Fideuram seeks sub-advisory fund flexibility

Tommaso Corcos, chief executive officer of Fideuram Investimenti, the asset management arm of Banca Fideuram in Italy, does not hide his enthusiasm when he talks about the sub-advisory agreement recently made with hedge fund Marshall Wace. The Italian fund house, whose E34bn fund assets are distributed exclusively through its proprietary private banking network, has appointed the London-based hedge fund to run a long-short equity mandate using the full powers granted by Ucits III. “In markets which become increasingly more complex and volatile, the kind of products that will be most in demand will be those that employ the typical hedge fund strategies generating absolute returns, decorrelated from markets,” he predicts. The first long-short fund, or flexible fund, managed by Marshall Wace was launched in October to be deployed within the fund house’s insurance-linked products and gestioni patrimoniali (discretionary portfolios for affluent and high net worth investors). In 2010, a second retail fund employing the same strategy will be available to be sold off-the-shelves by the 4,300 private bankers of Banca Fideuram. “We have been strong supporters of the theme of convergence between hedge funds and long-only for a number of years,” says Mr Corcos. “I am highly convinced that the hedge fund world has come out of the crisis strengthened.” However, for private individuals, who have generally been burnt by the illiquidity issues that many hedge funds faced last year, the preferred solution is the replication of a hedge fund strategy in the Ucits III structure, which embeds higher standards of investor protection, liquidity and transparency than offshore funds, says Mr Corcos. “I think you can re-channel a good amount of clients’ money if you can create suitable products.” The fund house has proved it has no qualms in seeking third-party managers for asset classes which fall outside its core competencies. Earlier this year it appointed hedge fund player GLG-Partners to manage three Ucits III equity funds – US, Europe and emerging markets for a total of €1.5bn – within its gestioni patrimoniali. Goldman Sachs Asset Management (GSAM) has been running a tactical asset allocation product for the firm, a flexible growth fund currently worth E430m, for a few years. Fideuram Investimenti is now planning to sub-advise a convertible fund, which is on the launch pad for next year, anticipates Mr Corcos. “We strongly believe that it would be just insane to manage everything in-house,” he says. Significant investments were made in the firm’s multi-management team, in charge of selecting funds and awarding mandates, since Banca Fideuram became an open platform in 2005. Earlier this year, the appointment of Mario Bortoli – previously general director at group company Eurizon Alternative – as head of multimanagement, further strengthened the division. “I don’t see Fideuram Investimenti as a competitor of the BlackRocks of this world,” he says, talking about the third-party products offered by Banca Fideuram. “We are the bank’s financial intelligence centre, which manages certain products but also selects third-party funds and hounds out firms like Marshall Wace to manage a fund for us, in exclusive deals for the Italian market.” Continued inflows That the firm survived the financial crisis relatively well has to be ascribed to the full integration of the fund house with its distribution network, the good financial knowledge of its advisers and their close relationship with clients, believes Mr Corcos. At the peak of the crisis after Lehman’s collapse, in the last quarter of 2008, the firm bucked the deepening downward trend of the Italian fund market, registering inflows of €1.5bn. “The solidity and transparency of the firm has been rewarded,” he says. “Our private bankers favoured in-house products because of the absolute transparency on the positions of the individual funds.” This does not mean private bankers have any hesitation in offering to clients third-party funds, if they are good or valid, clarifies Mr Corcos. “Unlike other bank-owned asset management firms in Italy, we have a very strong diversification between in-house products and third-party products,” he says. For example, of the €8.6bn in gestioni patrimoniali, third-party products and sub-advised funds represent €2.5bn. The firm also created a total return discretionary portfolio, entirely managed by five internal houses, currently BlackRock, Credit Suisse, GSAM, JPMorgan and Morgan Stanley. Each provider has the possibility to choose its own building blocks, within the asset allocation they devise. “We believe that each house knows its best performing funds but we monitor the risk and intervene in case the product selected does not convince us.” Banca Fideuram’s strategy to push even harder in the high net worth arena has driven its asset management arm to provide more bespoke products and services to this traditionally lucrative market segment. Already one of the top five largest private banks in Italy, Banca Fideuram is indeed making further investments in services, people and infrastructure to meet the whole range of the high net worth client’s needs, from tax consultancy, trust creation to succession planning, explains Mr Corcos. “To be aligned with the bank’s growth plan, within Fideuram Investimenti we have set up an investment division made of experienced professionals, led by Marcello Quagliotti, dedicated solely to cater to the needs of the high net worth clients,” he says. The team will create ad-hoc products, support the private bankers and meet the clients, when it is necessary, explains Mr Corcos. Fideuram Investimenti has not managed to totally sidestep the effects of the crisis. Its assets decreased by €5bn during 2007, in line with the Italian fund system, of which the firm accounts for 8 per cent. But the reduction of its outflows in 2008 (-€2.5bn versus -€140bn for the total Italian system) and net inflows for €900m year to date, against €6.5 outflows for the whole system, are encouraging. “Today we still have a high percentage of assets in monetary products or short-term fixed income,” says Mr Corcos. Of late, however, there has been a shift towards corporate fixed income, take up of risk on medium term government bonds, as well as timid moves toward the equity markets, although there is still strong risk aversion, he says. “Recently we have tried to push products which aim at generating an interesting performance as well as giving the investor the possibility to benefit from the rise in equity markets,” he says. In July, by taking advantage of attractive opportunities in the credit market, the firm launched a formula fund, which gathered more than E300m. Their asset allocation fund, which has a flexible approach, also attracted clients’ attention, says Mr Corcos. The fund invests in real asset classes, such as real estate and commodities, which protect the portfolio against potential inflation risk, as well as equities, fixed income and convertibles. “This product increases portfolio efficiency much more than you would have by diversifying only across traditional asset classes,” he says. Exploding the myth that during a crisis firms need to cut staffs to reduce their costs, the fund house actually did quite the opposite. “Our cost policy has always been very stringent, but we have never skimped on investing in people and infrastructure,” says Mr Corcos. “Every year, we made sure to cherry-pick a couple of professionals.” Moreover, today high level professionals are more willing to move, perhaps disappointed by the large companies not having a clear sense of direction, he says. In Ireland, where the firm established operations in 2002, Fideuram Investimenti employs 60 people, who manage the majority of the firm’s assets (€26bn) in Luxembourg-domiciled funds, while teams in Italy focus on asset allocation and multi-management. In the past 18 months the firm invested in a new risk platform, in a software system which calculates the performance and totally revamped its front office system for a total cost of around €4m. “We have invested a considerable amount of money and we continue to hire where we see opportunities,” he states. Looking to the future, Mr Corcos plays down the recent rumours around a possible sale of Banca Fideuram by Intesa Sanpaolo, its parent company. Exor, the holding company for Italy’s Agnelli family has been indicated as one potential buyer. “Since I joined Fideuram in 2002, no single year has passed by without rumours of sale, and I am sure it was this way before I joined, too,” he says. “What is remarkable is that none of the senior management at Banca Fideuram, private bankers or distribution managers let this distract them from their work, we are just used to it.”