Working in the fund selection unit of Paris-headquartered OFI Asset Management since 2007, portfolio manager-analyst Pierre Molinero scrutinises alternative funds as well as at absolute return, diversified, fixed income and equity strategies.
OFI’s buy-list contains a small bucket of alternative funds, an asset class that faces investors’ rush since a few months.
Molinero tells InvestmentEurope the alternative momentum will last for a long time, naming ‘hot money ‘ the biggest issue for the asset class as investors are not familiar enough with alternatives, getting in and out of the funds whenever they want regardless of the market environment.
“Alternative fund managers do not enjoy this kind of behaviour but they are conscious they manage some ‘hot money’. A number of alternative fund managers who rapidly faced a strong growth in assets conceded they would have preferred a limited one. However, offer still lingers over the segment and if the demand is strong then the offer should follow,” Molinero says.
OFI’s portfolio manager-analyst assesses more money could come into European alternative funds, in particular from US investors.
“Also when I look at the hedge fund universe, US investors seem disenchanted by local hedge fund managers because of multiple issues including poor performances and fees. We cannot exclude that part of these assets managed offshore would be soon managed under Ucits-compliant hedge funds domiciled in Europe,” he argues.
Molinero says the company has not exited any alternative fund yet but heavily trimmed positions instead. He adds that cuttings could be considered if the size of some strategies becomes too large due to the momentum.
In the alternative space, Molinero currently favours long/short equity with low volatility.
“There is currently a sustained demand from investors that puts pressure over the segment. I pay attention to the directional beta exposure of the fund. I do not buy funds showing a beta exposure of 40% to 50%. When I pick an alternative fund for the list, I want to buy alpha rather than beta,” he points out.
Molinero says he does not buy CTAs and that global macro funds raise transparency issues since these strategies use instruments such as total return swaps and assessing their drivers of performance remains complex.
Regarding event driven strategies, “many carry hidden beta and have similar positions”, OFI’s selector estimates.