The fund selector gives the example of Elcano, a Spanish boutique specialised in global equities that has been included in Abante’s fund-of-funds range for a number of years: “Elcano started buying energy stocks in 2015, but they were too early and the fund was our worst performing position, down -23% by the end of the year.”
So Campello was worried, and demanded an explanation. And that’s what she got. “They showed us all their portfolio and told us everything about their positions, including portfolio attribution. They convinced us their investment case was still valid, and last year the fund was up 49%,” she says.
Boutique woman
About half of Abante’s assets are invested in small, specialised boutique funds. And there are several reasons Campello is fond of them.
One reason is that boutique managers, who are usually not listed, tend to be more responsive to investors than large asset managers. And they tend to be more flexible, taking an unconstrained approach. These are all things Campello values deeply. But there’s more.
“Boutique managers usually run just one or two funds, so they are often more focused than larger managers,” she says. Campello works with boutiques across asset classes, but she has a special preference for them in markets with lower liquidity.
“For boutiques, it’s often easier to close a fund to protect investors. Boutique funds run a lower risk of becoming too big, which would hamper performance.”
A couple of years ago, Abante owned the M&G Optimal Income Fund, one of the largest actively managed funds in the world. However, the fact that the fund doubled in size between 2013 and 2015 to an eye-dazzling €33.8bn (March 2015) made them wary.
“As long as the asset class as a whole is performing well, and the positions are liquid enough, big funds are fine,” says Campello.
But according to Campello’s assessment, the fact that the fund had grown so big made it vulnerable to a correction in the bond market. So a decision was made to sell the fund.
Following a period of poor performance, total assets of the fund had dwindled to €18bn by mid-2016, but this didn’t prompt Abante to step back in.
