Focusing different aspects of the selector role on different individuals works for Spain’s BMN.
Banco Mare Nostrum (BMN) was founded in 2010 to manage the financial businesses of three regional saving banks: Caja Murcia, Caja Granada and Sa Nostra. BMN aims at servicing the Mediterranean area and currently holds €65bn AUM through 800 branches and 4,000 employees.
Within the organisation, Iván Merillas Santos, head of Investment Analysis, and Salvador Vilallonga Cairó, head of Asset Management, Insurance and Private Banking, (both pictured) work closely together and have a very clear idea of how the selection process should be conducted.
Together they manage some €700m for institutional and retail clients, all of which is actively managed. While Merillas is in charge of day-to-day selection activities, Vilallonga looks at things from the broader angle. Speaking with sales managers every day and keeping himself informed about the latest market trends by reading specialised magazines is where Merillas’ job starts.
The investment analyst also says he is in charge of creating an approved list with a number of alternatives for each peer group from which he selects the most appropriate funds according to the type of portfolio. And after that, the quantitative side of the selection kicks in, where Merillas creates a tailored quantitative model to rate each fund in the respective peer group. “Such a model has two main features: coherence and consistency. Once the score for each fund in its peer group is calculated, we analyse the funds qualitatively with more accurate ratings,” he says.
MULTI-ASSET AND ABSOLUTE RETURN STRATEGIES
Asked whether Spanish investors favour any particular strategy at the moment, Vilallonga says fixed income products and multi-asset strategies are at the top of BMN clients’ lists at the moment. “For this reason, we have launched the first fund of funds in a distribution class in Spain,” he says. However, he says he expects the rally to be over in the fixed income space and sees it being difficult for the asset class to obtain good returns going forward.
“As a result of that, we are looking for new managers with skills to obtain good results in absolute return and flexible fixed income strategies,” he says. Talking about absolute returns, Merillas explains that these funds are being sold in an active way to their clients. “In portfolios with low volatility they have an important weight,” he adds. As Vilallonga clarifies, BMN’s absolute return investments are completely offshore.
MANAGER QUALITIES AND RED FLAGS
Consistency and no mismatch with the investment style are the main qualities Merillas and Vilallonga seek in the managers who run the funds that will eventually end up in BMN’s client portfolios. On the other hand, both agree on pointing to style drifts and drastic outflows as the main reasons to take money out of a fund.
RISK CONTROLS AND HNWI
Both believe that risk controls are important in funds and they prefer those that are independent of the manager, and that operate without asking if a limit or condition is unfulfilled. On a different note, Merillas sees the biggest changes over the next five years happening in the high net worth client segment in Spain. “Everything depends on the new Mifid II regulations,” he adds. “Spanish investors are not used to paying for being advised and it will be very important to manage this change with them,” concludes Vilallonga.