The search for income dominates much of Brian O’Rourke’s thoughts. As head of Mediolanum Asset Management’s multi-manager team, O’Rourke oversees a team of eight within a broader investment team of 26.
Based in Dublin, the investment team is responsible for managing nearly €40bn (£31.3bn) in assets under management across a large range of funds.
The funds run the gamut from vanilla fund-of-funds, to specialist manager-of-manager structures that provide the firm’s roughly 5,000 advisers, with the building blocks to satisfy their clients’ needs.
Right now, much of that need is for alternative sources of income. “A lot of these clients are in Italy and have traditionally invested in deposits or in BTPs (government securities indexed to the Italian inflation rate), which are probably some of the best-performing asset classes of the past 20-odd years on a risk-adjusted basis,” O’Rourke says.
“Given the current rate environment, they’re no longer in a position to deliver that kind of return. They are currently on a yield of around 1%, and those clients are trying to find some alternatives.”
He adds: “The income requirement is quite strong and has influenced a lot of our product design. Because many of these clients are unlikely to make the leap into full-on equities, we have been looking at those assets that can be considered half-way houses, that are not without risk but which have more modest volatility, like high-yield and convertible bonds.
“Increasingly, we are seeing things like long/short equity and other alternatives coming into focus, which we have also been incorporating into portfolios.”
Right start
O’Rourke joined the firm in August last year from Bank of Ireland Private Banking, where he had worked for nearly nine years as head of multi-asset investment. He relished the opportunity to join a large, international asset-management business without having to relocate from Dublin.
He started his career with Cambridge Associates in Boston and has more than 18 years of experience in the investment industry, 13 of which were spent in research and manager selection.
“It was a great opportunity for me to build a strong manager-selection team, while at the same time contributing to asset allocation and the overall investment process.”
O’Rourke was also attracted by the extent of the relationships the Mediolanum team has with the world’s largest fund groups. “We have assets with roughly 70 asset managers globally in around 300 different strategies, so it is a very wide canvas, and a great opportunity to engage and challenge key decision-makers at these firms on a week-by-week basis. In a single year, we probably conduct somewhere in the region of 750 meetings across the team.”
The other attraction was the manner in which the team works, which O’Rourke says is different to most others he has come across in his time in the industry. The investment team is headed up by former Signia Wealth CIO Gautam Batra and is made up of units that collaborate into the overall process.
These include O’Rourke’s manager selection team, a portfolio management team headed up by Adrian Doyle, a trading team led by Michael Paterson and a performance analyst team.
O’Rourke explains: “The portfolio management team feeds quite heavily into the strategic and the tactical asset allocation around portfolio construction. On top of that, they are quite active on overlay, placing active positions within funds, either adding certain things we want to have exposure to or reducing biases within existing portfolios that we do not necessarily want.
Tactical decisions
Tactical trades are placed generally with a zero to three-month timescale and are subject, in O’Rourke’s words, to pretty constant reviews, especially given the current volatility. “Obviously, the size of the position will vary depending on the conviction of the view and the volatility in the market as well,” he says. “Our trading team is also key in giving expression to this view.”
As a result of this focus on the tactical side, asset-allocation meetings are quite frequent. The entire investment team sits down every Tuesday and spends around an hour and a half not only taking stock of where it is from a long-term, strategic point of view, but also discussing the various views across equities, currencies, credit and commodities.
“We can have positions on any of those sectors from time to time,” O’Rourke explains, adding that while equities tend to be the dominant area of expression, currency is something the team looks at as well.
He is, however, at pains to stress that the overlay is not the dominant feature of what the Mediolanum team does, but it is definitely a part of the firm’s ethos. The goal is to be a truly active manager.
“We don’t want to be a passive multi-manager. We want to demonstrate that there is activity – not just activity for activity’s sake but activity that is thought out and can deliver alpha. This can be expressed through the overlay or through manager selection, where we blend various style factors to reflect where we think we are in the cycle.”
