Edmond Schaff is our Fund Selector of the Month. Edmond is a Portfolio Manager at Sanso Investment Solutions since 2017. Prior to that he spend 5 years at Cedrus Asset Management.
What do you think leads to success in the business industry? Can you give some unique advice for people starting a career in asset management?
I would advise someone willing to become a portfolio manager to remain:
- Consistent in its investment process and beliefs even in difficult times
- Long-term oriented
- Curious and open-minded
- Humble and eager to improve.
It is also very important to really understand what you invest in and to avoid “black boxes”.
What is the greatest challenge as a fund selector?
One of the greatest challenges is to avoid mixing asset allocation and fund selection. Many fund managers have admitted or hidden biases which can notably influence performance, especially in the equity space.
You have got to analyze these biases in detail and to have them in mind when you construct your portfolio. Otherwise you may pile up funds which all look alike.
The other challenge is to never forget to try to figure out what could go wrong with a fund because no strategy is perfect.
What has been the most extraordinary thing you have seen in markets? Were the market scenarios/volatility caused by the Healthcare crisis shocking to you?
I started my career in 2007 so I lived through the great financial crisis, the euro crisis and the COVID 19 crisis to name those that seem the most important to me.
However, I have always been more struck by idiosyncratic risks than by systemic risk. For instance, I vividly remember the dire fate of companies like Sino Forest, Hanergy, SunEdison or GT Advanced Technologies to name a few. I suppose the same will be true for a stock like Wirecard.
It is probably partly why I prefer focusing on finding good stock-pickers to trying to allocate between asset classes.
Regarding the COVID crisis with hindsight the volatility was justifiable, but it is always somewhat shocking when you are in the eye of the storm.
What do you love the most about your job, and what do you like the least?
I really enjoy the whole fund selection / fund management process: looking for new ideas, meeting managers and trying to understand the way they work and how they create value for their clients, evaluating the credibility of their SRI process and finally constructing my portfolio.
However, the administrative side of the job (registrar account opening etc) is getting more and more burdensome and is certainly not as interesting.
Which assets do you think will perform better (survive) in 2020 considering the current market situations? Which assets are performing well under stress scenarios?
It is difficult to tell. I guess quality stocks (stocks of companies with little debt, a high profitability, and a low sensitivity to the economic cycle) are a safe bet but they are already quite expensive. ESG seems to be a safe bet as well given that the crisis has made investors and consumer even more “impact conscious” than before.
What kind of adjustments did you make in the portfolios that you manage, in terms of hedging or risk management? How does the adequate asset allocation look right now?
We increased our equity exposure during the market turmoil in March. We did it a bit too early, but the volatility seemed exaggerated at the time.
Recently we did the opposite because investors seem too optimistic to us. The level of uncertainty is still very high. My stance is to remain underweight equity and to be opportunistic.
On a different note, some high yield strategies can be attractive, but you have to be very selective.
Could you name any alternative investment options with high and long-term potential even during the current crisis ?
The ESG premium looks attractive to me. This premium has delivered mid-single digit returns associated to an equivalent level of volatility in the past 5 years and I think it is here to stay because lots of investors haven’t fully integrated theses issues yet and many studies show that companies with the best ESG credentials also deliver a higher profitability associated with a lower level of risk.