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Pure play or no way, says top French pension chief

Pure play or no way, says top French pension chief
For Hugues Fournier, CEO and head of investments of Macif Gestion, the €23 billion investment division of French insurer Groupe Macif, transparency is paramount.

‘We want pure allocation and exposure to the sectors we invest in and so do not use products like mixed asset funds.’

However, when it comes to Alt Ucits funds, he recently made an exception, for a while at least.

‘We felt we were not able to judge the timing about when to go into long/short or credit arbitrage funds, so in this case we thought it best to delegate to a fund of funds manager to create a mixed product and a diversified alternative fund with a range of different strategies.’

But the change in tack was quickly reversed.

‘We are now stopping all our investments in alternative multi-manager funds,’ he says. ‘Since the end of the crisis we have struggled to find funds that offer consistent returns.’

He now only taps the Alt Ucits universe directly through the Zencap Altra and the OFI Palmares Drive funds rather than delegating selection to a third party.

Selection overview

The Paris-based manager works alongside two colleagues, Gilles Pécaul and Pierre Chaize, who carry out the ground work when it comes to the group’s fund selection process and currently run just under €2 billion in multi-manager assets.

'I try and play more of a referee role and pass on the guidelines for asset allocation and leave them to their work, researching and finding potential funds to invest in,’ says Fournier.

The trio have weekly meetings to discuss the performance of their current funds and any interesting managers and asset management companies they have met.

While the majority of the group’s investments are directly made into European bond markets, fund selection still plays an important role.

‘When we move out of eurozone investment grade bonds that is when we tend to select bond funds. In equities it is more radical as we will invest almost exclusively in funds.’

Groupe Macif is one of France’s largest insurers and Fournier runs a number of different portfolios for his clients, the biggest of which is for the group’s life insurance company Mutavie.

Most clients only want exposure to the bond market but around a third have other requirements and that is where Fournier’s fund selection skills really come into play.

This discipline is exercised further by the fact that Macif Gestion subscribes to high SRI standards.

‘Within the SRI theme we are focused on mainly large-cap equities from developed countries. It would be a lot more difficult to do an emerging market debt SRI fund, for example, so we are limited by what exists,’ he says.

Mixing it up

Before even considering a fund Fournier and his team check the company’s credentials and decide whether this is a firm they can fully collaborate with.

‘For this reason we tend to work with larger investment companies but in certain cases we have turned to smaller groups,’ he says.

‘For example, if we know an excellent manager who has recently set up his own boutique then we ask to see its investment policy and examine its structure.

‘But we will not invest in a small group on the off chance without studying its approach.

‘We tend to steer clear of strategies where the possibility of mixing a large variety of risks lies too firmly in the hands of the fund manager.

‘The notable exception is equity stock picking because that is a very specific job. But we favour managers who can clearly explain what they are doing and what their next moves may be and expect that to be reflected in the following monthly reports.’

Boutique fund managers in Fournier’s portfolio include renowned French equity specialist Thierry Flecchia of Flinvest and Vincent Strauss of Comgest.

He holds Flecchia’s Entrepreneurs fund and Strauss’s Magellan fund, one of the emerging market sector’s oldest constituents. Another French equity fund he currently rates is the Moneta Multi Cap, managed by Citywire AA-rated managers Romain Burnand, Thomas Perrotin and Andrzej Kawalec from Paris-based boutique Moneta Asset Management.

While boutique stock pickers may be subject to a more flexible style of analysis than other managers, Fournier still expects a clear view of their investment strategy – full transparency is imperative.

Well thought out presentations may initially encourage Fournier to deepen his research into a fund but thereafter any shortcomings are rigorously interrogated.

‘There have been times when the sales people that represent the manager have done a good job at promoting the fund and of presenting the manager and his strategy.

‘But then when we met them we soon realised they were not all what they were made out to be and we were not impressed with their explanations. That is something you have to watch out for.’

Three-pronged approach

Fournier says his selection process is a pretty straight forward blend of quantitative and qualitative analysis that focuses on the manager’s investment approach and overall process as well as the selectors’ own views of the asset management firm after initial contact.

