TOBAM: the diversification challenge
By: Adrien Paredes-Vanheule | 10 Jul 2015
TOBAM : the diversification challenge
Paris based anti-benchmark manager Tobam is pursuing development in both institutional and retail segments.
Times have changed. Criticising market cap indices has become mainstream, according to Yves Choueifaty (pictured), CEO and founder of Tobam. When the firm, today managing over €8bn of assets, was launched in 2005: “It was considered a heresy.
“Nowadays, investors know that indices are totally inefficient. That was not the case before 2010,” he adds.
Tobam has sought to stand out since its launch by running an anti-benchmark strategy, that its CEO describes as the most diversified portfolio than can be built on a given universe, being long only, full invested and without leverage.
“The problem does not lie in the existence of benchmarks. The way the industry uses them is a problem. We should avoid replicating benchmarks,” he says.
“Passive management is a perfect oxymoron. How could you be passive and manage at the same time?” Choueifaty asks.
Tobam maximises diversification by avoiding predictions and bias. It has implemented its strategy based on equity markets before launching its first bond fund based on the US credit market universe in October 2014.
Half of Tobam’s clients are institutional funds such as the California Public Employees’ Retirement System, which is the US largest public pension fund and a shareholder in the boutique.
“Geographically, 34% of our clients are based in North America, 5% in Asia and the others in Europe, mostly in the northern part of Europe.”
Tobam has faced two steps in its business development. The manager was incubated by Lehmann Brothers in the US until the financial crisis of 2008 before going independent.
“First, we have gained recognition from the most challenging clients – sovereign funds, public pension funds. We have demonstrated that those clients trust us in allocating assets to Tobam. Then, since 2008, we have been leveraging this recognition through partnerships in covering the whole market,” Choueifaty says.
The firm has stepped up its development in the retail segment by making its anti-benchmark Sicav range accessible in six new European countries – Italy, Spain, Switzerland, Finland, the Netherlands and Belgium – in addition to France, Germany, Austria and the UK.
Amundi, which owns a 12% stake in Tobam, provides support as a distribution partner.
“Once the size of a country market is enough to open an office, we will strengthen our presence in the country,” Choueifaty says.
With offices in Paris and New York, Tobam has set a target to double the assets under management it had in 2014 (€7bn) by the end of 2016.
Socially responsible investment is part of Tobam’s DNA, according to Choueifaty. The firm started to measure its carbon footprint a few years ago. It finances programs aimed at reducing carbon emissions.
“What would be the point of outperforming the market for the next three months by 2%, if in exchange we burned the planet? Here is the driver of Tobam’s sustainable investment policy. We have to ensure performance in a context of high sustainability,” argues Choueifaty.
He spots that investors’ interest in SRI strategies is rising, but assesses that they are not yet interested enough. And in another rebuff to benchmarks, the manager points out that passive management is the “absolute negation of SRI criteria.”
NOT AT HOME
Despite Tobam’s Paris headquarters and the 10% of AUM accounted for by French investors, Choueifaty considers France negatively in terms of its economy.
He regrets that “France has lost its long-term saving culture” and labels the Livret A as “the worst savings product that could exist for the economy.
“Money should be invested or spent but sterilising it should be forbidden. In France, sterilising savings has been encouraged for decades.”