Summertime poses some challenges to fund investors, including the question on who is in charge of a fund when its lead manager goes on holiday. Juan Hernando, head of fund selection at Morabanc, reveals to InvestmentEurope some of the issues that concern him during the summer season.
- Do you ask questions around portfolio managers’ holidays/absences during due diligence?
We ask about contingent plans. Maybe we do not specifically ask about holiday but we try to make sure that there are back-ups, not only in the case of the manager but also in risk management, trading or operations.
We try to determine the idiosyncratic risk linked to the manager and depending on that, we are more or less demanding regarding back-ups.
There are some funds highly dependent on a key manager. In these cases we are more interested on what happens in his/her absence. There was a manager that even had written a contingent plan in case he died.
In funds that are not so dependent on a manager it is not so relevant but there is always someone in charge.
- Are you reviewing any position (either buying or selling) in your portfolio before leaving on holidays to anticipate any market downturn or upturn?
We prepare the portfolios depending on potential scenarios. We always have managers working in the office even during bank holidays so the summer or winter holidays do not change substantially the way we manage portfolios.
In our case we do not make specific operations before holidays to close some trade or some investment. What we do is to prepare the portfolios according to our market view. If the market situation changes we can adapt the portfolios.
- Do you have a particular souvenir of a summer market turmoil?
I remember the summer of 2011 that was very painful for the markets (Eurostoxx50 plummeted -22.32% from July 22th to August 10th, S&P 500 -16.71% in that period). It is one of those weeks that the investors do not forget easily.
August is usually a lower volume month, especially in Europe, but in 2011 August was the highest volume one that shows how complicated it was.
During the following year the problems in the Eurozone continued and the summer was very volatile until Draghi pronounced his “whatever it takes“.
2011 and 2012 are an usual conversation topic before summer holidays.