Lucas Strojny is our Fund Selector of the Month. He a multi-asset portfolio manager at Amilton AM since January 2019. He started his career in 2006 as a fund manager at Avenir Finance IM with a focus on asset allocation and quantitative management and joined RMA AM in 2009 to develop the alternative investments activity and manage low volatility absolute return funds. In 2016, he became head of discretionary mandates at C-Quadrat AM France (formerly Advenis IM). Lucas holds a Master’s of Science in Asset Management from the University of Paris – Dauphine and is a Chartered Alternative Investment Analyst (CAIA).
What do you think leads to success in the business industry? Can you give some unique advice for people starting a career in asset management?
Trust is the key to success in the asset management industry. This is acquired through transparency and regular communication with clients and partners, both in favourable times and in times of crisis as we live now, but also through daily work. Investing does not consist in having a bright idea per decade but in delivering daily questioning of its investment themes to seize new opportunities.
What is the greatest challenge as a fund selector?
Stay curious. A fund selector must constantly question his convictions, whether in terms of the investment theme, the management team or the company. Furthermore, fund selectors should beware of the danger of marketing. Asset management companies have considerably improved the quality of their communication over the past decade. Therefore, it becomes essential to exchange directly with managers and to get rid of “marketing” communication to understand what is really behind a strategy.
From the qualitative analysis, what kind of information do you find most interesting?
The main objective of qualitative analysis is to understand the management philosophy and the personality of the manager or the management team. This analysis makes it possible to identify the risks inherent in the investment strategy and thus the relevance of their integration into a portfolio. We attach great importance to transparency in management and regular exchanges to benefit from the manager’s knowledge on his asset class. We appreciate being able to know the detailed positioning of a fund as well as its performance attribution in order to quantitatively validate the managers’ speech. Finally, we are used to keeping the funds in our buy-list for several years, due to renewed confidence through exchanges and in-depth knowledge of the management process.
Which assets do you think will perform better (survive) in 2020 considering the current market situations? Which assets are performing well under stress scenarios?
The market dislocation environment has two main consequences, on the one hand, the extreme levels of correlation between asset classes and strategies annihilate the diversification effect of portfolios, on the other hand, market stress has generated a significant drop in the markets and now makes it possible to benefit from extremely attractive valuations on certain assets. Consequently, few strategies have generated profits during this period of stress. This is the case for certain commodity arbitrage funds which benefit from a very favourable carry or long-short market neutral funds with defensive positioning. In this period of stress, only government bonds have proven to be effective, but it becomes terribly difficult for investors to buy long duration bonds at negative rates. The easing of tensions will, in our view, be favourable to the credit market, in particular in the subordinated financial debt and the high yield segments. Besides, the theme of oil is once again becoming extremely attractive in the long term, whether through highly exposed equity markets such as Russia or oil currencies.
What kind of adjustments did you make in the portfolios that you manage, in terms of hedging or risk management? How does the adequate asset allocation look right now?
As the episode of sanitary and financial concern surrounding the Covid-19 is probably not over, we consider that reducing the gross exposure of our portfolios is the best way to reduce the level of risk. This was particularly the case within High Yield and EM debt as well as within the equity pocket. However, we have recently initiated positions in subordinated financial debt, the level yield level has become extremely attractive given the financial stability of the institutions in the Eurozone as well as the measures taken by the ECB. An eased environment will encourage us to reinvest in European high yield as well as in Chinese equities due to their good management of the crisis and Russian equities which will benefit from the expected rebound in oil prices.
The high levels of volatility and the epidemic trend in the USA encourage us to be cautious and therefore to maintain prudent exposure across all asset classes. In the longer term, the markets offer attractive valuations on assets that will benefit from central bank and governments measures, it is these assets that we favour in our allocations and that we will continue to strengthen.
Do you think that because of the current crisis situation in asset management and investing in general, ESG as a product and as an asset class will take a back seat?
We do not consider ESG funds as an asset class independently of the others. The extra-financial factors will become a prerequisite for all investment strategies to strengthen the quality of the analysis as a whole. In our fund selection, we will continue to favour the quality of the investment process and its ability to generate alpha, while attaching importance to the integration of ESG factors. However, we will always take care to favour performance and do not intend to integrate labels in our portfolios for marketing purposes.
How will the lower interest rates affect the client portfolios?
For European investors, low rates environment has been a reality for many years with the main implication the need for greater risk-taking to achieve the expected returns. The hunt for yield generates a concentration of positions and consequently as more frequent spikes in volatility. Our response to this environment consists of truly active management and an increased curiosity which allows generating original investment themes over the full spectrum of assets in developed and emerging markets.
