Capital Strategies Partners is using particular databases to find managers of niche active management strategies, and bring their capabilities and products to market.
CSP employs four steps in the due diligence process: phone interviews, face-to-face meetings at manager’s office; reference checks using CSP’s network of contacts; and back-office reviews conducted by the operational due diligence team, together with their investment partners.
If necessary, CSP will call on a third-party firm to carry out formal, independent background checks on key personnel. CSP analysts conduct initial phone interviews with managers and meet them in person, if the relevant strategy committee deems the manager or strategy of sufficient interest. The analysts will study the manager’s performance and run attribution analyses.
By meeting in person with the manager and their team, the investment analysts have the opportunity to assess the personnel, overall investment strategy and risk controls. If the manager meets the investment team’s criteria, the operational due diligence team will begin its review of the manager’s business practices and operations.
CSP finds its clients mainly in the institutional space (pension funds, insurance groups and banks’ proprietary desks), and also in the intermediary sector (fund of funds, unit linked and discretionary portfolio managers).
Milan says: “Last year, we decided to start targeting the pure distribution market, with a particular focus on Italy, where especially the private banking and financial adviser networks have proved to be extremely interested in reliable and successful boutique managers.”
Overall, CSP has more than 80 clients in southern Europe and Latin America, with more than €1.7bn in assets under advice. The Italian office opened in Milan in mid-2009. Since then, with three staff, CSP Italy has gathered more than 30 clients and almost €270m. Milan says he has many new deals on the horizon.
At the moment, CSP is handling the interests of ten asset managers, each of them specialists in a particular asset class or strategy. Milan says: “In the past five years, we decided to concentrate on sourcing companies specialising in fixed income and whatever really proves to be decorrelated from traditional equity and bond market, but also able to perform consistently on a risk-adjusted basis.
“We really believe in the high-yield market on a long-term basis. We are partnering with Muzinich, a firm that has specialised in credit since 1989, developing an outstanding track record. It has a unique and distinguishing strategy, focusing on BB- and B-rated only, and using no derivatives and no financials.”