Business news

Umberto Boccato: alternative management and activist management

Umberto Boccato, chief investment officer of alternative funds of funds within Mirabaud Asset Management, outlines the specific features of alternative management. He notes that the current environment particularly rewards activist management.

In the 1970s, Mirabaud was one of the trailblazers of alternative management. Is this an asset in a world of fierce competition, with more than 10,000 funds globally?

Absolutely, because there is no substitute for the advantages of knowledge and experience in such a field. Mirabaud has a real culture of alternative management and detailed knowledge of its mechanisms and players, which enable us to identify the best managers in the world. In Geneva, we have a team dedicated to alternative management in partnership with more than 100 managers.

In addition to their expertise and results, these managers often invest their own capital in the funds they manage. This ensures their own interests are aligned with those of our investors.

Which strategies do you use for alternative management?

We focus on two fundamental alternative management strategies: on the one hand, ‘global macro’, which looks at all product categories using macroeconomic analysis ; on the other, ‘long/short equity’, which involves buying undervalued stocks and short-selling overvalued ones. We find that, over time, these strategies are not affected by economic cycles. Furthermore, they offer very interesting opportunities, even in a low interest rate environment.

From the crisis of 2008 to around 2013, the market reacted to expectations linked to fiscal or monetary policy, real or expected, in very short cycles. Since then, the market environment has changed and alternative management permits returns that exceed the average for other types of funds.

How do you see your development and on what principles is it based?

Our development lies in finding new talent, emerging markets and, above all, activist management. However, we are careful to ensure consistency in our approach. For example, we’ve been working in Asia for 25 years. Initially, the typical profile of a fund manager investing in Asia was British and London-based, then it became a British or American manager based in Hong Kong, and then a Hong Kong native  trained in an English-speaking country. Today, it’s a national of mainland China who, after gaining experience in New York or London, works in Shanghai or Beijing. It’s this type of manger, with this level of expertise and knowledge of emerging markets that we want to attract.

Moreover, we have decided to continue to innovate by branching into activist funds. For structural and cyclical reasons, the current environment is very favourable to this type of management, particularly for alternative funds.

Photo : © J.-F. Robert

Biography

Umberto Boccato, CIO of Funds of Hedge Funds at Mirabaud Asset Management, oversees the analysts covering all major Hedge Fund strategies, the portfolio managers as well as the team managing the Fund of Hedge Funds’ operations. He has experience in the asset management industry since 1993

Activist managers

A significant cultural change is underway in the interaction between shareholders and companies. ‘Active’ investors are getting more involved in the management of the companies in which they have invested, whether this be corporate governance, remuneration policy for executive teams or the growth strategy defined by management. If they disagree with any of these, active investors do not hesitate to question, where necessary, a company’s management or even its board of directors, in the interests of shareholders.

While initially it may at times be difficult for executives to accept that shareholders are calling their strategy into question, activist managers often find that over time they develop consensual and constructive relations with the board of directors and management. The external perspective of an activist manager can be helpful in many areas.

The positive impact of these activist strategies (value creation and adaptive management) is now recognised. This is particularly so for institutional investors, who were sceptical at first but are now often the most convinced by this approach. By intervening, these activist managers, supported by other shareholders, help improve corporate results and returns, including for the funds for which they are responsible.