EFG Asset Management: Not Constrained by Benchmarks

A boutique with backing: New Capital is the funds arm of EFG Asset Management (EFGAM), the investment division of global private banking group EFG International which has a total of CHF144.5bn in assets under management. Whilst New Capital enjoys the benefits of a strong parent, autonomy is crucial to its DNA.

EFGAM offers a diversified range of specialist strategies within the equity, fixed income, and multi-asset space. These strategies are specialist in the sense they do not conform to the standard industry approach of managing money in a benchmark driven way. The firm instead believes in making investment decisions based on the sound analysis of the available opportunities – not on whether a security is included in a benchmark index. This is reflected across its New Capital product range.

The firm does not just offer expertise in one segment of the market. Its strategies are spread across a broad range of geographies and asset classes. The investment culture is collegiate and follows a cross-asset approach without silos. Instead, there is a network of talented managers and analysts sharing proprietary ideas and research, striving for company-wide investment excellence.

New Capital also does not have an investment style bias. It employs a macro framework that sets guidelines for managers and helps them identify opportunities. However, managers have flexibility to seek alpha through stock selection. This is well demonstrated by Michael Leithead, the firm’s head of Fixed Income and senior portfolio manager of the New Capital Global Value Credit Fund. In 2009, Mr Leithead helped launch the New Capital Wealthy Nations Bond Fund, the firm’s flagship fixed income fund, and three years later set up the New Capital Asia Value Credit Fund.

Chief Investment Officer and Senior Portfolio Manager Moz Afzal emphasises New Capital’s forte is in active management: “We adhere to a philosophy that is unique in the fixed income segment inasmuch as its thinking is centred on absolute returns. Credit and interest rate exposure are managed in a dynamic fashion. Credit selection uses a relative value approach.”

Mr Moz Afzal is lead manager on the New Capital Strategic Portfolio UCITS fund. He has also headed up the original Cayman-domiciled product since its launch in 2009. Mr Afzal is chairman of the EFGAM Asset Allocation Committee and has overall responsibility for the firm’s investment process.

Mr Afzal joined EFG Private Bank in 1994 and was appointed director and chief investment officer in March 2003, and director of asset management in January 2000. He previously ran fixed income funds and multi-asset portfolios, and has held supervisory roles in multimanager long-only and hedge fund investments. Prior to joining EFG, he was an investment analyst in the Macroeconomic Policy Division at HM Treasury.

“Active management is integral to everything we do and our managers are not constrained by benchmarks. Of course, we want to do well relative to peers and the market, but we are not obsessed with owning securities simply because they feature heavily in an index,” explains Mr Afzal.

In a world where passive funds are taking a growing market share, New Capital feels investors are unwilling to pay active fees for closet tracker portfolios. The firm’s funds offer genuine active management, therefore complimenting passive and more core benchmark-plus type offerings from other houses. Performance is also key to the New Capital ethos. The firm aims to have a high proportion of its funds in the top quartile at any one time.

The approach allows New Capital to create portfolios that benefit from rigorous analysis of global fundamentals and combine strategic thinking with active stock selection. New Capital is not looking to offer products in every category and will not launch funds just to satisfy the latest trend: the chosen approach is not that of mass distribution, rather the firm offers a focused portfolio of investment-led and relevant strategies.

In some cases, such as that of the New Capital Wealthy Nations Bond Fund, New Capital will cross traditional asset class borders to create a product it believes can offer strong, sustainable returns. New Capital will typically introduce funds in areas where it feels a long-term cycle is beginning, which often makes the firm appear contrarian relative to the wider industry.