As 2018 kicks off, how will fund selectors cope with the ever-evolving environment? If passives continue to dominate the market, how can fund selectors adapt?
In this edition of 'Selector Snapshot', one investment professional reveals his biggest challenges for the year ahead.
Selector: Jonathan Cohen
Company: Reyl & Cie
Passives and the increase in passive solutions is definitely a challenging situation for us. Meanwhile there are also many new thematics funds in the market, such as ‘millennials’ or ‘golden age’ funds.
For us, it’s all about changing the selection process, by that I mean adapting a little bit, although it’s definitely a challenging situation.
I would say that the number of providers is also quite a challenging situation for us. Due to our size we need to keep a close eye on the resources that we have as well as the amount that we invest in the selection process.
The way we cover the universe and source new opportunities is becoming increasingly complicated due to the number of other participants.
We are confident about the banking industry more from a credit point of view. You see a lot of banks that have improved their balance sheets and they are more solid, but that could always change in this challenging environment.
This was definitely a key driver of performance for 2017, as well as having avoided some sectors such as defensives and corporate credit in Europe.
ESG is something which has been prominent and has drifted its way over here from the Nordic pension funds and the Nordic region as a whole.
We are seeing more and more demand and we are seeing a lot of concern from investors regarding the environment and social impacts companies have.
It’s not just about compliance and investments, but it’s also about their conscious and social impact. We want to work out how we can use ESG, and how we can integrate it into our selection process.
One regret from the last year is possibly our allocation to European equity. We had it earlier in the year due to the challenge of the political situation and some elections, especially in France.
Maybe we were a bit too defensive in certain parts, however, this was more from an asset allocation perspective than pure fund choice or selection.