The hard currency sector is constantly evolving, with new fund launches and interest rates constantly changing the environment. So, how do the leading sector specialists compare in their efforts to generate outperformance amid disruption?
In this analysis, Citywire Selector focuses on the two hard currency managers topping the sector on a five-year total return basis.
*Data covers the period May 2012 – May 2017
1. Anthony Smouha, Atlanticomnium
Fund manager, GAM Star Credit Opportunities
Performance: Five-year total return of 58.41% with a Manager Ratio of 0.73.
Experience: Having worked for Atlanticomnium since 1992, Smouha is one of the most experienced investors in the US dollar bond sector. He also runs global bond strategies under his working relationship with Swiss investment giant GAM. He has more than three decades of fixed income fund management experience.
Citywire rating: Smouha is on an unbroken 36-month run in the Citywire ratings. He dropped down in April last year to an AA rating following a 12-month stint at AAA. He first entered the ratings in February 2014 with an A.
Investment style: Smouha has a clear preference when it comes to fixed income: financials. Be it in his wider global bond portfolios or his US-focused credit approach, the Geneva-based investor has backed banks, insurers and related real estate debt to power his performance. In his most recent market commentary, Smouha said ongoing de-risking by European banks was putting off many of his peers but he was finding ample opportunities on a risk/reward basis.
Elsewhere, contingent convertibles, otherwise known as CoCos, have also caught the manager’s eye. Speaking more generally, last summer he said the UK’s vote to leave the European Union would not be problematic for more proactive bond pickers and he highlighted his intention to keep a firm footing in the UK bond market.
2. Francis Chou, Chou America Management
Fund manager & founder, Chou Income fund
Performance: Five-year total return of 51.79% and a Manager Ratio of 0.23.
Experience: Boutique founder Francis Chou stands toe-to-toe with Smouha in the experience stakes and boasts nearly five decades of value-oriented investing, having cut his teeth as a telephone technician in the late 1970s before becoming a private investor and then launching his own outfit 31 years ago.
Citywire rating: In part due to running such a diverse range of funds, Chou’s ratings history is more patchy than Smouha’s. He entered the rankings in November 2014 with a AA rating and later dropped to A rating. He was last rated as Citywire + in December 2015 and has not been rated since.
Investment style: Chou adheres to a strict value approach across all the equity and bond portfolios run by his Canadian asset management firm. In the US-domiciled Income fund, which Chou has run since 2010, there is a strong defensive tilt at present and he is holding around 20% of the portfolio in cash, which is its maximum level.
In a similar vein to Smouha, the fund targets US dollar-denominated debt rather than the US market specifically, albeit with a strong tilt towards companies operating directly in that market. His largest single holding – away from his cash position – was an allocation to Ascent Capital Group, which is a three-year convertible bond.
This article originally appeared in the May edition of the Citywire Selector magazine.