The Interview - José Luis Jiménez, March Gestión de Fondos: “We will probably end the crisis in better shape”
José Luis Jiménez, chief executive of March Gestión de Fondos, the investment arm of Spain’s Banca March, says that a combination of macroeconomic analysis and analysis of financial markets, together with the valuation of companies, is the most critical process for the success of the Spanish firm’s investments.
GFM: What is the background to your company and funds?
JLJ: March Gestión de Fondos (MGF) is a fund management boutique and the investment arm of Banca March, the only wholly Spanish-owned family bank that is not quoted on the stock exchange.
Banca March was founded in Mallorca in 1926 and currently has offices in the Balearics, Canary Islands, Andalucía, Valencia, Madrid, Barcelona and London. Investment activity is carried out through the Corporación Financiera Alba, which focuses on building leases granted as operating leases and shares in companies that are leaders in their sectors. These include ACS and Acerinox, of which Banca March is the major shareholder, as well as Indra, Prosegur and Clínica Baviera.
MGF manages collective investments and services the investment requirements of Banca March customers. Since its establishment in 2000, Banca March’s vast experience of managing investments has been a fundamental pillar of the group’s growth strategy. MGF’s investment philosophy combines long-term value creation with asset protection an it specialises primarily in selecting companies as well as fixed income in the euro zone.
MGF has continued to deliver good performance combined with high transparency and closeness to our clients. Recently we launched March Vini Catena, the first global equity find specialising in the wine value chain, revamped Patrimonio Defensivo as a GTAA fund with a volatility limit of 1 per cent per annum, and improved the provision of information to clients through new daily fact sheets for our products based on work we have carried out with Morningstar.
GFM: Who are your key service providers?
JLJ: Our auditor is Deloitte and out custodian is Banca March
GFM: Have there been any recent changes to the management team?
JLJ: I became chief executive of MGF nine months ago, joining from Skandia Investment Group in the UK. I began my professional career at Caja Madrid as an economist in the research department before joining Skandia Vida as chief economist. I subsequently became chief investment officer at Skandia Investment Group for the Europe and Latin America division, first in Madrid and then in Paris, general manager of Skandia Multigestión and advisor to several companies in the group.
Before joining Banca March, I was the head of asset allocation at Skandia Investment Group, a specialist business for Skandia group investments worldwide with USD125bn in assets and head office in the UK.
GFM: How and where do you distribute the funds? What is the profile of your current and targeted client base? What is the split of your assets under management between institutional and private clients?
JLJ: We distribute our funds through Banca March, probably one of the most solvent banks in Europe with a core capital ratio of 18 per cent. Our target clients are mass affluent and high net worth individuals. Our assets under management are 60 per cent from private clients and 40 per cent institutional.
GFM: What is your investment process?
JLJ: The investment processes reflect how the investment philosophy is put into practice and how the ‘unique perception’ is exploited to the full. At MGF, the combination of macroeconomic analysis and analysis of financial markets, together with the valuation of companies, is the most critical process for the success of investments.
For an analysis of the macroeconomic environment and financial markets, MGF can count on recognised information sources, both private and public, as well as the experience of the management team, which includes lecturers from universities and prestigious business schools.
Analysis of the economic and financial environment, as well as the investment strategy, is undertaken by the investments committee, a body made up of the management company’s most distinguished investment professionals, who are invited to participate according to the subjects they cover.
The investments committee is regulated by the terms of reference and is presided over by the MGF director of investments. Companies are selected according to a fundamental analysis. The aim is to invest where there is an opportunity to purchase companies that have an attractive valuation and whose fundamentals remain solid over long periods.
The most typical ratios, including valuation, debt situation, profitability of the company and generation of cash flows, are examined using methods to analyse and value companies. If the conclusions are positive, the fundamentals are studied, including visits and interviews with the managers. The companies that are considered to be the best opportunities for investment are incorporated in the portfolio.
In all instances, investments in these companies are always made with a long-term view. The construction of the portfolio seeks to maximise the best ideas of the investment team and the beliefs of the manager in charge, in accordance with the investment policy of each product.
The investment strategy of the management company is replicated through model portfolios (conservative, moderate and determined), which are periodically monitored for their development and the allocation of profits as if part of an investment portfolio.
Risk control is a critical variable in the management of assets and both the director of investments and the management company’s director of control supervise the positions in the portfolio, the regulatory risks and the systems of operation, and report to the risk committee.
GFM: How do you generate ideas for your funds?
