Enpab's CIO Danilo Pone on how he runs the fund's money

Eugenia Jiménez
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Danilo Pone, Enpab's CIO
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Danilo Pone, Enpab's CIO

SELECTION PROCESS

When asked about his selection process, Pone said: "When we talk about the selection process, it is important to understand what kind of financial instruments we are referring to. This is a fundamental step since there is no a unique valid selection process. We use one or another depending on what we have to select."

With regards to fund selection process in particular, Pone said that it changes depending on whether the fund is subject to the Ucits or the AIFM regulation. It also varies depending on the legal form type of the vehicle.

With alternative funds, we can buy investment ideas that come from the strength of single networks capable to reach the right investment stories thanks to a non-lineal flow of information.”

But generally speaking, Enpab's selection process is divided in two main phases: the quantitative and the qualitative one.

Pone explains: "In the first - for example - we use mathematical techniques to analyse and evaluate the financial instrument. During the second phase, we analyse qualitative aspects ranging from the curriculum of the asset managers to the firm's organisational structure.

"Therefore, we use two separate and differentiated procedures for Ucits than for AIFM funds, which require different levels of sophistication depending both on the fund's complexity level and its investment strategy."

With regards to the characteristics he favours in fund managers, Pone says he particularly likes chameleon-like managers, who are able to adapt themselves and their investment strategies to any market challenges while thinking outside the box and questioning the status quo. 

MARKET OUTLOOK

Pone foresees modest growth and low inflation for the present year. He also believes that investors will have to evaluate the trade-offs to implicitly choose to achieve higher returns. Expected returns of Emerging Markets exceed those of Developed Economies in most asset classes. However, in the short term the uncertainty on the commercial front will continue to weight, so firmly believes Pone.

He adds: "Bond yields are compressed across all forecast horizons, investors will be forced in 2020 to move further along the risk spectrum if they want to achieve performance.

"In 2020 I will continue to observe the sector of illiquid alternatives."

In order to reduce portfolio volatility, he recommends basic techniques like reducing the risk of the portfolio itself and/or use the VIX index.

Pone fears the greatest financial risk for the coming months is what he calls the disappointment effect, which would consist of that scenario in which the financial market does not confirm the expected positive returns that are already discounted by prices today.

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.