Hedge Funds Review European Fund of Hedge Funds Awards 2015
Demand for medium-sized hedge funds – small enough not to move markets, big enough to have a good track record – is driving investors to Amundi's managed account platform (MAP). Michael Hart, deputy chief executive of Amundi Alternative Investments, says his investors' attitude is: "We know the big funds. We can write them down on the back of an envelope… Their positions are so big, you may as well get long-only funds."
Amundi Alternative Investments won best bespoke fund of hedge funds (FoHF) provider at the Hedge Funds Review European Fund of Hedge Funds Awards. How bespoke? Hart says he quickly finds out investors' problems by asking clients – both existing and potential – what their main concerns are for the next 12-24 months, and then lets them talk.
One increasing demand is for mid-sized managers as volatility starts to creep back up. "Investors want managers to react [to sell-offs]. The bigger positions, you have the longer it takes to unwind those," he says. Investors feel safer investing in small-name managers if they have their capital in an MAP, but this requires more due diligence.
Hart says that in his previous post as a consultant, he thought this was Amundi's competitive advantage. "We have an extremely strong and experienced operational due diligence team, one of the best in the business," he says proudly. Due diligence is ongoing, not simply prior to investing in a fund. The team has the power of veto, which is unusual among FoHFs. Usually the FoHF due diligence team reports to the chief investment officer, who makes the final decision. "Our clients really like this," says Hart.
The emphasis is on burnishing a reputation of being a safe platform. The stress tests on managers' portfolios – and their portfolios in the past – are therefore tough, says Hart. "We're quite stringent on that. If we think there's going to be liquidity issues, we wouldn't go with [the manager]," he says, adding that Amundi has never had liquidity problems with a managed account included in its FoHF. If an excessive illiquidity mismatch started to develop – if, for example, the manager poured its money into a different asset class – Amundi would phone the manager.
But liquidity of the underlying funds is a lesser concern for investors as they feel safe on the MAP, Hart thinks. "From a bespoke perspective, we haven't been asked for Ucits yet, and I thought there would be a bigger demand for that. Most of the managers on the platform are weekly or monthly liquidity, with a couple of quarterly [funds]," he says. Investors seem content with this. Some have said they would be happy with quarterly liquidity because it's on an MAP. "That really surprised me," he says.
More important for Amundi's investors is transparency. Institutional investors want to see the positions they've got, so they can justify it from a governance perspective. "Especially for government pension schemes in the UK now, they've got to really prove they are getting value for money, that they are following code of best practice…It doesn't matter where you go. In Australia now there's pressure on fees, so they are having to justify investing in hedge funds," says Hart.
He adds: "Today we are also building partnerships with a number of institutions who are looking to ‘rent' a managed account platform for their own investment propositions. Where we differ from rent-a-platform is we are offering investment solutions rather than simply plug-and-play. This could be through direct access to the managed account platform, a simple advisory solution, or a dedicated mandate."
The week on Risk.net, December 9–15 2017Receive this by email