Entrepreneurial nature needed for good Syz fit

Syz and Co, the Swiss banking group with €20bn under management, has recently expanded its fund analysis and fund manager selection department to eight people, in anticipation of new developments in the sub-advisory space.

Katia Coudray Cornu, appointed as head of Syz Fund Research in June, was recently joined by Reto Gehring and Alexandre Potelle, both members of her previous team at UBP, where she was in charge of multi-management and manager selection for 10 years.

In addition to being responsible for selecting third-party funds for the private bank’s open architecture platform, Ms Cornu is in charge of the product development and manager selection for the Luxembourg Oyster fund range and is already looking to appoint new sub-advisers in a number of innovative asset classes.

On the equity side, high alpha products are definitely worth exploring, as creating long only products has become challenging in the current environment, explains

Ms Cornu. Good high alpha generators are to be found in the European equities sector, she says. Also there is potential for more flexible investment strategies: in the long only space, being flexible means having the ability to raise cash or to protect capital, she states.

“Equity products tend to be 100 per cent invested, but many of them have a low tracking error and are facing big competition from index products,” says Ms Cornu.

“These very buy and hold fully invested long only strategies have to be revisited.” Buy and hold is an investment concept that goes back to the bull market of the 80s, but since the beginning of the century, the market is much more challenging and flexibility is a key requirement.

In the fixed income space, Ms Cornu is turning her attention to high yield strategies that focus on dividend or offer high protection due to high spreads, such as global fixed income high yield.

The range of in-house absolute return solutions is going to grow, too. Despite acknowledging that absolute return is a “very challenging” universe, and investors have been disappointed – perhaps as they expected products to deliver positive returns every year – there are still good opportunities, she believes.

“In a very volatile and non-directional environment it makes sense to have products that are more free in the way they invest.”

To be successful in this space, it is very important the manager is clear on the target performance he wants to achieve, on the type of risk he wants to have and on the investment strategy he pursues, she explains.

“In the absolute return bracket, the border between hedge funds and long only does no longer exist, so I am looking for managers having an approach that is completely non-directional,” says Ms Cornu. “It can be hedge fund managers, long only managers, it can be asset allocators. But what is really important is that the investment philosophy is replicable in Ucits IV.” This excludes all illiquid strategies.

Sub-advisory agreements are the best way forward to launch these new products.

“The sub-advisory model is a very good business model, if it is really based on shared interest and shared competence,” she says. Oyster brings the Ucits wrap and extensive network of distribution across Europe, and the sub-adviser has to bring a proven competence, a high degree of specification on the way he manages an asset class, a sustainable process and structure and investment philosophy that operates within Ucits constraints. And it has to agree to an exclusivity agreement, she remarks.

The key to building a long-term strategic relationship is to know each other very well, to have the same investment philosophy and the same investment culture, regardless of size, says Ms Cornu. Thus, having an entrepreneurial mentality is also important to be a good fit with the Swiss bank, which was founded by its three partners, Eric Syz, Alfredo Piacentini and Paolo Luban in 1996.

Over the years, the Swiss Group, which includes the private banking, institutional asset management, and investment funds – Oyster and 3A Alternative funds – has developed internal expertise in the asset classes that were considered strategic by the bank, such as European and global equities, bonds, asset allocation and absolute return, but has entrusted to external managers the management of other asset classes to enhance its product offering.

The bank currently uses 11 sub-advisers, which manage asset classes ranging from Asian, emerging markets, Japanese and US equities to convertible bonds and others, for total sub-advised assets of €1.1bn.

Katia Coudray Cormu, Syz and Co