François Rimeu likes to keep the La Française Allocation strategy more liquid than most other funds in his peer group. He prides himself on the fact that his global macro fund can be dissolved within an hour.
To pull off this feat, Citywire + rated Rimeu picks securities that can be traded easily. He keeps tabs on the liquidity of his holdings by monitoring the average trading volume of each security, and ensures that it does not represent more than a small portion of this trading volume, which is usually below 10%.
‘We liquidated the portfolio in April 2015. At that time, we were exposed to significant risk as we held long duration in Europe and estimated that the danger of a fixed income sell-off was real, which is the reason why we dissolved the portfolio,’ he says.
Rimeu, who also manages a long-only multi-asset fund for La Française, has plenty of flexibility when it comes to allocations. His long/short strategy has no benchmark and no structural correlation with the main asset classes.
Trading equities, fixed income and currencies, Rimeu is free to go long and short on each.
Working the asset classes
On the currency side, Rimeu has three plays. He is long the US dollar versus the Japanese yen and long the British pound against the US dollar and euro. He also holds a long position in Swedish krona versus the US dollar and is allowed a 100% exposure to any one currency, but thinks it is a difficult area to keep liquid.
‘It is the most difficult asset class to trade. There are only a very limited number of people who have been able to extract value and make money on a consistent basis trading only FX,’ Rimeu says.
Elsewhere, his fixed income holdings are based around duration, which is currently neutral. Rimeu prefers government bonds even though many investors have shunned the sector due to low yields. Long holdings include Mexican bonds of five and 10 years with a one-year duration, while short holdings include 10-year UK securities with a duration of -1.5.
‘It is not a matter of return, it is a matter of mispricing between our assessment and the market’s and it is linked to what the central banks are doing. When we trade government bonds it is mainly through futures. We do our own analysis of the current goals, the growth path of any geographical area, the inflation, inflation forecast and what we believe will happen,’ he says.
Rimeu’s equity allocations can fluctuate between -60% to +60% but his current total equity exposure sits at 9%, he also uses futures and options instead of specific securities to ensure liquidity. The equity holdings are split between financials, basic resources and oil & gas in Europe.
‘The issue that we have is twofold,’ he says. ‘First, the valuations are not really appealing. You have roughly 18 times price/earnings ratios in the US, which is quite high.
‘In Europe you have price/ earnings ratios around 14 or 15 which is average, so it is not very cheap. On top of that you have a market which is expecting and pricing in lots of good news.’
This article originally appeared in the April edition of Citywire Selector magazine.