So how does Borges go about in picking the select number of funds that make it to his portfolio? “We start with a quantitative screening, looking for the usual stuff like historical returns, risk, tracking error and style, and we might do some regression tests. Eventually, our goal is not to have the best performing funds but to create a portfolio that beats the benchmark. In the case of European equities, that is the MSCI Europe.“
We want to understand how funds generated their returns in the past. Whether theycould be attributed to style, or to a particular stock that did exceptionally well while the rest of the portfolio showed average performance.
“These are the kind of things we try to find in this phase. But it is difficult to judge all this by only looking at the quantitative side, so that’s why we must have interviews with the manager as well. We have to speak with the portfolio managers before we invest in a fund.
”Another of the managers who made it into his model portfolio is the Jupiter European Growth Fund, in 2009. As it has almost outperformed the MSCI Europe by a factor of three since then, Borges must either be avery lucky man, or he must be doing something right.