Fund Selection process across Europe
Criteria, ratios and soft skills necessary to pick an investment fund
Press article: RankiaPro, Ed. 5 – March 2021, page 31
Texte:
Our vision of selection and distribution for third parties involves exploring niche markets, in order to rigorously select the most promising international fund managers whilst instilling long-term vision and conviction.
Initial selection is based on key performance indicators and risk criteria. We seek for managers with a real economic outlook and consistent performance while respecting risk standards and expense ratios. However, a long track record and a significant amount of assets under management are not a necessity. We also endeavor to select strategies whose liquidity is in line with the underlying. In addition, each selection is the subject of a consensus within our selection committee.
These criteria are required but are only a basis, and our choices are oriented according to the two following investment principles: long term and conviction.
Our long-term vision has led us to develop the alternative credit class. Indeed, persistently low bond yields have pushed investors to develop alternative income opportunities born out of the disintermediation of banks and insurance companies. In the area of private debt, we have selected active managers in real estate bridge loans, litigation and trade finance, for instance, who offer historically very stable and uncorrelated returns in exchange for lower liquidity down to one month, in line with the underlying.
It is also a long-term view that led us to turn to Chinese management. Recently, China removed quotas from the Qualified Foreign Institutional Investor program so that strategies can now be accessed in the highly liquid local « A-Shares » market. In this context, we have selected a proven market-neutral strategy from which international investors will now be able to benefit. Indeed, despite the scale of the Chinese economy and its prospects, Chinese assets remain largely under-represented in global investors’ portfolios.
Targeting niche markets, we do not cover by far all asset classes. The other facet of our selection is driven by our convictions.
In the area of ESG, many asset managers now include exclusion criteria or an ESG filter in their selection process. We are convinced that innovative approaches can be taken in this area and generate awareness and performance. For example, the benefits of good governance are much less taken into account than environmental or social criteria, even though they are the basis for effective ESG development: this is the basis of one of the funds we promote, which has been particularly resilient in recent times of uncertainty, as better governed companies are more flexible, more responsive and often better prepared.
We are also convinced of the inevitability of the crypto market and have had a very early presence in this sector. Today it seems to us that although many investors are already directly invested in the main currencies, there are still opportunities that are too little exploited through alternative strategies. This is the case, for example, of the still important arbitrage opportunities inherent to this market or the quantitative strategies deployed within the funds we distribute.
Cecilia Merametdjian
Fund selection & Fund distribution