CASE STUDY
Multi Asset Total Return
European Corporate Pension Plan | Winter 2019
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Multi-Asset Total Return
Engagement at a glance
A European corporate pension plan was seeking to invest EUR 100m in a Multi-Asset Strategy, via a segregated account. The net return target was 3% p.a., with a risk tolerance defined by an expectation of not losing more than 6% peak-to-trough.
Client-specific Concerns
Driving the need for a dedicated vehicle, the client had a number of constraints that would have to apply to the portfolio: <50% equity exposure, <35% unhedged non-EUR exposure, no high yield exposure etc. Net short exposure to any asset class at the portfolio level was not permitted, focusing the search on long-only or strongly long-biased strategies. In addition, the client had a somewhat unconventional definition of their risk budget, expressed as a maximum drawdown of 6% versus a high watermark that resets every 6 months.
With a number of Multi-Asset strategies already invested in the client’s portfolio, this mandate was part of an overall allocation aimed at bringing asset allocation dynamism to the broader portfolio. Managers were expected to be able to share asset allocation research and views.
Outcome
- Full view of the sector. The process delivered a comprehensive review of the universe of Multi-Asset Total Return strategies, with 41 RFP submissions. Given the €100m mandate size, managers were willing to tailor their approach to accommodate the client’s risk budget approach and exposure limits in a segregated account.
- A clear picture of the different investment processes involved. The managers’ processes vary widely: some are more discretionary and others more systematic; some are more focused on top-down macro while others are more bottom-up driven; some are more dynamic than others in managing asset class exposures; some make more use of niche asset classes. Prior the quantitative analysis, the team provided the client with a clear overview of the key features of each manager’s investment process and their main distinguishing features.
- Track record scrutiny. Long track records for a considerable proportion of the group enabled the team to prepare a comprehensive analysis of performance and risk data to inform qualitative views on managers’ processes. Of the 41 managers, 19 presented more than ten years of track record while 15 could date their performance to before the 2008 crisis.
- Addressing the client’s idiosyncratic risk approach. With a relatively unconventional definition of the risk budget, it was important for managers to demonstrate how they would adapt their processes to deal with this specific requirements.
Our specialist says
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This was one of the more conservative Multi-Asset searches we have undertaken recently, with a relatively modest overall return objective but a desire from the client for a high level of consistency in that return. Finding the right fit in light of the investor’s unusual risk parameters presented a particularly interesting challenge.
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United States, Chicago
220 North Green Street
Chicago
IL 60607
Telefon: (312) 829-4353
Email: info@bfinance.com
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Canada, Montréal
1250 Rene Levesque Boulevard West
Suite 2200, Montreal
Québec H3B 4W8
Telefon: +1 514 393 4899
Fax: +1 514 393 9069
Email: info@bfinance.com
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Suite 2500, Toronto
Ontario M5J 0B8
Telefon: +1 (416) 560-7275
Email: info@bfinance.com
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United Kingdom
36 Queen Street, London
EC4R 1BN
Telefon: +44 20 7747 8600
Fax: +44 20 7747 8600
Email: info@bfinance.com
-
Germany
Promenadeplatz 8
80333 Munich
Telefon: +49 89 55 29 59 00
Fax: +49 89 55 29 59 00
Email: info@bfinance.com
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France
49, Avenue d'Iéna
75016 Paris
Telefon: +33 1 45 02 64 00
Fax: +33 1 45 02 64 01
Email: info@bfinance.com
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Netherlands
Symphony building
Gustav Mahlerplein 3-115, 26th Fl
1082 MS Amsterdam
Telefon: +31(0)20 794 61 00
Email: info@bfinance.com
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Australia
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NSW 2000
Telefon: +61 (0)2 8052 3930
Email: info@bfinance.com
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China
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199 Des Voeux Road Central, Sheung Wan
Telefon: +852 3953 7874
Email: info@bfinance.com