In Hungary we can see world-class performances in the asset management business – claims Botond Bilibók. The CEO of Concorde Asset Management drew up the difficulties in finding a new portfolio manager and launching new investment funds – however, recruitment is necessary, no doubt that the intellectual workshop of Concorde will come up with something new within 5–10 years.
Privátbankár.hu: Concorde Asset Management was the “Asset Management Company of the Year” in 2016, thus you held one of the welcome speeches at this year’s Klasszis awards ceremony as the CEO of the last year’s winner company. In this speech you also mentioned that domestic investors are lucky, because Hungarian asset managers offer world-class products – what did you mean by that?
Botond Bilibók: We entered the US market in the year before last: we introduced our two absolute return strategies on the biggest market in the world. These operate with the same principles as the domestic ones: if an investment decision is made, it appears in each portfolio (sometimes with a different weight) – for example, the same appears in the Hungarian Platina Pí Fund as in the US Pí Fund. Therefore, though the track record of the US funds is quite short, I’ve taken the liberty to take into account our 20-year operation when talking about our results. It’s important to be cautious and act ethically in every circumstance. Unfortunately, we still come across misleading information, including, for example, the description of short-term returns, sometimes extrapolating them on annual basis or just presenting performances without any cost included.
Back to the original thought, our US partner has our US funds measured regularly, revealing that the Sharpe ratio (an index which includes not only the returns of an investment but also the related risk, measured with the volatility of returns – the editor) of Concorde Pí outperformed every US hedge funds (listed in Barclay’s Hedge ranking) – with a return placing the fund in the top 10.
PB: So you say that Hungarian investment funds are competitive with US hedge funds?
BB: In the absolute return category we find at least three teams with portfolio managers in Hungary who are indeed competitive – as they prove to be competitive with our internationally successful teams in the domestic market. In Hungary we can see some really world-class performances in the asset management business. I think there are even more talents, but many of them have no opportunity to unfold their talent.
We are lucky. In the case of many other professions in Hungary, it’s not talent or diligence what matters but something very different; in our business where performance is manifested day after day, the situation is completely different – fortunately.
You mean that there is demand abroad for Hungarian investment funds?
I’d rather say that there is interest, this can be clearly seen. However, it is not the funds what people are interested in but the intellectual performance (it is extremely hard to sell Hungarian funds abroad, nearly impossible).
PB: What is so interesting in that?
BB: I’m sure that we’re exotic which explains a part of the story: no one sees crowds of domestic portfolio managers striving to be a player in New York. In addition, a Hungarian player won’t make it to the top league regarding the assets managed – but it can actually happen that a team which proved its capability in several fields (and also sees the world from a different perspective) will receive some “crumbs”.
PB: Can the Hungarian assets be interesting as well?
BB: We’ve not experienced it, the Hungarian market is too small for that. However, if we take into account the full region, it can catch the investors’ attention. In recent years Central and Eastern Europe separated from the classic emerging market region: it shows a healthy picture from macroeconomic aspect, some members of this group even use the common currency. This region is very sexy now among the investors – a kind of “Europe Beta” market.
PB: Let’s have a look at the other side of the story: do foreign funds compete with the Hungarian ones?
BB: In theory they do, but we cannot see great amounts of Hungarian investors’ money in foreign funds. This is primarily explained by the fact that domestic investors have always had the predominance of bonds and HUF in the focus of attention; these are best served by the Hungarian funds. These were predominantly sold by domestic institutions as well, in some cases by banks within the group. The absolute return strategies are also somewhat different here than those we see abroad: domestic players know that Hungarian clients seek for positive return beside very low volatility.
PB: The Hungarians’ risk-averse attitude is well-served by one of your competitors, the state: it offered retail government securities with high returns in recent years. However, the situation seems to change nowadays: realizable returns were reduced, inflation appeared again thus bringing down real returns below the previous levels. Will this process change the crowding out effect caused by government securities?
BB: You got the wrong interviewee for this question… everything depends on the conditions with which the securities are finally sold. The majority expects that the state will now start to decrease the premia. I’m sure that the risk-averse behavior was strongly supported by the state in the previous years. It’s not a healthy situation, but I wish it was our only problem.
