Fund/portfolio management team of the year: Columbia Threadneedle Investments
Since the introduction of Solvency II, European insurers' investments have come under greater scrutiny from national supervisors, with very specific requirements needed to satisfy different elements of the regulation. For third-party asset managers holding insurer assets, providing fund-based solutions with sufficient look-through data has been one of the key challenges.
Columbia Threadneedle Investments strives to offer transparency on asset allocation to ease some of the pressures brought by Solvency II. The firm has applied this philosophy to insurance clients which invest in its multi-asset flagship fund, the Threadneedle Dynamic Real Return Fund.
Managed by Toby Nangle, head of multi-asset, EMEA, the fund aims to navigate markets by protecting investors' capital when headwinds appear on the horizon and participating when opportunities develop by dynamically managing the asset allocation.
The fund aims to provide a real return of inflation plus 4%, with around two-thirds the volatility of global equities. If equity markets are up 20%, a good return for the fund would be 12%; by contrast, when equity markets are down 20% then an acceptable result for the fund would be down 5%. The firm monitors the fund's Solvency II capital usage and other risk metrics over time and can react quickly when required by clients.
The portfolio risk budget is managed using a long-only, unleveraged approach. Its managers invest in either passive products or internal Columbia Threadneedle Investments funds to gain exposure to idiosyncratic corporate level risk (e.g., equities, corporate bonds, property), and directly manage the government bond and currency allocations.
The fund managers look to invest in assets on a 12 to 24-month horizon. Any asset class in which the fund invests must earn its place from a risk and return perspective when either the manager perception of risk changes or when the valuation case alters.