‘These are all important questions that need to be answered,’ he says, ‘but even after the fund is accepted we then have a question of timing and determining if it is the right moment to invest or whether we should wait a bit.

‘So it is quite a classic approach which we apply systematically.’

Fournier opts for a mix of three different styles to balance his portfolio: index-driven strategies for stability; stock-picking expertise to drive returns as it is in this type of fund he has noticed the best performance over the mid to long term; and what he has to come to define as ‘benchmarked’ funds.

‘These are run by managers that follow their fund closely to make sure it does not stray very far from its benchmark. But they still make bets so there is a level of conviction mixed into their investment approach.

‘It is not an index fund, they try and outperform the index and these are quite often funds linked to big asset management groups which are owned by large banks and institutions.

‘They will allow their managers to make bets as long as it is controlled.

‘It is rarer to find a hardcore stock picker working in the investment arm of a large bank because he can have a positive performance of 15% but a loss on that scale won’t be tolerated by a big institution.’

Along with boutique managers, which are a minority in his portfolios, Fournier also holds funds from some of the biggest asset management firms in the business.

The Aberdeen Global Emerging Markets fund, run by Citywire Euro Stars A-rated manager Devan Kaloo, is another fund alongside Strauss’ Magellan fund which sits in his emerging market fund holdings.

Another high profile holding is Edmond de Rothschild’s Europe Synergy fund run by Philippe Lecoq.

Future proofing the portfolio

An established eurozone investor, Fournier is well aware of the problems facing the region especially since he runs a bond portfolio almost exclusively invested in euro-denominated bonds.

‘The situation will be rather painful over the next 12 months and it is hard to believe the eurozone will recover.’

Like many investors in this challenging environment, he is now turning to emerging market debt and high yield markets to find new sources of income to meet his need for long-term returns.

He currently holds the Allianz US High Yield as well as the OFI Euro High Yield fund and although investing in these types of asset classes means upping his risk exposure, Fournier says his future liabilities must be met.

‘There is a lot of talk about bubbles in these areas so we have to follow this like milk on the stove.

‘But that is the problem with today’s low yields, the difficulty is finding ways to boost performance considering the yield on investment grades is so very low.

‘In emerging market debt the question will be whether to go into local or hard currency and in high yield it will be whether to invest in the US or Europe and whether we prefer the safer high yield issuers.’

While his equity portfolio is also mainly focused on Europe, its next biggest allocation is to the US. Although the country is facing some considerable headwinds with its mountain of debt, Fournier is confident over its outlook and currently holds the parent company’s OFI GE
US and UBS US Growth funds.

‘In the mid-term I believe the US is getting ready for a strong revival, especially with its energy autonomy which is a recurring subject these days.

‘It is rather reassuring to think of the US returning to good growth levels with the resulting benefits for global markets. In contrast, countries like Germany, Japan or China, which are heavily reliant on exports, actually do very little to boost the country’s surrounding them.

‘There could be an American hope but its market is still near the cliff edge because of its debt issues.’


Hugues Fournier began his career in 1989 at the Crédit Foncier de France where he worked within the bond team.

A year later he was sent to Australia to work with Société Générale. Over 18 months he worked in its FX department covering banking and risk management.

He has always wanted to go back to the country but has had to postpone the trip due to other commitments. Upon his return in 1991, he joined Crédit Foncier’s fund management team and then moved to Macif Mutavie Finance, a subsidiary of Groupe Macif, in 1993 as a bond manager.

He has been with the group ever since and in July 2010 was appointed Macif Gestion’s CEO and head of investment.

Outside of work you will usually find him playing a round of golf with friends or catching up on some of the latest film releases or French film classics.

When he finds time to read Fournier likes to gain further insight into the world of finance and is currently deep into La Crise des Dettes Souveraines, by Anton Brender, Florence Pisani and Emile Gagna.

This article was originally published in the October 2012 edition of Citywire Global magazine.

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