Nordea prefers the smaller specialists
Christophe Girondel, managing director, Nordea Investment Funds (IF)
The multi-boutique approach adds style and interest to the process of alpha generation
The industry’s growing interest in generating higher alpha – measured as the expected return of an investment above its benchmark – explains why Nordea Investment Funds (IF) has awarded four new mandates to external managers within the last three years, according to Christophe Girondel, managing director at the Nordic firm in Luxembourg.
Nordea IF awarded its first sub-advisory mandate 10 years ago to Private Capital Management for equity North America value all-cap. The mandate is today worth $1.07bn (?683m). More recently, additional mandates covering Europe were given to Capital Four Management for European high yield, to European value Partners for European value all-cap and to Ashburton for European equities GARP. Wellington recently started managing a small mandate for the IT sector.
“You can generate beta through ETFs or through low-tracking errors products manufactured internally,” says Mr Girondel. “But if you want to generate alpha, unless you have a specialist team in-house, you need to go out and find a good manager.”
Nordea prides itself in using a multi-boutique approach, employing both internal and external managers. Looking for that independence and freedom that characterises its internal boutiques, Nordea’s investment strategy is to appoint specialised small companies, ideally managing between ?10bn and ?50bn in total.
“We delegate to smaller boutiques because we like them to be very focused,” says Mr Girondel, adding that in a big team alpha generation may be diluted.
Exclusivity in distributing the strategy is also very important, says Mr Girondel, as Nordea does not want to offer to clients the same products that are distributed by other firms. “In the selection process, performance and track record are important, but even more important is the ‘chemistry’, how people work, how they are willing to service us, how clear they are with their investment process and how good they are at explaining what they do,” he says.
Christophe Girondel, managing director, Nordea Investment Funds (IF)
