amLeague Portfolio Managers ViewPoint - Multi Asset Class Mandate - March 2013

Three Portoflio Managers look into their Multi Asset Class management strategies and comment on their performance.

amLeague Portfolio Managers Viewpoint

amLeague is pleased to present you the new edition of its monthly amLeague Portfolio Managers Viewpoint.

This month, 3 Portfolio managers on amLeague Multi Asset Class Mandate were chosen to give their thoughts and comments on their portfolio choices and results.

Pierre Guillemin

Pierre Guillemin

amLeague Portfolio

Swiss Life Asset Managers
Stanislas de Bailliencourt

Stanislas de Bailliencourt

& Emmanuel de Sinety

amLeague Portfolio

Emmanuel de Sinety Sycomore AM
Laurent Jaffrès

Laurent Jaffrès

& Gérald Perrin

amLeague Portfolio

Gérald Perrin Vivienne Investissement

Swiss Life Asset Managers Portfolio Multi Asset Class
Pierre Guillemin

Pierre Guillemin

amLeague Portfolio

Swiss Life Asset Managers

The portfolio is a combination of Equity, Fixed Income and Commodity exposures. We invest into futures whenever possible and use ETFs for specific investment types like corporate or High Yield Bonds.

The asset mix is realized through trend following models on the fixed income part and risk contribution models between equities and commodities. The rebalancing frequency is monthly. Our investment universe selection aims at building a robust portfolio throughout economic cycles focusing on the diversification power of our investment strategies and selected asset classes.

The management style is 100% quantitative with the objective of generating an attractive performance with an average volatility level of around 8%.

For the first quarter of 2013, positive contribution comes from our equity investments whereas commodity and government bonds strategies and exposures both contribute negatively to the overall performance.

Sycomore AM Portfolio Multi Asset Class
Stanislas de Bailliencourt

Stanislas de Bailliencourt

& Emmanuel de Sinety

amLeague Portfolio

Emmanuel de Sinety Sycomore AM

Central banks flood the markets with liquidity: Fed’s QE3, Bank of England’s QE4, Bank of Japan’s QE9... ECB non conventional policy is more subtle, taking the form of an off-balance sheet item, the well-known 'Draghi put'. As a result, so-called risk free rate are everywhere kept at artificially low levels.

Exiting these ultra accommodative policies will take time. The U.S. economy is showing signs of recovery, primarily driven by the housing market recovery and lower energy costs, but this improvement remains fragile due to, among other things, a more restrictive fiscal policy. We expect sluggish growth in the coming years, with a very gradual decline in the unemployment rate.

We do not expect a bond crach, but we do not see any value in highly rated bonds offering yields below 2%. We prefer credit, whose spreads reward the extra risk taken, though the absolute yields remain historically low.

In the search for yield, equities appear particularly attractive. The risk premium is inflated by low interest rates, but dividend yield often exceeds the cost at which issuers refinance their debt. Many firms have a lot of cash on their balance sheets, which will spark buybacks and M&A. Finally, many institutional investors are largely underweighted for regulatory reasons.

As of end of March, however, the portfolio is very defensive though: equity exposure is about 25%, versus 37% earlier this year. Why? The weight of the continental Europe has been temporarily reduced: our caution stems from a lack of visibility on Italy and the consequences of the Cyprus rescue. Moreover, Euro zone latest macro figures are worrying. We favour European companies whose revenues are global and whose valuations remain attractive, especially oil and pharmaceutical values.

Emerging equities are over-represented with 11% of the portfolio: This wager has not paid off in the quarter, but we wish to remain contrarian, after two years of strong underperformance. We keep a high weighting in the UK, both on large caps (FTSE 100), which are globalized societies, but also on the midcaps (FTSE 250), whose valuations are attractive. Regarding U.S. equities, we took some profits given the impressive performance indices in the first quarter.

We actively manage currency exposure: the foreign exchange market seems gradually guided by fundamentals. We are structurally buyers of emerging currencies, not only through equities mentioned above, but also purchasing debt in local currency, both sovereign and private. We use the U.S. dollar in the active management of the portfolio's overall risk.

Finally, we maintain a small gold position. Certainly, QE3 tapering out from the Fed in the favorable scenario of U.S. recovery will weigh on gold prices. But this position, at odds with consensus, is a cheap multiline insurance: if the U.S. recovery fizzles out, against certain extreme risks in Europe, covering the resurgence of inflation in some emerging countries, and more generally acting as a refuge in a context where the exacerbation of currencies war would lead to a relapse of investor confidence.

Vivienne Investissement Portfolio Multi Asset Class
Laurent Jaffrès

Laurent Jaffrès

& Gérald Perrin

amLeague Portfolio

Gérald Perrin Vivienne Investissement

The investment process that we apply for amLeague is based on our Systematic Global Macro fund’s process: OUESSANT. Quantitative strategies used are directional like trend following and mean reversion. Vivienne Investissement ranked first in the mandate since it took office in late September 2012 and since the beginning of the year. A coincidence? Chance? Not only, it is clear that a rigorous and disciplined investment process is a source of medium and long term performance. Our atypical history and team have developed an innovative asset management strategy. The main idea is to put risk management at the heart of the management process to implement robust portfolio construction and seek positive returns regardless of market conditions with good liquidity.

Since the beginning of 2013, Vivienne Investment posted a performance of 5.93% against 1.8% for the median of the mandate, therefore an outperformance of 4.13% for a level of volatility well below average.

According to our VI@Risk index, a measure of the probability of a stock market crash, 2013 is clearly in a "risk on" mode. Thus, our exposure to stock markets in developed countries such as Japan, Switzerland and U.S., coupled with a long position in EUR/JPY has proved relevant. In Europe, the defensive sectors such as Food & Beverage and Healthcare have also contributed to the good performance of the mandate.

Aberdeen AM AllianceBernstein Allianz GI Bestinver BNP Paribas IP
CCR AM CM-CIC AM Delubac AM Dexia AM ECOFI Investissements
Ed. de Rothschild AM Federal Finance ING IM Invesco AM La Francaise AM
Lombard Odier Mandarine Gestion OSSIAM Petercam Roche-Brune AM
Somangest Swiss Life Asset Managers Sycomore AM TOBAM Vivienne Investissement