Nicolas Demont and Charles Bouffier: «Our management approach is based on mutual values, including proximity and transparency»

Can you give us more details about Egamo?

Egamo was launched in 2008 as MGEN wanted to create his own asset management company. But we offer our expertise and know-how to all the players in the social economy (mutual, associations, benefit institutions...). Our assets under management amount to about € 2.2 billion, coming mainly from our parent company.

Our team currently counts 15 employees, mostly dedicated to fund management and risk control.

We offer to our clients:

 Discretionary management and dedicated funds
 Two management techniques: single fund management and multi-management. Single fund management focus mainly on fixed income (51% of our total assets at 30/09/2010), a key pillar of mutual portfolio. Multi-management enables us to build efficient portfolios and invest in major asset classes (equity, alternative investment, currency, commodities, etc ...) while diversifying underlying, operational risk and investment strategies
 Opened UCITS meeting the needs of mutualist clients like our fund Egamo Basic Mutuelle Santé Prévoyance.

What are the concerns of clients from mutual world?

They are very specific. Beyond their "good family man" management style with a focus on capital preservation, these players are especially concerned about regulatory framework that imposes asset management global approach: asset / liabilities link, correlation between different asset classes, separated processes between fixed income and asset diversification (equity, alternative investment, private equity...). Moreover, they really handle separately bond (main underlying of their portfolio) from other financial assets they viewed risky.

What is Egamo’s management style?

Our approach to asset management is based on mutual values, including proximity and transparency, and reflected by a strong commitment:
 A dedicated and customized client’s relationship,
 A rigorous and overall risk management process (interest rate, liquidity, credit ...)
 A knowledge sharing process: To meet client needs and transparency obligation, dialogue and information are emphasized throughout the management process.
 A transparent pricing policy where performance fees are excluded to avoid reckless risk-taking
 An agreement with the UN Principles for Responsible Investment (PRI).

How this approach meets the needs of your clients?

Our team comes from both mutual world and asset management. This enable us to be close to our clients. Our approach is primarily based on mutual understanding.

As part of our range of products and services, we establish with our clients a diagnosis of their financial situation in order to properly identify their needs and increase mutual understanding. This process ends with a road map given to the client to ensure our good understanding of their expectations and design appropriate investment strategy.

Indeed, we are able to offer complete solutions and customized portfolio management, tailored to their objectives, through:

 Direct fixed income investments to ensure fast and appropriate management, a direct view on cash flows calendar (potential "matching" with liabilities), portfolio’s duration, default risk, monitoring of capitalisation reserve, premium / discount depreciation or even an understanding of associated tax system.
 A diversification pocket using multi-management to offer various options taking into account asset classes, geographical zones or alpha generation
 A "reporting" tailored to each investor needs.

Can you tell us more about your fund Egamo Basic Mutuelle Santé Prévoyance?

Launched April 30, 2010 to address specifically the needs complementary health insurance, our fund’s Egamo Basic Mutuelle Santé Prévoyance assets under management amount about €22 millions.

The objective is to maximise returns, over a minimum period of 3 years, through investments in various assets classes but with a bond market positive bias.

A typical allocation is suggested by a scientific committee of complementary health insurance’s experts in order to build a model portfolio consistent with their legal and regulatory constraints. Seeds-Finance Investment Consulting is in charge of computing model portfolio returns.

In this way, Egamo Basic Mutuelle Santé Prévoyance is a true benchmark for those involved in complementary health and welfare protection

What are the main impacts of the upcoming Solvency II implementation ?

Solvency II is an European regulatory reform of the insurance industry: the purpose is to better match capital requirements with business risks. [1]. Accordingly, the financial management of complementary health insurances is at the heart of Solvency II implementation. In this context, efficient risk control becomes an absolute necessity as there are additional constraints. Moreover, many complementary health systems, facing the new changes, have decided to implement new internal organization schemes or to pool resources.

What are your medium and long-term views on bond markets given debt problems of European countries like Greece and Ireland now?

We believe that continental Europe should experience "soft" economic growth in a context of low inflation for years to come. Therefore, even if currently interest rates are historically low in the euro zone, notably in France and Germany, we do not believe in a bond market crash. In our view, a sharp reversal of trend is not on the agenda even if we do not exclude a slight increase in the level of interest rates compared to current low levels. Regarding the default risk of European countries, like Greece or Ireland, we do not agree with that assumption for the simple reason that in our view, a breakdown of the euro zone would have a higher cost for banking and financial system than a bailout of troubled countries. By cons, in the medium / long-term, the risk of sovereign debt restructuring of certain European countries is plausible.

Does Egamo protect itself against potential adverse developments of financial markets or against credit risk by using derivatives such as credit default swaps for example?

We do protect our portfolios using derivatives. By cons, we do not use credit default swaps. " It is important to note here that as part of our hedging transactions, we select only listed products traded on organized markets (futures and options on futures) the clearing rules of which protect us against counterparty risk.

Do you use inflation linked products in your portfolio?

Yes, we invest in such instruments, including OATi [2] to protect portfolios against inflation risk. Indeed, It is one of the very few available and efficient products against this type of risk. We use it more as a protection tool rather than an investment underlying.