Among the different strategies on offer, the selector says she is noticing an increased interest in flexible strategies, as they help investors identify the opportunities offered by the current levels of volatility in the markets.
RED FLAGS AND MANAGER QUALITIES
Apart from flexible strategies, the Caixagest team are seeking new managers in the absolute return/liquid alternatives spectrum, in order to access performance consistency as well as low levels of correlation with traditional investments in the portfolios.
“Our main goal is to develop close relationships with the managers we analyse so that we are able to assess their competitive advantages correctly. The best managers generate profit from inefficient markets with original ideas, insightful research, and accurate information. We first seek to understand thoroughly the investment strategy of managers, together with their ability to execute it profitably,” she says.
When it comes to lifting the red flags, the rapid growth of assets under management, departures of key investment professionals, unexplained drawdowns, and a proven evidence of poor compliance procedures are the main triggers.
“We seek out managers that have expertise in managing portfolios according to agreed client limits, firm policies, regulatory and legal restrictions, while ensuring that the risks associated with any of the investments do not exceed reasonable expectations given the potential return associated with the strategy.
“In order to accomplish this task, portfolio managers need to show evidence of strong quantitative skills while also being subject to control and limits monitored independently by a risk team. The risk process presented needs to be robust, disciplined and up-to-date with market changes,” Brízido concludes.