A single year of poor performance doesn’t instantly make a bad manager and you can actually value hunt for those likely to rebound strongly, according to EFG AM’s Oscar Blanco.
Speaking to Citywire Selector, Blanco, who selects equity hedge funds at the Swiss firm, said he has been focusing on managers who had significant drawdowns in 2016.
‘2016 was a horrific year for long/short managers. What I have been doing this year is focusing on the managers that experienced large drawdowns.
'I have focused on those who were down in the region of 15-20% in 2016, but where they have had a reasonable track record history going back many years.
'There were two main themes that crushed these managers, such as the breakdown in momentum and also those that persisted with a short energy and materials theme.'
Blanco said he believes no one single strategy can work consistently all of the time, so has compiled an approved list of managers who fit into the required drawdown category.
'One of the managers we are looking at is R Parus Ucits, this is managed by a group of three portfolio managers from London,' he said.
'The other fund is the Odey Absolute Return fund, which is managed by James Hanbury. Hanbury is now the lead long short equity alternatives manager at Odey and has taken over from Crispin Odey in terms of long/short assets.
'He has made some sensible changes to his portfolio, including removing the macro aspect and also reducing the gross exposure whilst concentrating the portfolio with high conviction names.'
With this approved list, Blanco said he is acting as a counter trend to the market, which he believes is currently focused on market neutral and systematic managers.
‘I have also been looking at high octane, directional managers, identifying good managers where they have high conviction in their stocks.
'Most people will say it’s easy to select managers that are down 20%, because inevitably they will rebound but most may not understand where their skills lie.
'These managers have just been hit by themes that just didn’t go according to plan, thankfully this year they are doing really well,' he added.