2016 has been a turning year for markets in the view of Lucas Strojny (pictured), head of Discretionary Mandates at Paris-based Advenis Investment Managers.
Not only has 2016 opened a new chapter for the firm’s current allocation but also for Strojny himself as he returned to Advenis after he departed from it in 2008 to head the multi-management unit of French alternative boutique RMA Asset Management during more than six years.
Speaking to InvestmentEurope, Strojny lists a number of events that have conducted to the firm’s present positioning: “On the one hand, Chinese authorities speeches around the yuan unveiled a market trend reversal and on the other hand, the European Central Bank’s voluntary policy removed all market stress seen in previous years. Concerns around disappointing global growth were exaggerated. In addition, we had the Brexit vote and Trump’s election. In a way, 2016 was all about perfect timing. We knew when to reshuffle our portfolios.”
Advenis’ fund selection chief outlines that he and his team have increased risk in portfolios as from early March 2016, through credit (high yield) and equities (Europe, US) mainly.
“Since then, we observed a certain linearity and that our macro views were accurate. Hence we benefited from volatility peaks to introduce more risk in portfolio. Currently, we have reached our maximal level of risk. Our most dynamic and flexible portfolios are exposed at 80% and 60% to equities respectively,” Strojny underlines.
He adds that all credit positions in Advenis’ mandates have now been removed at the exception of subordinated debt and that they would only be exposed to investment grade or high yield segments through an unconstrained strategy.
“I look at unconstrained strategies like I would consider global macro funds applying an absolute return logic. We do not want unconstrained funds that would solely blend what can be found on the whole fixed income spectrum. The active management of duration and the flexibility of the fund manager are two key criteria we assess. A fund manager should be free to buy what he thinks bring added value and to time the market as he would do with a total return mindset. We will rise this pocket over the coming months,” explains Advenis’ head of Discretionary Mandates.
Strojny expects central banks not to fail in their communication, branding it a major issue. He argues that currently both bond and equity markets are supported by central banks’ confidence. The consequence if confidence is broken? The markets will reverse, Strojny answers.
The EM rebuilding
As for equity investments, Advenis’ fund selection chief says they have been very late investors in the current emerging market stock rally but that this was done on purpose. He points out that the firm missed the EM boom triggered by March 2016’s trend reversal and that it did not seek to catch up with it. With his team, Strojny fully reviewed Advenis’ approach towards emerging market equity funds instead.
“First, we focused on finalising our developed market equity fund pocket before looking at emerging market equity funds. As we had no more EM equity funds in portfolio, we took the opportunity during summer 2017 to conduct a thorough review of our EM equity fund quantitative and qualitative analysis. We have hence rebuilt our buy list in this pocket with fresh analysis and due diligence criteria.
“Four companies stood out in our study, one was a London-based boutique that we removed as it would have been too complicated to reference it on insurance platforms. The others were Comgest, RAM and Janus Henderson. In the end, we play the Comgest Magellan fund in our discretionary mandates and use the RAM Emerging Markets fund for multi-management purposes. If we need a third fund in this pocket, we would select Janus Henderson’s one,” outlines Strojny.
Advenis tends not to be trend followers in order to generate ideas within its fund selection process. In Strojny’s words, funds ranked among the most performing one have a bias, their managers hope it is the right one and exploit it as most as possible.
“But in our view, today’s outperformers tend to be tomorrow’s underperformers. We rather look for marathonists. They will not be the fastest to perform or within the top performing funds but overall they will always outperform over the long term,” tells Advenis’ head of Discretionary Mandates.
An important component of the French manager’s fund selection remains absolute return strategies, forming at least 20 to 25% of its allocation.
Strojny underlines the like for absolute return funds goes with Advenis’ strong asset management incubation culture.
“We have always favoured high added-value alternative funds. In my previous role, I was responsible for alternative multi-management therefore I keep a positive stance towards this type of funds. We do not seek to necessarily increase the share of alternatives in our portfolios but they are essential in the current low yield environment,” he says.
Advenis’ head of Discretionary Mandates also keeps a much positive view regarding active management as he states the firm’s portfolios do not hold a single ETF. “Active funds only.”