Clarity above all else

Rafael López de Novales (pictured), head of Fund of Funds at Spanish asset manager Imantia Capital, explains that clarity and simplicity regarding investment strategies are key factors when selecting mutual funds.

Keeping things simple is the number one rule for an investment vehicle to be added to Imantia’s internal list of funds, which the asset manager classifies according to asset class, strategy and region.

The approved list is used to meet the asset allocation requirements of the firm’s funds of funds; which comprise two defensive vehicles, with a strong tilt to preservation of capital, and two risk profile funds.

López de Novales’ team is charged with creating the model portfolios while selecting funds depending on their favoured investment strategy.

“For us, it’s key to know the role that each fund can play in a portfolio, that is, what we can expect from each fund. This is why we look for funds with a clear and simple strategy,” López de Novales says.

“If a strategy is too complicated we are not going to invest in it. If, for instance, a fund has negative returns, I don’t want to sell because of that; instead I want to know why we got there and what I can expect afterwards – if you don’t know the products well then you tend to do blind decision making when there’s a crisis.”


With persistent low interest rates hitting fixed income yields, Imantia, which historical addresses clients who are conservative investors, sees alternative funds as one solution to generating returns.

“An important part of the portfolios (between 20-25%) is in alternative management. What we are looking for is diversification but, above all, we are obsessed with understanding the strategy very well,” López de Novales says.

“For alternatives, we are very demanding and the fund manager is key. We look for managers who have a very long track record, our ideal is a track record of 10 years or more, otherwise very clear strategies,” he adds.

Within the alternatives universe, Imantia’s fund selection team looks for strategies such as long/short or event driven that avoid high volatility and with limited drawdowns.

López de Novales is also seeking investment products with limited duration, with a preference to credit strategies such as high yield or emerging markets.


Imantia’s Fof team ranks selected funds through quantitative tools which support analysis on factors such as historic return, consistency or risk.

Once Imantia’s fund selectors have the “objective” quantitative ranking, they start the qualitative analysis, in which getting to know the fund manager is “the most important factor”.

“We need to know not only the fund manager but also the philosophy of the asset manager. Rather than being interested in just one fund we want to know how the firm works in terms of investment style or asset expertise,” López de Novales explains.

Imantia’s head of Fof also points out that track record and consistency are highly valued attributes of a fund manager.

“I like those managers who do what they have expertise in. I find it least interesting when they start doing additional things, because this usually means the manager is doing something extra without much experience in it or maybe his previous [investment] strategy is exhausted.”


Another sign of possible strategy exhaustion is when a fund receives excessive inflows – which automatically raises a red flag to Imantia’s team.

“When a lot of money goes into a strategy, it usually doesn’t behave so well in the coming years,” López de Novales notes.

Extraordinary returns can also be a source of concern, as this sometimes means that the fund manager is taking on more risks than Imantia’s team wants to take.

The minimum fund size depends on the type of the investment vehicle: for fixed income, Imantia prefers investment vehicles of more than €500m in assets, while alternative funds should have about €150m in AUM.

“But we do not have a preconceived idea; for us the size of funds requirement is flexible. It is more important there is a track record and to understand the strategy,” López de Novales concludes.

Alicia Villegas
Alicia Villegas speaks Spanish and Italian and is Iberia Correspondent for InvestmentEurope. She was shortlisted for the Rising Star Award at the British Media Awards 2017 and Writer of the Year at the PPA Independent Publisher Awards 2016. Previously, she worked for almost three years at the seafood business website Undercurrent News as a market reporter. In Spain, she also worked for more than five years for several media outlets.

Read more from Alicia Villegas

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