Agilis IM: An all-weather portfolio for any season

Eugenia Jiménez
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Agilis IM: An all-weather portfolio for any season

Agilis Investment Management is an independent multi-asset fund manager based in London with an investment philosophy that is in part accounted for by the circumstances of its launch.

Agilis’ team members had already worked together for some 10 years when the firm opened its doors – firstly at Fauchier Partners and later at Permal. According to Chris Welsh, Agilis’ head of business development and distribution, this familiarity among team members made the business launch easier as well as helping to bring in customers.

The British firm runs just one investment fund, the Protea Fund – Agilis Ucits, which is a multi-asset target-return strategy focusing on performance. According to Welsh (pictured), this core Ucits strategy is an all-weather investment portfolio designed to perform in all stages of the economic cycle.

Protea Fund – Agilis Ucits’ investors are 95% European and primarily institutional with a small proportion of HNWIs clients. Since the fund offers weekly liquidity, it is not targeting retail investors at this stage. For the remainder of the year, the firm’s priorities consist of focusing on the portfolio and the investment process while increasing its assets under management. “Our focus is on developing this fund and we do not have any current plans to offer a broader range of funds,” Welsh states.

Agilis’ head of business development joined the company earlier this year from Mako Group, where he was its CEO for the past 10 years. Mako is a derivatives trading and technology firm based in London.

Welsh works closely with Agilis CIO Clark Fenton on business strategy, and with the client team on distribution and marketing. Most of the business is carried out from the middle office platform which “is well established and supports the investment team with an integrated bespoke technology solution, covering analytics, risk management and the broad middle office functions. Some key specialist functions including tax or legal advice are outsourced,” explains Welsh.

Agilis runs a multi-strategy investment process when managing its exclusive Protea fund in order to achieve its defensive-growth objectives. Among them, the firm aims at achieving return above 5% before fees over a rolling 5-year period, truncating drawdowns to protect capital and achieving beta to equities of 0.1 to 0.4. “We start with a portfolio first approach to construct and actively risk manage a resilient all-weather portfolio in synch with the market cycle.

“We seek diversification across factors and styles, but with a manageable number of holdings,” outlines Welsh.

The fund’s portfolio includes between 10 and 15 discrete investment strategies, that are a mix of thematic (longer-term) and episodic (shorter-term, tactical) strategies. The final stage of the investment process focuses on trade expression, “which is a source of significant differentiation of the Agilis fund that leverages heavily on the experience of Agilis CIO and head of trading,” comments Welsh.

He continues: “In expressing a number of the investment themes, we use listed options for risk mitigation, portfolio protection, and asymmetrical pay-offs.”

Agilis believes the market is late on the cycle, a reason that explains why its fund is positioned accordingly with moderate level of risk. Its exposure to equities is relatively long, long to US government bonds, short to European and US credit, and also long to volatility and commodities.

DEFENSIVE MULTI-ASSET APPROACH

Welsh affirms that Agilis should be a source of return and diversification within investors’ portfolios to navigate the current market environment.

“We have several layers of protection embedded in the portfolio construction that should perform if the equity markets drop sharply and we have already seen these contributing to the portfolio, last February and recently in October. Conversely, if the market trends upwards we have sources of return that would allow us to participate.”

The firm believes that we are now entering a rolling bear market across most global risk assets, caused by a drain in liquidity and peaking growth. According the manager, some sharp market moves and dislocations might occur through this next stage.

As we move through the investment cycle, bonds may not be the diversifier they have been historically, becoming a challenge for investors when building balanced portfolios. Holding higher cash balances may help, but given continued low returns in money markets, that can only be a limited part of the solution,” Welsh explains.

BUSINESS PLANS

The Protea Fund – Agilis Ucits is mainly distributed across the UK, Europe and some strategic regions of Asia.

Agilis is now mainly focusing on bolstering its network of existing investors, by “doing a good job for them”. This means to defending well in pull backs and during periods of market turbulences, while being able to capture good opportunities during more benign environments.

So far the firm is not planning to launch any new strategy and it is focusing most of its efforts on performance.

Welsh highlights how Agilis has a good number of long-term client relationships in Spain which he considers:“a dynamic and entrepreneurial financial community with an outward looking global approach to investment.”

The Fund is available via a number of UK and Spanish Institutional wealth managers, or directly for HNWIs and family offices in permitted jurisdictions. In Spain, it is registered in the Spanish CNMV and available for Spanish wealth managers through Inversis.

LESSONS FROM THE PAST

Although Welsh reckons the financial industry has changed substantially since the 2008 crash, he warns it is more important than ever before to look at the market through broad lens, whether it is across asset classes or across geographies, since there is an evident degree of interdependence. “Signs of stress or dislocation in certain area, can quickly affect the market more broadly.

“It is also crucial to take liquidity into account, both in the portfolio construction and in asset pricing.”

He follows: “Given the breadth of the Agilis mandate and its focus on trade expression, both points are under regular discussion within the firm.”

When Lehman Brothers collapsed a decade ago, Welsh was working at a listed derivative trading business, and therefore, very close to the markets’ volatility as the turbulence unfolded. “The warning signs had started in July 2007 when we first saw some huge swings in the US fixed income markets with the 10-year futures moving in a massive range.

“Although the very pronounced market moves had not triggered a market wide reaction at that stage – or even reached the public consciousness -, we took note of the obvious stress in the system, adjusted accordingly and proceeded with caution. Thus, we were relatively well positioned when the crisis exploded.”

Eugenia Jiménez
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Eugenia Jiménez

Eugenia Jiménez speaks Spanish and is Iberia Correspondent for Investment Europe covering Spain & Portugal, as well as Italy.