“Be humble.” That’s the advice Madrid-based Marta Campello gives fund selectors and managers. “The market is always wiser than you.”
Campello speaks from experience. After graduating with a degree in business and economics from Comercial de Deusto University, she joined investment firm Ab Asesores in 1999, where she qualified as a financial adviser. The business was subsequently acquired by Morgan Stanley.
In 2002, she moved to financial planning firm Abante Asesores, set up by her former boss at Ab Asesores. For the past 13 years, she has been a member of the asset management team and holds the roles of absolute return fund selector and portfolio manager.
She believes having a foot in both camps gives her a professional advantage.
Forging a close relationship with fund managers is of paramount importance to Campello and the Abante team, whether they are Spanish or international, big firms or specialist boutiques. “I find it useful to talk to managers who have a different opinion to me or my team,” she says.
After coming across an interesting idea, the first step is to carry out a quantitative assessment of the fund. Second, and most importantly, the team does a deep dive.
Campello wants to know how the firm is paid, if it is a one-man show, how the AUM is managed and what happens when there is a bad idea that results in big losses. She also wants to find out how the business reacts to both under- and outperformance.
“We want to have a very deep knowledge about the identity of the fund and the process,” she says, which can take months. “We are famous among some of the fund sellers because it takes a long time for us to do our due diligence. But we are loyal and patient.
“Once we make a decision, especially if it is an equity fund, we usually stay for a long time. We have funds in our portfolio we have held for 15 years.
“We really like to discover jewels in the market, but that takes time because often you don’t know the asset management company at all. You have to start from scratch and we are quite happy to do that.”
But there are certain red flags that prompt Campello and her team to reassess their relationship with a fund or manager.
“The most important thing is feeling comfortable with the information we receive and being sure we can have contact when we need it.”
Something like tracking error, for example, is not an automatic red flag. “We just need to understand what they are doing. It is important to have a very transparent asset management company in front of us.”
An immediate sell for Abante, however, is if “someone is doing things differently from what they say they are doing”. While it doesn’t happen often, it does happen. “Not in the long-only space but in the absolute return or fixed income space when liquidity and volatility are more important to keep under control.”
The departure of a ‘star’ manager may also prompt a sell. “If an important part of the performance comes from the manager’s decisions, and that manager quits, we will usually put the fund under review. Most of the time we end up selling.”
An area Abante firmly supports is active management. “Passive investments play a role in our portfolios but we love to find relevant managers with niche ideas or small, specialised boutiques,” says Campello.
If the teams finds it difficult to select a manager who will beat the market, “we will go for passives”.
“But we don’t like them in the fixed income space at all.”
Campello also describes Abante as a “pioneer”. She cites the MFS Prudent Wealth and Jupiter Dynamic Growth funds as examples of where Abante was one of the first, if the not the first, Spanish firms to invest. “These are funds that are now very famous and have grown a lot. But maybe six or 10 years ago nobody knew them or was willing to invest in these ideas.”
Campello says the firm has built up a solid international reputation. “Everyone knows us as fund selectors and managers. Around 90% of our clients’ wealth, of almost €3bn, is invested through fund of funds. I’d say 70% is placed through international boutiques and companies.”
Abante is relatively fee agnostic, particularly when it comes to equity mandates. “You have to pay the manager if you want them to beat the market,” says Campello. “We understand their job has a price.
“We never buy really expensive fixed income funds because the expected return in this environment is low. We are also very cautious in low-volatility absolute return funds because the higher the fees, the smaller the return for the investor.”
But the fee is not the make or break decision. “If the fund and the team is good, if we like the idea and the process, and if it has historically delivered good performance net of fees, we’re happy to buy.”
Setting the record straight
Abante’s client base is predominately Spanish high net-worths, and Campello admits they sometimes have misconceptions about her role as a fund selector. First, that she is an expert on the whole universe of funds, which simply isn’t possible. Second, that every manager she picks will be successful.
“Sometimes you can do your due diligence deeply and be very careful but it simply doesn’t work,” she says. “The manager might change or the fund underperforms for longer than it used to.
“Even if you have very high-quality managers in the portfolio, you always have a couple of ideas that have had bad performance in a certain calendar year.”
The other misconception is that Campello and her team pick a fund manager and then sit back and do nothing. “That’s not true,” she says. “You have to carefully follow the fund, meet with the manager, keep an eye on the daily NAV and try to find out if something is going wrong.”
Accountability is an important part of the job, she adds. “You need to have accountability for the funds you have picked in the past and, if you have a better idea, propose new ideas to your team.”
Investors and the financial services sector are still being haunted by the ghost of the global financial crisis. “When we think about a recession we don’t think about a mild one but about 2008, which was very painful.”
Campello, however, believes “you can take advantage of this pessimistic environment”.
The post-Christmas 2018 equities sale saw Abante start 2019 “heavily overweight equities”. As of November, it is neutral; with its model portfolios holding 50% equities. “We are quite optimistic about it and, if you have a long time horizon and think the world is growing, we should invest in equities.
“Our role is to make wise decisions for our clients. This is not the time to buy things that are really expensive, such as bonds, real estate in Spain and the super-quality stocks.”
Expanding on her advice to remain humble, Campello says fund managers and selectors should be prepared to “not be right all of the time”.
“You should be open to listening to people who think differently from you. It is always good to have different angles in your decision-making process.”
She also advises not to celebrate when things go well. “Sometimes your success is because the market is up and you are in the right place. And sometimes the market is not going where you thought it would be and that is not your mistake either. It is part of the job.
“You have to stay fresh, have fun and be open to new people.”
Marta Campello’s interview featured in the January 2020 edition of Expert Investor’s magazine. To read the online version of the print publication, please click here.