Managing wealth: how can you invest your money, other than bringing it to one or more banks? One answer could be what's known as a "multi manager". Here, Patrick Picenoni of Altrafin Ltd., tells Swiss News about the business he launched in Zurich four years ago.
As said, banks are one institution you could go to. But for tailor-made solutions to suit your requirements, accommodate the degree of risk you want to take, and give you that personal touch, you could try one of several so-called 'investment boutiques'. An independent wealth management and advisory company, Altrafin offers no investment products of its own but specialises in scouting the world market for good buys for clients.
Analysing The Risk
Picenoni says the term "wealth management" is fairly self-explanatory, but there's more to the job than you might think. Wealth managers analyse a client's personal situation before developing a specific investment strategy to form the basis of an investment plan.
Easy though it may sound, the process involves lots of research in the area of global financial markets and investment options, as well as a thorough understanding of every client's risk tolerance over time. "Wealth management--the way we do it--begins with understanding and analysing a clients' personal circumstances, needs, investment and other restrictions, in order to determine appropriate investment return and risk parameters," he says.
Investing With A Difference
Altrafin manages tailor-made segregated portfolios, and its level of discretion to act without the prior approval of the client is governed by a legal agreement with that person. The company focuses only on the "bankable" or "liquid" assets of an investor's total wealth. This encompasses cash, equities, fixed income and, to an extent, hedge funds (an investment fund where the fund manager is authorised to use derivatives and borrowing to provide a higher return, albeit at a higher risk.)
Unlike many investment institutions that deal with single securities, Altrafin adopts what it calls a multi-manager approach. "We don't buy single securities like Siemens, IBM, Sony, Samsung or bonds of distressed companies or emerging markets. Instead, we buy a specialised fund that is usually broadly diversified, and where the fund manager has a specific edge/strength in the application of its investment strategy," Picenoni says.
To allocate money to the US equity markets, for example, Altrafin will buy an investment fund specialised in US equities and managed locally by a specialised investment firm. Then for each asset class and region, Altrafin prepares a portfolio combining different specialist investment vehicles or investment funds that are managed by specialist investment managers.
"We believe it's almost impossible to have an edge in the analysis and selection of single securities on a global scale unless you have a large enough--and internationally based--investment research and asset management team," he says. "That's one reason why we go out in the market and pick funds managed by local investment professionals who are on the ground and focused in the area or the specific region."
Other than looking at what the client wants in terms of risk, returns, and allocation, the wealth manager analyses the historic risks and returns of a fund, comparing them to peers in light of market conditions. They take a hard look at the fund manager, his background and reputation, and how the investment strategy was decided, whether individually or by a team.
"Even more important to us, is to look for managers who are entrepreneurs at the same time, or who invest a considerable part of their wealth in the strategy they manage. We want an alignment of interests," Picenoni says. He will consider what kind of institution is offering the product--whether it's a large bank or a smaller investment boutique--then check out the fee structure, tax aspects, and fund registration.
Though the planning and the portfolios are created according to customer or client needs, the company is not autocratic. There are two sides to Altrafin. One involves an advisory role, in which the final investment decision rests with the client. "This focuses on advising those who want to organise their wealth and investments internally, without relying too much on banks," he says. Advice is meant to complement an external advisory team of tax advisors, auditors or lawyers.
But again, the client can also give Altrafin some discretion to make decisions according to a limited power of attorney, allowing the wealth manager to decide how much, and what, to invest in. "We, of course, have to take into consideration the specifications of the client regarding risk and returns at all times," says Picenoni. "But other than that, the decision is ours and we do not need to consult the client. It's for the client to choose whether he wants to enter an advisory agreement or the discretionary one."
So the business of fund management is personalised and customised for the potential investor. Picenoni says under "normal" circumstances, younger people seem to be able to afford more risk, as their investment horizon is longer. Older people or those with a limited asset base tend to have a more conservative portfolio.
Quality Over Quantity
Picenoni says the personal nature of his work places a natural limit on the number of people he can serve. But he and Altrafin's other founding partner--Alessandro Rizzi--value quality over quantity, he adds.
"Ours is a niche service. We don't have retail clients, but have more family offices and other high-net-worth individuals. This does limit our capacity and it puts pressure on us to really focus on our services. This kind of clientele has very high out expectations."
The company operates strictly out of Switzerland, however their business is international with over 70 per cent coming from clients in Germany, Italy and the UK. "Our portfolios are very internationally diversified. We have no clients who want only Swiss or only European equities," Picenoni says.
The Way Ahead
With all the investments and transactions, risks and returns for clients being taken care of, where exactly does an investment boutique earn its own money?
"We make two-thirds of our earnings through the asset management fee and the rest is performance-linked fees. We also earn on the advisory side as strategic investment consultants," he says. So far, the company has not advertised its services and almost the entire clientele have been referred by existing clients or external service providers like lawyers, tax advisors, trustees and even bankers.
From a two-man show in 2001, Altrafin has grown to include two senior portfolio managers and two financial and research analysts, "backed by a dedicated office professional," says Picenoni. "We want Altrafin to grow very slowly because the service we provide is very time consuming. And we also want to grow on a qualitative basis; managing the clients' expectations is a must."
For more information please visit: www.altrafin.com
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|Date:||Apr 1, 2005|
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