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TOBAM brings maximum diversification multi asset strategy to European wealth managers


French-based USD10.2 billion quantitative fund manager TOBAM has expanded its Anti-Benchmark Multi-Asset strategy institutional offering to include IFAs, retail investors and other distributors across Europe. The Multi-Asset Fund was launched in December 2016 and had an annualised return of 9.3 per cent to the end of March this year, with volatility of 4.8 per cent and a Sharpe Ratio of 1.6 (gross of fees).

Christophe Roehri, Deputy CEO of TOBAM, explains that the firm started approaching large institutional clients in 2006 and spent the first 10 years of its life managing money for large institutions such as pension funds.

2016 saw the firm moving into the retail space in North America, Canada with a partnership with Mackenzie, with whom they built six ETFs and six funds, based on TOBAM methodology. The partnership raised CAD1 billion in less than two years, which Roehri describes as ‘quite compelling’.

The firm then replicated this in the US with two more partnerships which saw the launch of ETFs and funds. “We got the idea to leverage the legitimacy we had built on the institutional side and move into the retail side,” Roehri says.

“We had the right partnerships in place in North America, and in Europe, we looked at the specificities of the IFAs and our conclusion was that from a product perspective we needed a multi asset approach for the retail client base.”

This was the Multi-Asset strategy. “We are looking for partners in Europe and the idea is to propose a multi-asset approach which is going to be quite unique in that there is absolutely no macro top down approach embedded in the allocation process. Our vision is that virtually all the existing offerings are based on the traditional macro idea.”

TOBAM’s Maximum Diversification approach to a multi-asset framework involves investing without macroeconomic views and without forecasting asset price movements, making no bets.

By maximizing diversification between and within asset classes, the strategy seeks to avoid risk concentrations, reduce volatility while improving return and providing steadier capital growth than traditional market-cap driven approaches. 

“We propose a maximum of diversification between equity and fixed income and allocate between those building blocks to achieve maximum diversification methodology,” Roehri says.

“We believe our completely agnostic approach should deliver returns that are going to be better than typical market cap weighted returns with a lower risk profile. We think it should be attractive to a large number of retail investors who are either not able or willing to decide on their asset allocation for themselves.”

Roehri believes that if an investor is wondering what a good allocation mix is or questions the ability of traditional managers to forecast correctly, then, going forward TOBAM’s approach makes a lot of sense.

“Beyond performance improvement and risk reduction, an added benefit of the approach is that it tends to be lowly correlated with popular high conviction strategies invested by the typical retail investor.”

Roehri is also interested in launching ETFs in Europe and his firm has been observing the growth of the sector. “It’s clear today that in North America, ETFs are taking over market share from funds One of the main drivers in the US ETF success is the favourable tax treatment for the ETF’s vs funds. We don’t have that incentive in Europe, which might be why it is behind in terms of flows.”

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