Vanessa Bonjean, Senior Fund Analyst, joined the Fund Selection Team in the Société Générale Group in 2014, being part of Lyxor until December 2021 and now integrated in SG Private Banking. Vanessa is covering European, US and Global equity funds, as well as Emerging Market Debt funds. Prior to joining Lyxor, Vanessa worked for the HSBC Group for 11 years. She worked as a Portfolio Manager/Analyst in the HSBC Global Asset Management multi-management team from 2010 to 2014. She held similar positions within HSBC Private Bank and Banque du Louvre where she began her career in 2001. Vanessa graduated from NEOMA Business School with a degree in Finance.
Could you please tell us about the Fund Selection process at Société Générale Private Banking?
Our team of Fund Analysts covers an extensive range of asset classes. We implement an holistic approach to fund selection, using both quantitative screenings and data, as well as extensive qualitative assessment to build our opinion on strategies, to enter a fund in our recommendation list as well as monitoring valuable peers.
Our fund selection process is based on the 5P approach (Parent company, People, Investment Philosophy & Process, Performances and Price). We spend a lot of time analysing the positive and negative elements attached to each of these pillars, using both historical quantitative data as well as a fundamental view and understanding of the investment approach through regular meetings with fund managers.
Moreover, aside our investment due diligence, we consider that operational due diligence is a key element in our fund selection process. For this reason, we have one dedicated person in our Fund Selection Team covering this aspect and having a veto right within our Fund Selection Committee – which is our dedicated instance to validate new funds entering in our recommendation list.
How many people are in your team, and how is it organised?
The Fund Selection Team at Société Générale encompasses 9 people, split in 6 Fund Analysts, 1 Operational Due Diligence Analyst and 1 Business Controller, headed Nicolas Moussavi. The 6 Fund Analysts are organized by teams of 2 people dedicated to a range of asset classes and being in charge of the Investment Due Diligence and the funds’ selection on their area of coverage. Analysts have a dual role: (i) an investment role, curating an investment universe for the benefit of our clients and (ii) an advisory role, supporting the designated client across their business. We also have one person within the team in charge of the Operational Due Diligence and working alongside all the Fund Analysts. Finally, our Business Control manager has also a central role managing all operational requirements like IT, systems, data, budget etc, allowing the analysts to concentrate on their job.
What parts from your job as a Senior Fund Analyst at Société Générale Private Banking do you find more challenging?
One of the new challenges we face as Fund Analyst relates to SRI topics, SRI integration and Sustainable investment approaches that have massively penetrated the industry. In fact, when talking about SRI and sustainability, asset managers implement a range of diversified approaches across the different stages of the investment process: at the exclusion level, at the companies’ ESG rating level, and at the investment approach itself (“Best-in-Class”, “Best-Effort”, “Best-In-Universe”, “Impact”).
That’s the reason why we have strengthened over time our process on these specific topics. Apart from analysing the ESG process implemented in the funds, we have also developed an internal tool to monitor the ESG metrics of all the funds in our recommendation list, based on their underlying holdings. This allows us to challenge asset managers on the ESG accountability of their funds and push them to improve their sustainability profile. Moreover, this provides concrete ESG metrics to our clients wishing to place more emphasis on specific criteria (for example: carbon intensity, water intensity, exposure to sectors or companies under controversy).
What aspects do you consider more important when selecting a fund for a portfolio?
When selecting a new fund, we want to have a clear view on the preferred habitat, scenario dependency and sources of alpha generation, to ensure repeatable and reliable alpha stream over time. This requires having a strong view on both quantitative and qualitative items relating to the strategy. The analysis of the historical track record, in relation to performance attributions and factors’ analysis over time is a key element. In the meantime, having an in-depth understanding of the key feature of the investment process in place (from idea generation to portfolio construction, including fundamental analysis and top- down inputs) and the key people involved are also decisive when we run our fund’s analysis. It enables us to qualify as much as possible what the strategy is and how it is expected to evolve over time in different market conditions, and thus to have a view on the complementary features it provides to the multi asset portfolio it will be part of.
What processes do you have in place to identify a good manager?
Historical track record of a fund or a manager is often the first element, that we will capture through our performance and risk screenings compared to the appropriate benchmark and peer group, which are key elements to pre-define. However, as shown by several studies and our own experience, this necessary condition is not a sufficient one and as such selecting a strategy cannot be exclusively the result of quantitative analysis. Then a material part of our analysis will be to deeply understand the preferred habitat, the intended and unintended bias, the decision-making process leading the portfolio managers to build their portfolio and track record over time. Aside data, we put a strong emphasis on meeting portfolio managers and follow them on the long run to build our conviction on the strategy and obviously the investment team.
A robust process must also rely on qualitative insights, making fund selection something of a mix between art and science.
Do you have any red lines when selecting a fund? Are there any sectors, or themes where you would never invest in?
We cover a broad range of asset classes under UCITS regulation. The only sectors/themes that we exclude as a single standalone strategy are the cryptocurrency and the agriculture commodities strategies.
However, apart from excluding specific sectors or themes, the cornerstone of fund selection is also about avoiding risks that you don’t want to bear. In that sense, we obviously have specific elements at fund selection level which are red lines when we run our analysis. As previously stated, the operational due diligence on the asset management firm and fund is fully integrated in the process to detect red flags. But it also fully integrated in our investment due diligence to detect intended or unintending risks we don’t want to be exposed to. They are various by nature: the liquidity of the asset class and the strategy itself, and by extension the maximum capacity that can be managed in a strategy without distorting its performance pattern, the absolute and relative risk embedded in a strategy (“there is no free lunch”), the instruments and leverage, but also the “simple” adequation between the investment process and the output (which are the portfolio and track record) to name a few.
What sectors or geographical areas do you find more interesting at the moment?
Our role as Fund Selection Unit of Société Générale Private Banking is to offer at any point in time and whatever market conditions a broad range of diversified and complementary strategies across asset classes, styles/market caps, credit/duration level, risk levels… The SG Private Banking Global Investment Committee provides us the top-down framework that we can fulfil with what we consider as the best suited solutions within our broad recommended funds’ universe.
At the moment, we find for example valuable solutions in the alternative UCITs space, with diverse types of strategies providing less correlated returns to our long only exposure. That’s the case for L/S equity funds being currently defensively positioned, but also merger arbitrage strategies which provide decorrelation to the equity market, as well as credit arbitrage funds and some global macro strategies.
How are you navigating the current inflation and volatility in the markets?
Current volatility and inflation environment are obviously challenging. In current inflationary environment, we have several types of strategies that we consider as well positioned to navigate this new inflation paradigm: it can be flexible bond strategies being short duration and exposed to breakeven and inflation linked bonds, as well as floating rates strategies.
As market volatility also materially increased with overall market risk being on the rise, we have also alternative UCITS strategies as described in previous questions, that we use in portfolios to mitigate the directional risk.
Do you have any hobbies? What do you like to do when you are not working?
When I am not working, I am spending a lot of time reading and listening to music. They are key parts of my personal universe, and like investment funds and strategies constitute a broad and various universe of possible. If I had to share one of my “strongest conviction” in terms of literature, I would certainly recommend Romain Gary and in particular his book “La promesse de l’aube”.