Interview with Mussie Kidane, Banque Pictet & Cie SA

Mr. Mussie Kmussie-kidaneidane is the Head of Fund Selection and heads a 7 member team responsible for selecting best-in-breed fund managers across all asset classes for Pictet Wealth Management globally. Mr. Kidane is also the portfolio manager of a US$ 2billion low volatility fund since 2007. Prior to joining Pictet, Mr. Kidane was analyst & portfolio manager within the fund selection and multimanagement team at LODH &
Cie. Mr. Kidane, your team is directly responsible for overseeing close to CHF 11 billion in external fund managers. What types of strategies do you invest in?
Mussie Kidane: We select and monitor a wide range of products covering equities, fixed income and real assets both active and passive investment strategies. Our mission is to build a toolbox that will help our discretionary and advisory management units implement the strategic and tactical asset allocation decisions made by the Wealth Management Investment Committee (WMIC).

UCITSindex.comHow do you find the best managers and how does your screening process look like?
Kidane: We have a proprietary quantitative methodology that allows us to sort, group, compare and analyse a vast universe of funds. Once we have identified a focus list of funds, we then delve into the analytical due diligence work which of course is the most important part of our selection process. Beyond the numbers, we try hard to understand the decision-making process all the way form idea generation to actual position-sizing.  Asset management is primarily a human business, thus deeply impacted by human character and biases. We have a preference for fund managers with temperament that allows them to hold bold convictions and act resolutely upon them. Such managers may occasionally run out of results but are rarely out of good investment ideas. It’s often by thinking and acting differently – resolutely – that high conviction fund managers end up with quite different and, we assume, better result most of the time.
At Pictet, we are not in the business of trading funds. We generally take a medium-to-long-term view when we select managers. Our aim is to identify fund managers whose investment approach and decisions we can understand and are comfortable with. We tend to be long term investors provided that the fund managers that we have selected continue to deliver results in line with our realistic expectations.

UCITSindex.comDo you prefer a certain fund vehicle and what is your view on the current UCITS alternatives fund universe? Do you miss certain strategies or depth in some geographical areas?
Kidane: With regard to long-only strategies, UCITS funds are the most suitable vehicle for the majority of our clients in the world outside the USA. Apart from some of the niche strategies (such as Insurance Linked Securities) or less liquid strategies (such as Bank Loans), we find virtually all the other strategies of interest to us in the UCITS fund universe. As for alternative strategies, we have a dedicated team that conducts due diligence on and invest in both offshore and UCITS alternative funds. That flexibility gives us the the lead to tap into appealing strategies in whichever format they might be available in.

UCITSindex.comWith volatile markets reflecting the current uncertainty: what kind of strategies and types of managers are you currently looking for?
Kidane: Again the decision of what asset class or strategy to own in a given market environment and how much to own is not up to our team to make. What we really strive to do is to find the most appropriate fund managers that would enable us to strictly implement the asset allocation decisions made by the WMIC. The latter has been steadfast in maintaining intact its core asset allocation bets this year, although option strategies were used to adjust portfolio beta at times. With regard to the current environment, given recent performance and relative valuations, we tend to favor managers with value and cyclical tilts. In fixed income, we have recently shortened the duration of our credit exposure and moved higher in credit quality in a bid to preserve the alpha generated so far. Thank you for the interview.