Passion, clarity and responsibility

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Olivier Mugnier, fund selector at Banca Finnat Euramerica identifies three key watchwords by which he judges managers.

Banca Finnat Euramerica is one of the oldest banks in Italy. Founded in 1898 by the Nattino family, it is regarded highly in the region around Rome – its historical base – but is known across the country.

In addition to its long-standing presence in the Italian market, the bank has gone through an intense transformation process that took it from offering corporate finance, to offering stock-broking services, and becoming a Societa’ di Intermediazione Mobiliare (SIM).

Banca Finnat sees itself distinguished from other Italian banks through its focus on investment services, including asset management services and products, intermediary and fiduciary services, as well as corporate finance and real-estate funds.

The bank has some €150m invested in externally managed funds, and €7.7bn in client assets under management overall.

Olivier Mugnier, fund selector for the bank since 2011, says passion, clarity and responsibility are the key elements Banca Finnat looks for in its fund managers. “We like managers who really show passion in what they do; who are able to explain their investment philosophy and process in few, simple words. We also value managers who don’t play the blame game when they have to come up with an explanation for a past negative performance,” he says.

Customer trends and strategies

Almost exclusively investing in actively managed funds, Mugnier says Banca Finnat’s clients have recently shown an appetite for equity and fixed income products, as well as an interest in innovative concepts on the fixed income side, such as flexible bonds.

“We have observed a growing interest for equity, although it remains a very small part of our clients’ asset allocation. The fixed income arena of emerging market debt, with a focus on local currency, has also managed to attract a discreet amount of our clients’ attention lately,” Mugnier says.

Looking at the strategies Banca Finnat uses to seek new managers, everything that is beyond its own in-house capabilities is valuable to the company.

“In Finnat, we have a Lux Sicav with funds that invest in European fixed income, European and global equity,” Mugnier says.

“In particular, we look for products capable of generating some yield in a low yield context. But that doesn’t only include the usual emerging market and high yield debt; we rather go for long/short debt, flexible bonds.”

Quality and quantity interlace

Banca Finnat’s selection process is underpinned by both quantitative and qualitative research, Mugnier explains. “The first step is almost always quantitative and it aims at assessing the strength of products based on several criteria according to which we judge the absolute level as well as the consistency over time in terms of performance – absolute and relative – volatility, hit ratio, maximum drawdown, and so on.”

“Then comes the most interesting and most difficult part: meeting and talking to fund and product managers and trying to understand what elements of the investment process, risk management and fund manager personality make the product attractive,” Mugnier says.

Red flags and risk control

When it comes to evaluating red flags, Banca Finnat’s approach is to investigate in-depth, to understand what is going on rather than jumping to conclusion and consider them mere sell signals.

“It could be a strong rise in the turnover rate, a performance and/or volatility pattern – absolute and relative – that becomes strongly different to what it was in the past, and obviously a change of fund managers,” Mugnier says.

“However, those are red flags that push us to dig further to understand what has happened and are not mere sell signals.”

Managers’ risk control skills are equally important to Banca Finnat, which values departments that are independent from the fund management.

“Proven ability to limit drawdown in difficult times, as well as the ability to explain what went wrong if that didn’t happen and what’s been changed since then [so that it doesn’t] happen again are very important to us,” Mugnier concludes.

Olivier Mugnier has been fund selector at Banca Finnat Euramerica since 2011, where he is in charge of externally managed funds research, analysis and selection for both institutional and retail clients.

Between 2006 and 2009, he worked at Dnca Finance in Paris as fund manager of Italian equity fund Leonardo Value Italia, handling €25m AUM; as well as co-managing the €160m European equity fund Centofolia Europa.

Prior to that he worked as buy-side equity analyst at Tocqueville Finance in France.



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