Last month Francisco Arcilla (pictured) joined AXA Investment Managers as their new Global Head of AXA Funds of Hedge Funds, an exciting role that will see him drive forward AXA IM’s tailored solution-based approach to meeting clients’ investment needs. Arcilla is based in London and reports directly to Thibaud de Vitry, Global Head of AXA IM’s Investment Solutions business.
Speaking to Hedgeweek about his new role, Arcilla enthused about the opportunity of developing AXA’s FoHFs business, which he admits is fairly classical in nature, into a new generation FoHFs model. “From AXA IM’s viewpoint it’s also about how we can get more out of the hedge fund space, can we find ways to work across the entire platform and in general can we offer different types of solutions,” explains Arcilla.
With the FoHFs industry under pressure in recent times in terms of the value it offers for the costs involved Arcilla says the real challenge is to move from a historical set-up where it was a ‘nice to have’ option for investors into something that has meaningful value in investors’ portfolios and has a real function.
“AXA IM has real ambitions to be a leading solutions player and I think hedge funds, because they utilise so many underlying markets and find ways to express those market views, can be central in this whole solutions approach,” explains Arcilla. Part of what helps Arcilla in this new role is that he hasn’t come from a pure FoHF background and is able to bring an objective mindset to developing the business. “I’m not a traditional veteran of the FoHFs business. I was a trader for many years and as it happens most of my investment team here are ex-traders so that sets us a bit apart from others. I guess I try to bring more of a market-orientated view to the role.”
Crucially, in his last role at a boutique FoHF provider in Switzerland there was a focus on providing tailor-made solutions to institutions: precisely the target market for AXA and therefore an easy segue for Arcilla upon joining the firm. Having that propensity to empathise with investors is helpful, particularly when performance becomes an issue and this helps keep Arcilla, as an ex-trader, critical of what’s being delivered. Listening to clients’ concerns is vital.
A clear signal that AXA IM is pushing the envelope and delivering targeted solutions is evidenced by the fact that they’ve launched what is believed to be the first FoHFs strategy to focus on low probability ‘tail-risk’ events. It’s been active for 12 months and is composed of less than 10 underlying managers although Arcilla thinks that as the offering matures it’ll expand to 15 managers.
Explaining the concept, Arcilla says: “We want to add value not only through our ability to select managers among the growing tail-risk universe but also work with managers who may or may not have such products and help them design specific kinds of pay-offs which we then assemble. We’re trying to add value both in terms of selection and portfolio management, combining the risks of different managers and dynamically reallocating between different strategies.”
So far the strategy is running over EUR400million but is only available to a select number of close partners for whom the product was designed for. However, Arcilla confirms that there are plans to bring a more standardised offering to market in early 2012. “We’re going through all the motions internally to do that right now.”
“The tail-hedged product is quite representative of where I want the business to go forward: respecting the perception people have of AXA IM but at the same time offering a more solution-orientated approach. We want to move from a product angle to a solution angle. The tail subject provides us with a number of opportunities to develop different vehicles to tackle different extreme scenarios,” asserts Arcilla.
He’s quick to point out though that AXA IM’s FoHF’s business is not about to become some maverick entity.
“We’re not trying to be original for the sake of originality. We’ll stay grounded and realistic but take advantage of discussions we have with clients to generate ideas and try to think more out of the box.”
