Wouter Van Overfelt, Head of EM Corporate Bonds at Vontobel AM, is our Fund Manager of the Month for January. Wouter is an extremely passionate and successful EM investor, and his non-traditional path into asset management demonstrates his willingness to keep an open-mind and pursue his interests.
Wouter joined Vontobel Asset Management in April 2013 as Portfolio Manager in the Emerging Markets Bonds team. Prior to joining Vontobel, from 2012 to 2013, he headed the Business Control of the Central Portfolio Management unit at Gaz de France (GDF) Suez and prior to that, he held various positions at Dexia Group within the Fixed Income team.
Wouter Van Overfelt holds a PhD as well as a Master’s in Applied Economics from the University of Antwerp.
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 actually didn’t follow a traditional career path to become a portfolio manager. I had many different jobs before landing in my current position. I had the chance to work in academia and in the private sector, which, together with curiosity, helped me gain a broad perspective on how the world works. Commitment has been always part of my work ethic; therefore, I always want to be part of the strongest team in any organization. Being part of a high performing team is not always easy, but it allows you to learn from the people around you. I think learning continuously and not being afraid to make mistakes is very important. Perhaps the best piece of advice is to be passionate about what you do. Choose a job you love, and you will never work a day in your life—that motivation helps you to work hard and earn the trust and respect of colleagues.
What is your advice to investors – how should they position themselves with the current environment?
This is a very good question. During or immediately after a systemic crisis, one always sees articles stating that most active managers underperformed their benchmarks. Such statements are usually framed in a way that compels readers to conclude that passive is the best way forward.
I disagree with such reasoning for various reasons. First, such reasoning implies that passive investments replicate the benchmark, but that is not true for most asset classes. Most passive funds underperform the benchmark by definition. Secondly, by its very nature, a systemic crisis is unpredictable. In a systemic crisis, most investors try to liquidate a position at any price; getting out is the only thing that matters to them. Therefore, I would argue that as long as people are running for the exit, different rules for investing apply.
During the panic, people disregard underlying fundamental value, and prices deviate a lot from fair value. This is exactly the time when you do not want to buy everything, i.e., the index. In such times, you want to be invested with an active manager whom you trust and whose investment process and decision making you understand.
I think crises are great opportunities for active managers to lay the groundwork for future outperformance. In credit-based fixed income, there is an additional complicating factor that rates returns tend to dominate spread returns as policy makers cut interest rates aggressively. It is, therefore, more difficult to differentiate fund managers who are good credit selectors from the ones benefiting from duration. However, when rates start to go up again, the credit selectors will keep their gain, while the fund managers that benefited from duration will give back most of their returns.
My recommendation for investors is twofold. First, go active with a manager you trust. Second, be mindful about the duration risk in your portfolio. Duration in many indices has increased dramatically as issuers try to benefit from the low rate environment. It is interesting that many investors ask about lower-rated securities or defaults in a portfolio but care little about long-dated bonds in a portfolio.
What sustains your drive within the industry?
Passion for my job. I enjoy being an emerging markets portfolio manager. It is a fantastic job where I meet companies from different countries and industries, allowing me to understand and respect cultural differences between people. In addition, I have the ability to interact with clients and think with them.
What is the greatest challenge as Head of Emerging Markets Corporate Bonds at Vontobel AM?
I think the greatest challenge for any portfolio manager is to have the best risk-adjusted returns.
What do you think will be the next disruptive element in the asset management industry?
There are many aspects of the asset management industry. I can well imagine that there may be new players to enter the market, because they have access to more or different data; perhaps the way funds will be distributed and marketed in the future will change. However, I think the fundamental tenets of investing and portfolio construction will not change dramatically. In my view, there are three parameters that matter for investing: expected returns, expected volatility, and expected correlation. It is possible for these three parameters to change. For example, due to the rise of passive investments, returns may become more correlated; or due to changing regulations, markets may become more or less segmented.
Which parameter do you value most when selecting companies ?
It’s not just one parameter. In emerging markets, there are many factors that matter, and it depends on the situation. People tend to focus on hard data, but, while important, they reflect mostly the ability for an issuer to repay its debts. Furthermore, since these data are mostly readily available, they only move prices when they are released; but after that, prices reflect the quality of the issuer. In my view, the more important elements are soft factors like culture, values and incentives of stakeholders. Unsurprisingly, the soft factors are always the hardest.