Sandrine Vincelot, head of fund selection at VEGA Investment Managers, was among the pioneers of fund selection in the 1990s and has seen first-hand the changing dynamics between asset managers and fund buyers.
Since creating its first fund of funds in October 1996, the Natixis affiliate’s selection process has never stopped evolving, and neither has the quality in service received from asset managers, Sandrine Vincelot says.
Back in the 1990s, asset management firms didn’t even recognise fund selection as a dedicated role but the role’s increasing expertise has since gained a lot of respect in the industry, she says.
‘The profession was still in its infancy so it was interesting to be a pioneer, approaching asset managers and saying: “I would like to meet you because I am also a manager and I’m thinking of buying your fund”.’
Over time, asset managers have made themselves readily available to fund selectors who they now recognise as clients. ‘We are in the same profession so they really listen to us,’ she says.
VEGA has been in touch with many asset managers for a long period of time and expects a high level of service. These long-term associations mean many companies now have a clear understanding of what the fund analysts want and who to contact.
Nevertheless, Sandrine Vincelot says it is important for the team to uncover smaller and newer asset managers, rather than solely focusing on large established players. The smaller fund houses are often especially attentive because they are keen to understand what VEGA IM, as a firm, needs from them and how Vincelot wants to work and they are ready to adapt themselves.
Sandrine Vincelot says regulation has been key in helping to improve the communication fund selectors receive from asset managers.
New regimes such as MiFID II have lifted standards of reporting across the board, she says.
‘Asset management firms have really taken on the new regulation and have had to do things the right way in order to address our needs properly.’
This has smoothed the process for VEGA IM’s selectors, she says, as asset managers have had to supply more information in their reports and are better prepared during meetings.
Last year, VEGA’s selection team completed about 325 meetings with fund managers, many held within Natixis’ offices. This shows how willing asset managers now are to meet the fund selection unit.
Meetings can be used as a gauge, she says, as a fund manager who isn’t available can indicate a problem. ‘When there are any changes with the management team or the structure of a fund, there is generally rapid communication as they know it’s very important for us have such information as soon as possible.
'If we realise there’s been a change without having been warned, we sell and get out immediately if this change calls into question why we selected the fund.
‘If they let us know ahead of time, we might put the fund under “negative surveillance”, until we can be assured that all is well.’
The term ‘negative surveillance’ is used at VEGA to inform the team that it can’t buy any more of a certain fund but equally, that it won’t sell. This is imposed for one to two months while the analysts meet the manager.
‘If the firm tries to hide things or forgets to tell us, it’s a bad sign and few of them do it because they have more to lose than to gain,’ she says.
This article originally appeared in the March 2019 issue of the Citywire Selector magazine.