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UBS WM prefers unconstrained managers

Coming from the asset management side, Stefan Lecher, new head of client portfolio management for Asia-Pacific at UBS Wealth Management in Hong Kong, said unconstrained managers have the best chance to excel.

Lecher manages discretionary portfolios and also does the fund selection for both the advisory and discretionary shelf within Asia-Pacific. He replaces Patrick Grossholz, who moved back to UBS in Switzerland late last year. 

Lecher comes from the asset management side at UBS where for 12 years he managed multi-asset funds. He told FSA that his experience on the fund management side translates well to fund selection.

“Knowing the investment process, how that operates, how the team executes, whether they can provide transparency on good and bad performance, and whether they have the tools in place to achieve targets they are aiming for. Those are the elements I would look at.

“Managers have to be realistic about their chances and ensure they have the breadth of trades in the portfolio. If a manager has only a few levers to play in the fund, the chances of getting stable alpha is very low. You need 20-30 trades at least in a portfolio. If you are 60% right and 40% wrong, then you can get consistency in generating alpha.”

Active vs passive

 Studies by Morningstar and S&P have shown that actively-managed funds have generally underperformed their passive counterparts, especially over longer time horizons. In addition, capital has been flowing out of active and into passive funds. In 2016, assets in the global ETF/ETP industry reached a record high of $3.5trn, according to ETFGI.

However, Lecher believes good active managers can still be found. He looks for those using unconstrained strategies and concentrated portfolios. 

“The chances for an active manager to excel are in more unconstrained strategies. We make an effort to find those managers, who tend to be less regional, but more global.

“Before, there was often more of a mixture in the industry of low tracking error active managers for everything. That’s where underperformance net of fees comes from. If a manager doesn’t take enough tracking error, there is no chance to outperform the benchmark.”

China and India

For the advisory shelf, Lecher is looking at China and India equity and fixed income funds.

“We see upside potential in terms of adding good quality funds [from China and India] on our shelves.

“These are areas I would see as large weights [for our clients] relative to global indices and probably increasing weights.

“In those countries there is a relatively young [asset management] industry and markets are not researched as well as developed markets, so it’s a perfect place to hunt for portfolio managers who can generate alpha. There are great opportunities in A- or H-shares.”


Part of the Mark Allen Group.