The most important asset allocation call over the past 12 months for La Financière de l‘Echiquier CIO Olivier de Berranger was being mobile in profit taking as market volatility slowed.
The Paris-based investor, who assumed his senior post this year, told Citywire Selector that 2017 did not allow for static investors to buy and sit on a position and wait for it to perform.
Having begun the year overweight European equities, de Berranger and his team took profits on this position at the end of May, which was done ahead of the French election result.
The CIO came back more aggressively on the market in September with an investment rate above 70% for the Echiquier Arty fund, which invests in equities and corporate bonds. By the end of October, he had taken profits again.
Meanwhile, his second best asset allocation call was to stay away from duration, which de Berranger said was an advantage amid lower volatility. While this position wasn’t performing in terms of market returns, it has substantially lowered the volatility of the fund.
All year, de Berranger said they have had very short duration across all the portfolios, of between one and a half to two years.
Vying with value
A third key theme of the year was to be invested in value stocks that have had a growth problem or a growth accident, an investment preference held across all funds. A good example of this type of company is Swatch, he said.
The Swiss value stock was valued only 1.1 times capital employed in September 2016. The share price fell below CHF 205 and has since climbed to around CHF 400.
‘It is the kind of company that performed very well in our portfolio last year and it was a strong call for us to be long this kind of ex-growth company that has had some problems.’
There is still more upside potential for Swatch, he said, as this year all companies linked to the luxury market have done well. ‘For the time being, the watch market is lagging a bit on clothes and perfume but it should be on a better footing in 2018.’
Another good example for value investors, he said, is luxury group Hugo Boss, which invested too heavily on women’s wear and placed too much importance on marketing and high-end men’s suits.
‘The company has new management and we like the stories of growth companies that have had a problem at some point with management, a product have since had a restructuring.’
The €1.47 billion Echiquier Arty fund returned 7.9% in euro terms over the 12 months to the end of November 2017. The average fund in the Mixed Asset – Flexible EUR returned 6.4% over the same timeframe.