Swedish CB Asset Management's ethical approach results in a particular selection of funds, say portfolio managers Marcus Grimfors and Alexander Jansson.
When we have secured the external variables of the funds we turn to the internal variables. In order to make an investment we have to feel comfortable with the managers of the fund and the structure and strategy of the fund company. Prior to all investments with smaller managers, we meet with them in person and/or arrange conference calls. We are looking for track record, view on risk, region and/or sector specific competencies, incentive programmes, commitment, etc. This is a soft variable and therefore hard to measure – it is much about personal chemistry and trust.”
In contrast to other managers, we prefer to allocate to smaller niche managers that have competence in specific areas, for example energy efficiency in Europe or water management in North America. Size is usually not an issue to us, skill and performance is.
The last step in the process is to make sure the fund fits our strategy and market forecast. This can be considered a moving target due to the constant variations and new information in the markets and our interpretation and response to that. It can, for example, be choosing a fund we know has entered capital preservation mode instead of a fund that has positioned itself for a blue-sky scenario, at times when we see more question marks than exclamation marks in the market.”
What are the key attributes you like in managers / management groups?
MG: Diversification, transparency and risk awareness. For smaller firms we also focus on specific competencies in niche areas. Actively managed portfolios are also important to us.
What are automatic red flags for funds / managers?
MG: Inability to protect investors’ money, i.e., large drawdown. We understand long-only funds may lose some money when a market is down, and active managers may lose money even when markets are up, but if an active manager loses more money than the market when the market collapses then the risk is too high for our strategy.
AJ: The objective of the fund is to provide a low-risk product in a high-risk sector. We compare the risk in the fund to that of MSCI World – compared to environmental sector indices and peers we have much lower risk in the fund.
Do your clients invest heavily in absolute return funds, and are the funds mainly on- or offshore?
MG: Our funds are focused on delivering absolute return, so. in that respect, they are absolute return funds – the long-only funds on a rolling 36-month basis. However, only one of our funds is a pure hedge fund and has an absolute return target on a rolling 12-months basis. The other funds depend on the stock market, and also have a target to beat the market index, but they have a defensive profile, compared to the market. All our funds are onshore funds.
If you can choose between equivalent regulated or unregulated hedge funds, would you prefer ‘regulated’?
MG: The regulations are there to protect investors and are good, so we would chose regulated. The risk is, in the future, the regulations will go too far and cause too much administrative costs. In Save Earth Fund we would prefer regulated funds.