JLJ: As an investment boutique we have a highly motivated team of investment professionals that aims to combine all the expertise within the Banca March Group. Every month at our ‘Fund Lab’ special guests and we discuss industry trends, clients’ needs and new product launches.
Once we have agreed on new ideas we carry out an investment assessment, analysing how the new product would have performed in the past under different scenarios, stress testing and what we can expect in the future. One of the key strength of March Gestión is the involvement of our shareholder, which provide seed capital for new launches and invest in our fund range as private or institutional clients.
GFM: What is your approach to managing risk?
JLJ: As the investment arm of a private family bank, we look at managing risk with a special emphasis. A prudent approach is part of our DNA. For this reason, although no one wants to deal with a global financial crisis, we have to recognise that we will probably end the crisis in better shape.
First, we do traditional fund management business – when most of our competitors are coming back to basics, we are still there. Secondly, performance has been very good overall in bear market periods. In 2008, the worst year for fund managers, more than 80 per cent of our fund range ended in the first or second quartile.
Finally, we are very transparent and our clients know all the time what we are doing and why. There are no black boxes in the way we manage money. Although we are not one of the biggest fund managers in Spain, we ended last year in the top 10 as measured by new inflows.
GFM: How has your recent performance compared with your expectations and track record?
JLJ: As an investment boutique we do not manage all asset classes. We just do what we do better, and as a consequence we usually get above-average returns. On the other hand, we do not expect our investment style to change going forward. We are value investors with long-term views but at the same time we look to protect our client’s wealth. This means we do not want performance at all cost (or risk) – we want to maximise returns with a wealth protection bias.
For example, the March Premier Bolsa, a global equity fund, gained 41.43 per cent compared with an average for its benchmark of 20.66. The March Premier 70/30 (balanced fund) gained 9.26 per cent compared with 6.44 per cent, and the March Renta Fija Privada (corporate bond fund) gained 6.77 per cent, compared with a benchmark of 13.98 per cent
In these three examples we are an active manager with high tracking errors. Despite the excellent results in the global equity and balanced fund, we are very confident about our corporate bond fund, which has a low duration strategy because of its risk-adjusted returns.
GFM: What opportunities are you looking at right now?
JLJ: The team is constantly looking for value investments. In 2010 we expect a better performance in emerging markets and commodities, and we prefer risky assets like equity or emerging market debt over government bonds or cash.
GFM: What events do you expect to see in your sector in the coming year?
JLJ: There is a lot of noise out there. Some firms are deciding what business strategy to follow in the coming years. Some firms are on sale due to problems in their core business, such as banking or insurance. In this environment, we are extremely lucky in having a solvent and well-managed parent company in Banca March with a clear private banking strategy that allows us to focus on fund management on behalf of our clients.
GFM: How will these developments affect your own portfolio?
JLJ: John Kennedy once said: “A rising tide floats all boats.” Now there is no rising tide, so only good sailors will avoid the rocks. We are working hard to be one of these sailors and in 2010 a lot of new opportunities will arise for those who are ready for them
GFM: How do you assess investors’ current expectations?
JLJ: They are mixed. On one hand they are very worried about wealth destruction. On the other, they do not want to miss out on this market recovery. But for the first time in 20 years of working experience, I do not see a clear answer of what will happen in the coming years, so I perfectly understand the mood of many investors. What becomes clearer is that active management is gaining ground over passive management (or low tracking error), while tactical asset management is reigning over strategic asset management.
GFM: What differentiates you from other managers in your sector?
JLJ: Probably the sum of three things – our philosophy of creating value with asset protection, our process of consistency, transparency and a humble attitude about managing money, and a team with a strong personal commitment.
GFM: How do you view the environment for fundraising over the coming 12 months?
JLJ: Despite the noise we see interesting opportunities. March Gestión has distributed its products only through Banca March, but we are working toward more open distribution through other private banks or specialised networks. At the same time, we are considering the institutional markets as some firms has approached us about Vini Catena, the wine value chain fund.
GFM: Are you considering any mergers or acquisitions in the foreseeable future?
JLJ: We have a clear and reasonable business plan for 2010 and do not need any merger or acquisitions to achieve our goals, but if the opportunity arises we are open to analyse on a case-by-case basis.
GFM: Do you have any firm plans for further product launches?
JLJ: Innovation is key for an investment boutique like us, so we currently have a few ideas on the pipeline. One is to clone one of our flagships – Torrenova Sicav, a total return portfolio – in a Luxembourg fonds commun de placement (FCP) for a broader distribution. The other one is with Vini Catena. It could be the first fund with such characteristics in the world, but this is still under analysis.
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