Massimiliano Gnesi, Senior Portfolio Manager at Copernicus WM

Massimiliano is our Fund Manager of the Month for March. Read what he has to say about beginning his career in finance as the dot com bubble was bursting.

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Massimiliano Gnesi is a true veteran of the asset management industry. With over 20 years of industry experience across portfolio management of all types of asset classes, years of hedge fund experience, and a career that began in trading, Massimiliano is a wealth of knowledge when it comes to the fund industry.

He joined Copernicus Wealth Management as a senior portfolio manager to manage total return multi-asset strategies for the firm. Prior to the current experience, Massimiliano Gnesi has been the head of the absolute return team at Credit Suisse Asset Management, member of the fixed income investment committee and lead portfolio manager of the Credit Suisse(Lux) Absolute Return Bond Fund from May 2014 until end of June 2019.

From 2009 until the end of 2013, Massimiliano was at Vontobel AM where he managed the 2bn USD Fixed Income Absolute Return franchise. Prior to Vontobel AM, Massimiliano worked in London in various positions in the alternative investment space. He kickstarted his career in finance as a trader in London with Banca Intesa, first, and then Credit Agricole AM.

Massimiliano holds a degree in Financial Economics cum laude from Universita’ Bocconi and holds an MSc in Applied Maths at Imperial College in London.

Taking a brief look at your trajectory, what would you highlight about your professional career? Any advice for young people trying to be successful in the industry?

I got my first job out of university in January 2001, right in the aftermath of the burst of the bubble. Back then, the financial landscape was very different. Negative rates were inconceivable, the default of systemically important banks belonged to dusty history books on the roaring 1920s and ESG investing was a niche virtually unknown to the general public. Since then I spent twenty years in the money management industry and over these 20 years, the financial industry has undergone incredible changes. Looking back at when I started, history took a very different turn to what one could have possibly imagined. The ability to adapt to fast-changing market conditions has been and remains key to navigate the financial industry. I believe I would give young professionals approaching the industry the same hints I still today give to myself: be forward thinking, open-minded and remain humble enough to identify mistakes, analyze them and ultimately learn from them.

What is the greatest challenge as a Portfolio Manager?

That’s probably sticking to the long term plan even at the cost of losing short term market opportunities.

What sustains your drive within the industry?

A big passion for investing. Building an open relationship of trust with investors. Last, but not least, I truly enjoy working in a diverse team, where different backgrounds, different professional experiences share a common vision.

What key principles drive your investment processes and why?

Our investment process relies on three core principles:

  1. We are benchmark agnostic.We do not see value in blindly following a benchmark and over-diversify in asset classes or market segments that do not materially add in terms of expected capital appreciation or diversification. We focus our capital allocation on the most attractive and diversifying investment themes.
  2. We limit our beta to general markets. We commit a large part of our research efforts to look for investment opportunities with low correlation to broad markets. With this regard, we believe the rise of passive investment strategies has created significant pockets of opportunities. Our focus is to take advantage of dislocated valuations across companies capital structure (senior, subordinated and common equity) and sectors.
  3. We believe extreme events are systematically mis-priced. We see value in investing a fraction of the income generated by the portfolio to buy an insurance against extreme market events. This helps preserve capital in periods of market volatility and enables patient investors to deploy capital at attractive valuations.

Could you share a few details about the investment process for the Portfolio that you manage?

Our investment process is the result of the combination of the sophisticated risk management, modern investment technology and strong research of Copernicus WM with the investment expertise of a seasoned investment team. Myself and Guglielmo Di Gioia, have been managing active multi-asset strategies for over twenty years. Copernicus WM is a 2.5bn Swiss investment boutique which has developed over the years an institutional asset management business specialised in active equity strategies, fund of hedge funds and investments in blockchain technology.

In Q2 of this year, we are also launching a total return multi-asset strategy managed in a UCITS fund. The strategy, based on the approach the PM team has followed over the last 10 years, will target stable returns in the area of 5-6% with a moderate risk profile investing primarily in liquid investment grade, high yield and equity markets. To achieve this objective, we follow an investment process focused on three areas. First, we run an extensive macro analysis to identify periods of markets’ euphoria and panic. In periods of euphoria with employ a defensive strategy with the fund’s risk profile kept in line with investment grade bond investments. Conversely, In periods of high market volatility, we add up to 50% exposure to equity markets to boost capital growth. Second, we employ relative value analysis at asset class, sector and company level to identify market dislocations. We mostly take advantage of such investment opportunities through market neutral investment strategies, lowly correlated to general markets. Lastly, we consistently look for cost effective ways to limit the portfolio downside in periods of market volatility. With this regard, we employ a multi-asset framework and we do not just rely on duration and therefore lower interest rates to mitigate portfolio volatility.

Our approach can be a valuable building block in the asset allocation as an alternative to more traditional high yield and moderate risk balanced funds for investors that wish to achieve an above average income and a small but stable capital growth over time.

What differentiates your fund from others, and how does this differentiation bring value to customers?

Today the fund industry is dominated by a strong offering of directional strategies which perform very well in bull markets, but struggle to protect capital in more shaky markets. Similarly many fund allocators have been chasing past performance tilting the asset allocation towards strategies with high beta to the market. The result is often poorly diversified investment portfolios which may hit some speed bumps along the way, should the macro picture of continuously declining interest rates materially change. Our approach differentiates in two important ways. First, we seek to generate a large part of our returns from market opportunities with limited correlation to the market beta. Second, we consistently use a fraction of the income of our portfolio to buy insurance against extreme events. Therefore our flexible multi-asset strategy can be an important building block in a well diversified portfolio. 

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Massimiliano Gnesi, Senior Portfolio Manager at Copernicus WM