Nicolas Duban & Jérôme Coirier : « This year, among the 70 reviewed projects, a significant number is related to quantitative asset management companies »

Next-Finance: In 10 years, NEXT-AM has built a diversified portfolio of 20 stakes in 13 asset management companies but only a few "quantitative" funds are managed by these companies, however the industry is young, innovative and shows some good performances. Are you interested in this style of asset management (Global Macro funds quantitative statistical arbitrage fund, CTA funds...)?

Nicolas Duban and Jérôme Coirier : Some stakes have been actually taken in young companies specializing in quantitative management. In the past, the examples are Aqtis and Pythagore Investment. Today, we support the investment consulting firm Trend Finance (Global Macro CTA) which provides quantitative filters and signals to La Française AM. We have shown some interest in the past and we remain very interested in this style of asset management.

However, choices are quite large and our preferences are not only guided by the asset management style. We pay attention to the ability of asset managers to successfully commercialize their investment style. This year, among the 70 reviewed projects, a significant number is related to quantitative asset management companies. We have a strong relationship with “Quant Valley" association which effectively promote these asset management techniques. The fact that assets under management should be significant to cover management costs which could be high in relative terms (R&D, marketing costs) is a major challenge during the seeding period. Some projects could be in the pipeline, in the near future.

Given the institutional investors commiments, it should be noted that the quality of performance, in absolute terms, and not only on a relative ranking basis, is an essential prerequisite.

Nicolas Duban and Jérôme Coirier

Quant fund manager go very far in the due diligence process. They explain in detail the construction of their models and disclose all their trading positions on a daily basis; however they are still considered to be a non-transparent, how do you explain that?

Nicolas Duban

Quantitative models are often made of several bricks whose their stability is not permanent and their articulation could be regularly adjusted to be customized to market evolution. This situation contributes to this opacity feeling. Evident progress have been made in terms of transparency, education and clarity,

Independant French "quant" fund managers feel abandoned by French investors, viewed as cautious unlike foreign investors. Do you have this feeling too?

It is not a feeling, this is a reality. Some of them have been disappointed by the recent performances during a period of destructuring markets. Expectations were probably too high, like for alternative investments in general. Returns have been also poor in 2012, apart from a few isolated cases, traditional asset classes performances do not suffer from the comparison this year. In addition, the French institutional investors are still focusing on single asset class products, a situation which does not facilitate the development of total return strategies.

Beyond performance, what should be improved?

Jerome Coirier

The investment teams we meet, work very seriously, have significant resources and are credible. Therefore, beyond performance, we believe that stability, readable investment process and sufficient track record should be the key to break the deadlock. Given the institutional investors commiments, it should be noted that the quality of performance, in absolute terms, and not only on a relative ranking basis, is an essential prerequisite.