Academic collaboration forms the basis for 1741 Swiss boutique

1741 Asset Management, the quant firm that emerged from the reorganisation late last year of the Wegelin Group, is forging its investment strategy by collaborating with the University of St. Gallen, the ETH Zurich and other leading academic institutions worldwide.

In January, Wegelin & Co transferred its non US-business to Notenstein Privatbank Ltd, and its asset management division merged with Wegelin Fund Management to form 1741 Asset Management AG, a 100% subsidiary of Notenstein Privatbank, itself 100% owned by Raiffeisen, the third largest banking group in Switzerland.

1741 Asset Management is intent on setting up and running an asset management model of the future, based on proven financial theories and a long term perspective. The firm wants to combine the solidity of being under the umbrella of a large parent bank, and the innovative approach of a boutique.

CEO Dr. Magne Orgland is backed by CIO Urs Schubiger, COO Frank Häusler and CFO Reto Sonderegger. Daniel Leveau is head of Portfolio Management, Christophe Morize head of Client Services and Hartmut Birkner head of Legal and Tax.

1741 is already managing the former Wegelin funds in Luxembourg and Switzerland, with assets in excess of CHF2.4 bn, and equity in excess of CHF20m. The investment philosophy is producing positive results. Of 21 funds based in Swiss francs, euros or US dollars, there have been double digit returns, year-to-date, from two Equity active indexing funds.

The successful approach derives from sound economic principles, supported by empirical validation. In practice, this means developing in-house fact-based models that draw on cutting-edge financial theory and modelling techniques.

Des Morris, director of institutional clients, said the firm believes financial markets are efficient in the long term, but not necessarily in the short to medium term. “We know most asset managers fail to add value beyond market benchmarks over longer time periods. Only a systematic approach to investment management can generate long-term and superior risk-adjusted returns.”

Client input is also critical. “They are very involved in product structures,” said Morris. “The risk parity strategies that evolved in 2009 came out of clients wanting to focus on risk portfolios after 2008, and protection from another event like it in the future.”

Another key tenet of 1741’s philosophy is diversification. Leveau’s research, presented at numerous industry conferences, indicates how current index weightings are flawed because they lead investors to overweight overvalued constituents and underweight undervalued constituents.

He notes that passively managed funds are gaining market share, and alternative indexing methods are emerging. Based on the findings of new analysis, 1741 portfolios aim to improve the true diversification level of portfolios.

Managers also ensure the strategy is consistently applied, especially in volatile markets, and where “fads” sometimes take hold among investors.

 

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