A long duration portfolio is the key to success in the multi-strategy sector, according to Soprarno SGR’s Marco Seveso.
Speaking to Citywire Selector, A-rated Seveso, who runs several funds at the Italian firm including the Soprarno Inflazione fund, said multi-strategy products require a sizeable amount of duration.
'On the bond side we have a duration of 3.5 years, generally speaking, it’s not a high level of duration, but for these products, this is a significant bet. Last month we increased duration due to the fact that interest rates were at the top end of their trading range in Europe.
'Currently, there are attractive yields in bonds, and we are finding good opportunities in the financial bonds in Europe, especially in Italian and French banks.'
With 48.4% of the fund allocated to government bonds and 51.6% allocated to corporates, Seveso said exposure to banking names has been attractive due to the yield available.
‘We started to invest at the start of the year and it’s still a great opportunity for us in this environment with low-interest rates. We have no particular fears of seeing rates go up dramatically in the short term.
'Italian names have performed very well, while this time last year there was high-interest rates due to the fear of international investors with regards to the NPLs. Of course, the risk was real for some names.’
All eyes on Italy
Despite being based in Italy, Seveso said investors in search of multi-strategy products should look globally for sizeable returns.
'We have exposure to Italian investments, it can be good and bad for the fund, as sometimes the Italian market goes well and investors think our fund should be doing the same. Italian investments are important to us but they are not a priority.’
Seveso currently has 13.60% allocated to Western European bonds and said the concern surrounding Italian NPLs had been similar to the concern around French names after the country's election.
‘In this fund, we have around 3.8% allocated to Italian equities and in France, it’s even more. The fund has around 25% allocated to European equities, while there is a small portion in the US which is partially hedged with the futures of stocks, mostly the Euro Stoxx 60 or the Euro Stoxx 600.
'It’s important to have a portfolio of stable names where we believe there is a story to play. For example, in Italian banks, consumer staples (15.5%) or even in technology (9%).’
Over the three years to the end of September 2017, Seveso returned 8.87% in euro terms in the multi-strategy category. This compares with a 5.59% return by the average manager, over the same time period.