked to Investment Europe about the fund selection process developed by the company for the Italian market.

What sources do you use to find new funds for potential investors?
Firstly, we use databases like Morningstar Direct where we rank investment lists and short lists for each fund’s category. However, investment ideas very often have been generated from one-to-one meetings that we regularly do. So, we use a wide number of counterparts looking for experienced managers specialised in asset class we are interested in.

How is your selection process structured?
Our selection process is based on both qualitative and quantitative analysis. In quantitative screening we start associating the fund with the correct asset class classification, and we continue monitoring the product in term of risk and return profile, beta and drawdown.

Qualitative analysis includes one-to-one meetings and carries on with a non-stop analysis that aims to understand the evolution of the fund in different market environments. This is because we need a high transparency level and a regular communication with the asset manager. The process becomes time-consuming in this part but it allows us to know concretely the selected fund.

What are the key attributes you like in managers?
We like a consistent and coherent managerial style. We appreciate funds with a disciplined and clear investment process. Generally we find these characteristics in funds with a strong manager bias, with concentrated stock picking and long term trend focus.

In this way, if the investment strategy is consistent, we know what we have to expect from the fund, and we can do an efficient selection in respect of our macro view or client’s needs.

What don’t you like in managers?
We avoid funds with no track record: we think that if a fund is well managed, it will continue to be so not only in the present but also in future.

We don’t invest in strategies that we do not understand and avoid illiquid strategies.

What risk controls skills do you seek out in managers?
Risk management is something we focus on but at a different level from fund to fund.

If we are confident in manager ability to create alpha we give the manager the freedom to take bets, asking him only to be conscious of the risk he is taking. Otherwise if we select a “benchmark driven” manager we expect a greater risk control.

Finally when we select Alternative UCITS funds, generally managed with an absolute return target, we require strong risk management. For example, we focus a lot on non-correlation of the strategy versus market indices and managers’ capabilities in downside protection.

Whot is the current market sentiment in Italy, and how has it affected investors’ appetite?
Political uncertainty in Europe has made market sentiment more cautious. However, as we manage global investment profiles, we are not particularly affected by a single country. Our portfolio is generally broadly diversified by asset class, country and sector exposure.

Some clients have appreciated a core-satellite approach maintaining the strategic allocation in a balanced profile and adding a tactical allocation in a basket of currencies.

Last year we saw many asset managers launching funds investing in currencies of countries characterized by the best financial and economic fundamentals. In this way we can easily diversify the currency exposure of managed profiles benefiting from currency appreciation of virtuous countries.

 

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