Benoît Boru, founding partner of French investment advisory company Insti7, speaks about growth since the financial crisis and long-term fund selection for cautious clients.
Balancing client needs with manager capabilities is just one aspect of manager selection. The experience of the manager’s team is also important, Boru adds, as “new managers are more of a gamble”. Although he believes personality is important, “they all say the team is nice and works well,” he notes. This means there is no room for instinctive decision-making – “we are more factual,” Boru explains.
One personal quality Boru is drawn to is the capacity to admit mistakes. “I like managers who are able to admit mistakes and explain and prove they have acted
to avoid these mistakes. I am no longer very impressed by track records, indepth analysis is needed to understand it,” he says.
For open-ended pooled funds the selection process follows a quantitative approach to whittle down the best managers with the best track records in the appropriate asset classes. These can be more short-term investments which are possible to cut on any given day and so the level of involvement with the manager and his team is different, Boru explains.
Insti7 therefore agrees to meet all managers, “literally everybody”, as they have
no preconceptions about preferred managers or strategies. The due diligence process on these managers involves meeting them onsite, as well as getting to
know existing clients of these managers.
Insti7’s analysts then present their preferred manager picks at monthly committee meetings to decide who will make the final cut. In terms of asset allocation, Boru says clients are less keen on equities (“they haven’t sold their equity positions,
but they’re not adding to them”).
By contrast, he notes that many clients are looking to diversify short-term assets through short-term credit. Absolute return funds are also popular provided they fit
within the Ucits III framework. Liquid vanilla hedge fund strategies such as equity long/short is the most obvious Ucits III candidate, but global macro and managed futures strategies are also attracting attention, despite their exposure to commodities markets. Meanwhile, other clients are hoping to diversify short-term assets through low volatility investments such as arbitrage strategies, Boru notes.