April 2016

SPONSORED FEATURE: Lucky number 13

Fabio di GiansantePioneer Investments believes its market neutral European Equity strategy is differentiated from competition due to a team approach to finding alpha across 13 different alpha sources. Increased uncertainties have led some investors to seek investments that are less reliant on the direction or potential of traditional assets. In recent years, focusing on absolute returns coupled with lower volatility has become a growing area of interest for investors. A Market Neutral Equity Strategy focuses on ‘‘alpha’’, or the ability of a manager to generate returns, while eliminating ‘’beta’’ or market returns. Long and short equity positions take advantage of both under and overpriced securities and a market neutral position (that is one without reliance on the direction of equity markets) may be achieved. The potential advantage for investors can be smoothed returns without the big swings that can characterise equity markets.  However, given the elimination of any beta, a key concern for absolute return investors is manager risk, that is the risk that a manager may potentially generate low or no returns. Pioneer Investments’ solution to circumvent this risk is to implement an approach where all team members are responsible for an independent source of return.  Fabio Di Giansante, Head of Long/Short European Equity, manages the market neutral European Equity strategy that focuses on 13 independent alpha sources. Last year, 11 of the 13 alpha sources of the strategy delivered a positive return.1 This, according to Di Giansante, highlights the key differentiating factor of Pioneer Investments approach. “Our strategy is to build on the proven capabilities of our experienced team and not just rely on single individuals for returns. The strength of this approach is that even if some alpha sources do not produce a positive return in one year, other sources may compensate.” Di Giansante employs an initial stock-selection approach that looks to exploit the capabilities of an experienced investments team; and secondly, multiple layers of risk management that seek to dampen volatility and minimise drawdown.   Recognising that each basis point of alpha generated is a “precious commodity”, the team works closely with Pioneer Investments’ in-house Portfolio Construction team. Headed by Ali Chabaane, this team partners with the investment teams with a focus on achieving “risk-adjusted” returns. Di Giansante believes this is a critical element of the team’s success. “Ali and his team ensure that we have allocated the correct risk budget to each member of the team and then focus efforts on managing drawdown. This process ensures we address drawdown in any alpha source quickly to stop it leaking into other areas of the portfolio. In short, it seeks to protect the returns we have already generated.” 2015 was a strong year for the strategy, with returns ahead of target. Consistency is key more importantly, and the focus on fundamentals makes this approach repeatable. “We think that our fundamental approach to long-term investment may deliver meaningful returns over the long-term,” Di Giansante says. Since the beginning of this year, the strategy has demonstrated its resilience by delivering positive return even when the wider market suffered a volatility shock. “Volatility like this is likely to become more commonplace. -10%/+10% moves in the market are becoming the ‘new normal’” Di Giansante notes. “Our aim is to continue to generate solid returns while insulating the strategy from broader market moves.” Disclaimer: Unless otherwise stated all information and views expressed are those of Pioneer Investments as at 1 April 2016. These views are subject to change at any time based on market and other conditions and there can be no assurances that countries, markets or sectors will perform as expected. Pioneer Investments is a trading name of the Pioneer Global Asset Management S.p.A. group of companies. 1Pioneer Investments as at end-December 2015. Past performance does not guarantee and is not indicative of future returns. ©2016 funds europe

Sponsored Profiles

SPONSORED FEATURE: Investing for income

May 17, 2017

Portfolio Manager Thomas Kruse examines the findings from Pioneer Investments’ survey on income investing and outlines ways of achieving a target income.

SPONSORED ARTICLE: A radical solution to KYC concerns

May 17, 2017

The 1MDB affair shows that lax know-your-customer and due-diligence procedures are a major risk, says Paolo Brignardello, head of product management and marketing, Fundsquare. New solutions are...

SPONSORED FEATURE: AIFMD - What does Brexit mean?

Apr 18, 2017

An open discussion between funds industry experts and initiated by SGG Luxembourg took place in London to examine  the implications of Brexit for UK fund managers marketing to the EU.

SPONSORED FEATURE: Luxembourg fund reporting – CRS vs FATCA

Apr 18, 2017

Luxembourg funds need clear procedures for CRS compliance, writes Andrew Knight, Partner at M Partners, a member of the Maitland network of law firms.

Executive Interviews

INTERVIEW: Finding managers that can (and do)

Apr 18, 2017

Fabrice Kremer, a fund selector at Banque de Luxembourg Investments, has berated fundamental managers for failing to beat indices, but he remains committed to active funds. He speaks to Nick...

JERSEY INTERVIEW: ‘A steady sort of place’

Mar 21, 2017

The chief executive of Jersey Finance is keen to portray the island as a stable, trustworthy jurisdiction. He talks to George Mitton.

Roundtables

MARKETING & BRANDING ROUNDTABLE: It’s about aspiration

May 17, 2017

With such an intangible product, it can be hard for asset managers to communicate what they do. Having personality and connecting with customer aspirations may be the key, our branding roundtable hears.

ROUNDTABLE: The issue is perception

Mar 21, 2017

Our panel discuss tax transparency, the elegance of private placement and why Jersey could do more to promote itself. Chaired by Tom Cowsill in Saint Helier.