PB: Last year you launched the online sales of funds. Is it successful?
BB: Let’s get back to this question in two years time…We’ve just started it, we’re in the middle of a learning process, we’d better be cautious. Furthermore: it can take like ten years actually to see whether the world will change that much and whether online sales channels will be as important in this regard as some predict these days.
PB: During 20 years you had plenty of time to get to know the clients, you have information what they’re looking for – are you planning to launch new funds?
BB: At the moment, we’re not. We’ve just opened our fund called Superposition (it was launched in 2014 and was available with limited access only – the editor), so in this sense we have something new to offer, but currently we have no further plans to introduce new products. It’s very difficult to find new portfolio managers – even if we find one, a 3–5-year track record is needed for us to make sure that he is able to manage risks and achieve return.
PB: So this is what only matters? You need new people for the business?
BB: Of course. Me and Laci (László Szabó, President of Concorde Asset Management – the editor) will be closer to 70 than 60 in 20 years time. This is a profession in which people are active between 30 and 50. When being in active, work takes 7-8 units out of 10 units, leaving the rest for the family. If we take a look at the company’s future with a perspective of decades, we have to ask whether any of the current managers, leaders will still choose to manage the savings of thousands of clients and who will decide to retire from the business. It’s a necessity to look for new, talented portfolio managers.
PB: This means that talent search is on the way in the background?
BB: Absolutely. Moreover, we’re also owners in this company, not only managers. We got a chance from life which we were able to exploit, it’s our responsibility to plan the future. A company like ours cannot get on without good portfolio managers. As for the original question, the answer is that we’re not planning to launch a new fund at the moment, but within a 5–10 years time it’s inevitable to come out with something new. There are two ways for this: by launching a completely new fund or completely transforming a currently existing one. I mean, for example, if Columbus will be one day managed by someone other than Dani (Dániel Móricz, portfolio manager of Concorde Columbus Fund – the editor), then it will be no longer Columbus but a new fund – even if running under the same name.
PB: On your website you define yourselves as a vibrant intellectual workshop – what does this mean?
BB: I would suggest you to come and join us for a collective brainstorming, you’d better see yourself how it works. At such occasions we gather together (20–30 persons) and discuss what’s going on in the world, following a designated guideline. Depending on our temperament, we all join the conversation differently. We share our thoughts with each other for 1.5–2 hours roughly. This includes some current political developments, but various investment issues, market developments are also covered, as well as things we read recently, sharing new ideas and thoughts we’re concerned about, interest rates, inflation etc… so I would call this a true brainstorming. I’m convinced that an extraordinary performance requires the presence of oddballs in a given community. Oddballs differ from what we’re used to, are deviant from an aspect, pushing to the limits, seeing the world and interpreting things differently – in these discussions we hear extraordinary ideas from time to time. That’s what makes our company a vibrant intellectual workshop.
Concorde Asset Management was awarded with the following at the Klasszis 2017 awards ceremony of Privátbankár.hu:
Privátbankár.hu Klasszis – Portfolio Manager of the Year in 2017: Viktor Zsiday, Concorde Asset Management
Privátbankár.hu Klasszis – Best CEE Equity Fund of the Year in 2017: Concorde Equity Fund
Privátbankár.hu Klasszis – Best Absolute Return Fund of the Last 10 Years in 2017: Concorde-VM Fund
Privátbankár.hu Klasszis – Best Absolute Return Derivative Fund of the Year in 2017: Citadella Derivative Fund
Privátbankár.hu Klasszis – Best Domestic Short-term Bond Fund of the Year in 2017 – 2nd place: Concorde Short-term Bond Fund
Privátbankár.hu Klasszis – Best Domestic Long-term Bond Fund of the Year in 2017 – 3rd place: Concorde Bond Fund
Privátbankár.hu Klasszis – Best Mixed Balanced Fund of the Year in 2017 – 3rd place: Concorde 2000 Fund
Privátbankár.hu Klasszis – Best Developed Market Equity Fund of the Year in 2017 – 3rd place: Concorde International Equity Fund
Privátbankár.hu Klasszis – Best Absolute Return Derivative Fund of the Year in 2017 – 3rd place: Concorde Columbus Fund