Pictet AM overhauls its Total Return offering

Pictet Asset Management (PAM) is overhauling its series of Total Return funds, placing them within a new business unit which will expand and run existing funds in a different way.

Geneva-based managing partner Renaud de Planta said the decision was taken after prolonged discussion within PAM and the privately-owned parent group Pictet & Cie, vigilant to protect its 200-year reputation and brand. PAM had some €97bn in assets under management at end 2010, the parent group close to €300bn.

“Total Return implies a different approach to investing and running money. There could be cultural differences co-existing with long-only managers, and everyone is very aware of potential conflicts of interest,” he explained.

“But these have been addressed and we have decided to develop a collection of more focused total return strategies. And now I think that having both businesses – long-only and long/short, will make us a better investment house. In fact, it is back to our roots as a total return manager – rather than relative return, which has become a bit like slavery for some managers.”

Pictet & Cie is wholly owned and managed by eight partners with unlimited liability. De Planta is one of them. He noted that interest in total return strategies has increased in the last decade from all types of investors, and in all geographies. The phrase implies capturing upside but proactively managing downside, as well as a more unconstrained approach to investing, using shorting or leverage.

Asked to identify the difference between total return and absolute return strategies, de Planta said Pictet’s total return was aimed more at institutional or wholesale clients, with the outsourcing of stock as well as asset allocation decisions. Absolute return implied a shorter term approach with immediate downside protection, often in fixed income, and aimed more at retail investors.

The new unit will develop a range of total return funds, most spun out of existing structures within PAM. Each will have a small, highly focused, incentivised team of experienced managers, supported by central compliance, IT and distribution structures. The dedicated division will ensure a stronger identity and supervision.

Five funds will form the first tranche of offerings, including two new long/short funds. One, to be launched in September, will be an Asian long/short equity fund, similar to the highly successful long-only fund already run by PAM for 10 years. Another, the Kosmos long/short relative value credit fund, will be launched shortly, after registration approval.

In June, managers Raymond Sagayam and Kazik Swiderski, hired nine months ago, will launch a long/short global corporate credit fund ahead of a roadshow targeting Europe. “We will look at pan-European presentations first, then move to Japan, Asia and the Middle East at a later stage,” said de Planta. He does not rule out a US clone of the fund, in the form of a Cayman-registered vehicle likely to appeal to US investors.

“This is how we intend to run the Total Return unit,” he explained. “New managers are seeded with capital mostly from Pictet partners but also our large multi strategy fund, until we can see that they can actually do what they say they can do.”

“It is an initial assessment, before they manage client money, which is driven less by performance, than our view on their methodology, risk management and general ethos. We are acutely aware of financial and reputational risk. Historically we have not used this kind of process but as we are lifting teams for new launches, we will use it for the total return unit.”


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