| Investor Profile: France's Groupe Mornay seeks to internalise value |
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| 30.07.2006 | |
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"We try to visit management teams as frequently as possible so as to have a better understanding of their economic model." This financial analyst's talk is not the kind you would usually expect from the chief financial officer of a pension and welfare institution in France, and yet, this is exactly what Annick de La Borderie, the CFO of the institution, told bfinance. In the end, this position reflects Ms De La Borderie's professional training as a financial analyst, as well as the structure of this "institution de retraite et de prévoyance", which manages about 93% of its reserve internally. Even if such an approach to investment management seems to run against the tide of outsourcing in France, which was slow to pick up but is now adopted by most institutions, Ms De la Borderie rather sees it as a way to capture the value that is usually left to fund management companies, and to return it to the company's stakeholders. "We have to internalise this value, and this is what we try to do with lots of work and thought, and of course, a bit of luck," she says. "So far, this model has been a performing one, but we are aware of its limits," she says. "Our concern is to be able to change it swiftly if we notice that we don't bring any more value at one point." Limitations The asset classes that are deemed to be outside the group's expertise are not directly managed by her three-manager strong team, but rather via open-ended funds (OPCVM) selected by the team. This is the case for small and mid caps located outside the French market. Currency funds are also used indirectly since French regulation prohibits pension institutions from doing this on their own. "On top of that, we use trackers to get more industrial and regional diversification," she adds. Socially responsible investment funds also fall within Groupe Mornay's open ended fund strategy. "We want to have a clear position on this strategy within two years," she says. "We have opened a SRI portfolio thinking that at worst, it would not destroy any value. To get to this conclusion, we assumed that if the stakeholders of a company work within good conditions, then the development of their company will be in their own interest, which should be a powerful growth engine." All the fixed income investment operations have been kept within the group. According to Ms De la Borderie, that's the only way to keep the hand firmly on the duration wheel, a priority given the strong exposure of the institution to fixed income (approximately 60% of the global allocation). "Thanks to this direct fixed income management, we are able to know precisely and to fine tune the duration of our fixed income portofolio," she says, while adding that the group has reduced the duration of its fixed income assets over the last months and is now searching for fixed income funds with a negative duration. Decorrelation is the other top priority of the group. In line with its global investment policy of remaining close to its assets, the institution first used private equity funds of funds, only to switch later to direct investments of €1-5 million in private equity funds. "This asset class is incredibly time consuming", says De la Borderie, pointing out the difficulty of gathering trustworthy information on those markets. For the CIO of Mornay, this is one more good reason to undertake direct due diligence of the fund in which it invests so as to avoid nasty surprises. So far, this has proven to be the right thing to do since the group has refrained from investing in some private equity funds following on-site due diligences. Julien Laplante |
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