How to build a successful investment strategy: Yoann Ignatiew, Managing Director & co-Fund Manager of R-co Valor at Rothschild & Co Asset Management Europe, shares their expertise in investment approach, reveals their “carte blanche” strategy, and explains the importance of differentiation from the rest of the market.
A combination of “top down” and “bottom up” analysis
Quantilia: R-co Valor is now 25 years old and holds more than 2 billion AuM. What is the secret of such longevity?
Yoann Ignatiew [Y.I.] : Taking advantage of a diversified allocation as part of its “Carte Blanche” investment approach, R-co Valor offers a flexible exposure to all asset classes, without any sectoral or style bias, nor any geographical constraints or reference to a benchmark.
This fund provides access to innovative and cross-functional investment themes through high-conviction investments. The core of the portfolio consists of long-term structural themes around which a more opportunistic stock selection is based. We seek to optimize the fund’s risk-return profile through a concentrated portfolio, founded on a combination of “top down” and “bottom up” analysis.
Quantilia: How do you pilot such a fund with a top-down approach in a context of zero or negative returns?
Y.I. : The return of a multitude of uncertainties and a slowdown in the global economy, prompt Central banks to implement particularly accommodating monetary policy. Against this backdrop, investors are not currently expecting a short-term economic recovery at all but rather anticipating further rate cuts. This hypothesis is supported by the sluggishness of leading economic indicators. In the long run, this scenario could prove favourable to equity markets, but only if there is more visibility on the political and economic fronts. In addition, stock market indices are still at high levels, but a phenomenon of sector rotation in favour of defensive stocks tends to occur in a context in which the dollar keeps on strengthening. In such a context we are adopting a relatively cautious approach with a rather defensive stance in terms of allocation while voluntarily maintaining exposure to certain specific sectoral risks.
Managing allocation between the major pillars of global growth, the United States and China
Quantilia: How do you manage the tactical allocation of the fund with such volatile equity markets?
Y.I. : The situation is proving complex to assess. Our overall allocation is well below the levels reached at the beginning of the year or even below its historical average, at approximately 70%, due to profit taking in sectors that have performed well. We operate tactical intra-sector arbitrages and continue to initiate positions when we feel it is appropriate.
Quantilia: How do you manage the context of trade war, raw material tension, and allocation between the major poles of global growth, the United States and China?
Y.I. : We remain invested in both US and China through long term investment themes and high conviction companies, but we are very cautious about the negotiations between these two countries. This uncertain environment warrants some caution and compels us to be patient until we have better visibility. We retain a significant amount of flexibility to be able to react and adjust our allocation if necessary.
Regarding raw materials, the gold mine sector experienced very good performance during the last months, reflecting macroeconomic uncertainties and developments related to the trade war. This context has enabled us to take some profits that were subsequently reinvested in copper mining. We therefore maintain exposure to mining companies but also to oil companies, particularly those based or listed in Canada, where we are also invested in industrial and rail transport companies.
As a result, this country is currently our main geographical position, ahead of the United States, as we consider the economic situation and outlook to be more favorable. Finally, Canada seems to be less affected by the trade war led by the American President, taking advantage of a positive trade dynamic with its American neighbour. In addition, the Canadian dollar tends to appreciate against the U.S. dollar and the euro, a situation which favours Canadian stocks.
R-co Valor Balanced, a “Carte Blanche” approach with a risk-balanced profile
Quantilia: Rothschild & Co launched one year ago the R-co Valor Balanced fund, what is the difference with R-co Valor in terms of management and asset classes?
Y.I. : The main difference between R-co Valor and R-co Valor Balanced is the structure of the portfolio. R-co Valor Balanced is based on two sub-strategies. The first one is managed using a “carte blanche” approach similar to R-co Valor, investing in global equities and fixed income, while the second one focuses on fixed income, with the majority being Investment Grade. This investment solution seeks to generate long-term performance while reducing its volatility through a diversified portfolio and the decorrelation stemming from investing across different asset classes.
Each sub-strategy is managed on a discretionary basis, founded on both “top-down” and fundamental analysis to identify securities while providing ample flexibility in accordance with the portfolio management teams’ convictions. Each sub-strategy seeks to generate performance, including the fixed income pocket which is not solely managed to lower the overall portfolio’s risk. Emmanuel Petit, the Head of Fixed Income at Rothschild & Co Asset Management Europe, manages the fixed income pocket and I am in charge of the second one.
A few words about Rothschild & Co Asset Management Europe
Quantilia: How would you present the Asset Management division of Rothschild & Co and what differentiates you from the rest of the market?
Rothschild & Co Asset Management Europe: We are an independent player in Asset Management, providing management services and bespoke investment solutions. Our development is built around complementary expertise in active and conviction-based long-only management as well as in long-only and alternative open architecture. Our investment strategy is based on key principles (conviction, contrarian and convexity) that drive our investment decisions regarding allocation, sector and stock selection.
Driven by an in-depth knowledge of the financial markets, we deploy our know-how, while respecting the values of the Rothschild & Co Group: Responsibility, perspicacity and creativity. This approach, combining innovation and experience, makes it possible to develop investment solutions that create long-term value for our clients.
Quantilia: Rothschild & Co is a well-renowned active management house. How important is it for you to collaborate with a Fintech like Quantilia?
Rothschild & Co Asset Management Europe : It is important for Rothschild & Co as an Asset Manager to collaborate with a platform such as Quantilia because they offer an innovative and easy-to-use solution dedicated to investors and they give access to a broad selection of data related to our fund range. Given the wide range on offer in our industry, to be able to identify and to compare the most suitable and efficient solutions through a single platform is a valuable tool. In addition, as a company driven by strong entrepreneurial values, collaboration with a human size fintech is a logical choice.
About Yoann Ignatiew
Yoann Ignatiew has a DEA in “Monétaire, Banques et Finance” of Paris 1 Panthéon-Sorbonne University and began his career as a trader in fixed-income markets for eleven years at CCF and Morgan Stanley. He went on to work as a European equities broker for two years. From 2004 to 2005 he was Head of tactical allocation for diversified funds at IXIS AM. In 2006, he joined Banque Privée Saint Dominique where he was responsible of investments and asset allocation. Since 2008, Yoann Ignatiew has managed the wealth management open-ended fund and co-managed R-co Valor at Rothschild & Co Asset Management Europe.
The aim of this article is to expose the view from different Rothschild & Co Asset Management Europe experts. It reflects the opinions of the authors and do not in any way engage the responsibility of Rothschild & Co Asset Management Europe. The conclusions of this article do not prove to be engaging in making operational decisions and do not bind in any way Rothschild & Co to positions that it has adopted or may adopt in the future. This article is designed exclusively for the purpose of information. It does not constitute an offer to purchase nor a contractual commitment of any kind whatsoever to its recipients or third parties. Investors who are considering subscribing for any fund units or shares should read carefully the most recent version of the fund’s legal documentation (Prospectus, KIID and annual report, etc.). Any reproduction, copying, duplication, transfer in any form whatsoever, concerning all or part of this publication by Rothschild & Co Asset Management Europe is strictly prohibited.”
About the Asset Management’s division of Rothschild & Co
As the Asset Management division of Rothschild & Co, we deliver bespoke investment solutions to institutional clients, financial intermediaries and third-party distributors. We aim to develop complementary expertise in active high-conviction management and open architecture investment solutions. Based in Paris with offices in 10 European countries, Asset Management’s division of Rothschild & Co has around 170 employees and over 21 billion euros under management.