EVENT ROUND-UP EXPERT INVESTOR FORUM
Chris Huelin, Collins Stewart
Fund Management
Simon Redman, Invesco
Real Estate
Ryan Rogowski, Société
Générale Corporate &
Investment Banking
John Long, Stenham
He pointed out that this
kind of strategy used on an
equity index will potentially
outperform the benchmark
in bear and flat markets
with volatility and
follow the benchmark in
moderate bull markets.
Since launch in October
2006, BNP Paribas’ own
Harewood Covered European
Equity Fund, which
uses the Euro Stoxx 50
Index as benchmark, has
outperformed this index
with lower volatility.
“What is important for
clients and fund managers,
especially on the institutional
side, is the level of
volatility, which is less than
two-thirds the volatility of
the benchmark,” he said.
But this strategy will
underperform the benchmark
in strong and sharp
bull markets.
“When the market is
performing extremely well,
we will be lagging the
market. In 2009, the market
produced 25% while the
covered call strategy produced
16%.”
Conversely, during the
troubles of 2008, the Euro
Stoxx 50 fell 42% in the
year, while the strategy fell
only 16%.
Chris Huelin, head of fixed
interest, Collins Stewart Fund
Management
Partly given how low cash
rates are, investors today
are more welcoming of
lower returns at the lower
end of the risk spectrum.
But one thing they are still
wary over is when interest
rates will start to rise as a
fixed return in a rising
interest rate environment is
that much less attractive.
Investors are also wary
of promises made by those
with influence as they
remember the Bank of
England Governor saying
he would not spend all the
£75bn put aside for QE
and we are now at £225bn
and rising.
Huelin argued the case
for taking a total return
investment approach to
fixed income while surrounded
by so much economic
and market uncertainty.
Interest rates, he
said, will stay low for as
long as they can possibly
be kept low.
Markets are moving on
a weekly basis, making it
tough for long-only managers.
The key is flexibility
and Huelin prefers the ability
through his fund of
going short to protect the
underlying market risk. He
expects to have to work
harder for returns in 2010.
Prime office rental growth ’09 – ’14
Manchester
London City
Stockholm
Madrid
Barcelona
Amsterdam
Munich
Frankfurt
Paris CBD
Prague
-50 -40 -30 -20 -10 0 10
Rental income (%)
Source: Invesco Real Estate
Simon Redman, head of product
management, Invesco
Real Estate
Redman is a senior director
in Invesco’s real estate
operation which runs £25bn
in assets, £1bn from transactions
in 2009, with
£400,000 so far this year.
Property, he argued, can
play a different role at different
times in different
cycles, partly depending
on the underlying asset
type and partly on the
position in the property
cycle of each country.
The UK, for example,
came out of its trough in
the autumn while the US is
still falling. He will not look
to invest in the US until
later this year. In the UK,
properties outside London,
where the growth story is,
are close to their peak so
he is selling to reinvest in
properties at their trough.
The lack of supply in
some areas is a benefit. He
bought one property in
Edinburgh, for example, a
year ago for £55m and is
already getting offers for
£10m more so is going to
sell, happy with the 7%
yield so far earned.
Redman is a net seller
of the UK and prefers
Europe. Eastern Europe
will have strong economic
growth through to 2012
but there are no new buildings
going up until then.
16 PORTFOLIO ADVISER [www.portfolio-adviser.com] MAY 2010
20
’09 (actual)
’10 (forecast)
’11-’14
(f’cast total)
30
40
50
Ryan Rogowski, director,
cross-asset solutions, Société
Générale Corporate &
Investment Banking
The background to Rogowski’s
presentation was that
systemic risks do happen,
with markets today pricing
in government defaults at a
rate higher to corporates.
Sovereign debt levels are a
good example as the fear
of countries not being able
to pay back their debts is a
very real risk today.
Investors know these types
of risk could happen again
in the near future even
though volatility is back at
pre-crisis levels, but they
still do little to insure their
portfolios against it.
He argued that a good
part of the focus is who to
buy the insurance from,
emphasising the importance
of a strong counterparty,
with government
bonds providing a strong
source of collateral.
The liquidity of the
underlying holding is also
essential, with Rogowski’s
a multi-asset solution so
this can be also diversified
across FX, interest rates,
commodities and so on.
These can easily be tailored
to fit a long only
equity and a multi-asset
client portfolio.
John Long, fund of hedge fund
product specialist, Stenham
Now the dust has settled,
investors are able to see
that there are opportunities
available to retail investors
in the hedge fund world
and that they are not all
the devil incarnate, as
many had assumed. Long
gave the case for funds of
hedge funds offering a
greater chance of wealth
preservation; they are
market-agnostic so are not
as easily affected by a great
deal of external noise; they
offer access to a number of
sectors; and they offer both
protection against volatility
and returns.
The market conditions
hedge fund managers such
as Long want to invest in
include certain unknowns
like the scale and speed of
ongoing deleveraging and
future government policies.
Instead there are certain
knowns for hedge fund
investors – he argued that
investors should avoid leverage,
and not give money
to managers who have to
borrow; the underlying
assets should be tradable
on an exchange; it is paramount
that any investor
understands what each
manager does and how
they do it.
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