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Caroline Le Meaux Lambert : « We are looking for strategies able to benefit from upward equity trends while limiting volatility »

Caroline Le Meaux Lambert, head of delegated asset management at Caisse des Dépôts for the French public pension fund Ircantec, tells us a little more about the Smart Beta concept.

Article also available in : English EN | français FR

Next-Finance : What are the main challenges facing Ircantec in the current environment focused on low interest rates and monetary policy ?

Caroline Le Meaux Lambert : The low interest rate environment is a real challenge ahead because it raises questions about performance and risk for diversified portfolios. Indeed, sovereign bonds become less profitable and riskier (with a probable interest rates rise). Moreover, they are not able to display the same defensive nature than before in case of a stock market correction.

Most institutional investors show performance below their medium and long term objectives. Do you think that conventional allocation models need to be updated ? What’s your take on new approaches like multi-factor or smart beta model?

Evidently, allocation models must take into account the current low rate environment. The smart beta concep is interesting from this point of view, given the fact that it is more the case for stocks (mature markets) than bonds.

Do you invested in smart beta or factor investing strategies? In yes, what is their weight in your portfolio? Do they replace active funds?

Yes, we have invested in this type of strategies, for approximately 10 % of our equity allocation. In my opinion, this approach is complementary to our equity investments managed through fundamental methods.

In my opinion, Smart Beta is complementary to our equity investments managed through fundamental methods.
Caroline Le Meaux Lambert

What are the most interesting smart beta and factor investing strategies (Low volatility, Sharpe ratio maximization, factor investing, etc…) ?

We are looking for strategies able to benefit from upward equity trends while limiting volatility. In order to achieve this objective, we use the 3 following methods : Low volatility, Sharpe ratio maximization and Factor investing.

What are the main changes to be made for this type of investment approach (transparency, education, understanding, model evolution, hidden costs, etc ....)?

We consider these type of investments as active management, therefore as usual, we perform a due diligence before investing. In addition, as these investments show bias, it is important to identify and understand their performance cycle. Beyond all these aspects, we pay a special attention to SRI management as our entire portfolio (including Smart Beta Strategies) integrates ESG criteria in our investment policy.

Beyond all these aspects, we pay a special attention to SRI management as our entire portfolio (including Smart Beta Strategies) integrates ESG criteria in our investment policy.
Caroline Le Meaux Lambert

What are the main elements to consider in order to select smart beta fund managers ?

The main factors taken into account are:

  • A lower volatility than the benchmark,
  • Ability to include SRI criteria without degrading performance,
  • The Sharpe ratio,
  • The costs.

Paul Monthe , RF , May 19

Article also available in : English EN | français FR

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