Charles-Henri Nême began his career as a Financial Analyst with Fauchier Magnan, then at Barclays. He was then Head of the Exane European media team of analysts for eight years. In 2003, he turned to alternative long/short asset management by becoming one of Monam's two founders. In 2007, Charles-Henri joined Exane Asset Management to launch the Exane Ceres fund, best Equity Market Neutral fund Europe over 10 years*, which he manages. He also serves as Deputy Chief Executive Officer and Co-Chief Investment Officer of Exane Asset Management.
How has the Ceres fund changed since its inception in 2007?
Initially, the Ceres fund focused on the Consumer theme, which alone accounts for more than 20% of the European stock market (food, beverages, luxury goods, cosmetics, tobacco, food/non-food distribution, media, travel & leisure) - and corporate services.
Over the years, I wanted to expand my field of expertise and integrate new sectors: automotive in 2012, real estate (2016), IT services (2017), aeronautics and defence (2018), and most recently, capital goods and concessions (2019).
Since 2007, the Ceres fund has posted an annual performance of 4.7%, and more than 3% over the last five years. As we have seen over the entire period, and more recently in May 2019, the fund has managed to perform well over the long term and offers a decorrelation during periods of market decline. The overall result is therefore more than positive. The assets managed in the Ceres fund fluctuate between 600 and 700 million euros, while its investment universe represents nearly 40% of the European stock market. Today, our clients are balanced between institutional investors, asset management companies, and private management, mostly French and European (Italy, Germany and Switzerland).
What are the specific features of the sectors covered?
In general, I decide to follow sectors that offer visibility, a key criterion in my approach, and which are little regulated. I am particularly interested in family-owned companies because they are managed from a very long-term perspective. They project themselves over time to best ensure their durability, a vision to which I am sensitive and which I share as the fund manager of Ceres.
The fund has been closed to new subscribers since May 2010. Why?
From the outset, I designed Ceres as a wealth-oriented fund based on a "client centric" perspective. My main objective is that our clients are proud to be involved in this adventure. This is why I considered it necessary to close the fund (soft close) to remain flexible. Exane gave me the opportunity to control the assets under management, as well as choose the name of the fund; for me, these two signs of confidence are strong points of attachment to the Group.
How would you define your approach to asset management?
A fund manager stands out primarily because of their capacity to look ahead, requiring a well-thought-out methodology. For my part, I built my approach around four variables: growth, Return on Capital Employed (ROCE), visibility, and use of cash. The first seems obvious and indissociable from the stock market, even though it is sometimes "over-played" by many fund managers. The second also deserves special attention; to do this, I rely on the intrinsic characteristics of the business (ROCE excluding goodwill). The last two variables remind us of two obvious facts: no one can claim to know the future (hence the concept of visibility) and as a minority investor in the financial markets, I do not have a say on the cash allocation; however, this can be good or bad.
The weighting of the companies in the portfolio is also a key factor that I determine according to three criteria: the intensity of my conviction, the degree of operational risk of the company, and how knowledgeable I consider being about it.
Lastly, interactions within Ceres, and EAM more generally, lead to dialogue with the teams on market developments, best practices and cross-disciplinary themes, enabling us to enrich our respective approaches on a daily basis.
According to you, what makes a good fund manager?
The quality of fund management is based mainly on the chosen investment universe, the process implemented, and the fund manager's ability to analyse their mistakes. In my view, the constant combination of these three components is what enables someone to be a good fund manager.
It is necessary to have detailed knowledge of who we are and our strengths and weaknesses. Based on this analysis, we can establish a universe that is aligned with our personality and experience, and to which a methodology must then be applied. This methodology is a way of prioritising information; it is essential for the direction of my reasoning, in a world saturated with information.
Of course, our profession also requires a lot of discipline and modesty. Understanding and learning from our mistakes is essential. At Exane Asset Management, we work tirelessly to improve the standard of our teams, by helping them to refine their processes in concrete terms and to regularly question themselves. Our recruitment criteria have evolved in this direction over the past few years; we attach increasing importance to the flexibility and ambition of our employees. The asset management profession is a daily competition in which the winners are identified over a long period of time.
What difference do you see between long/short equity market neutral and long-only asset management?
On absolute return, the alpha that must be generated over time is at least five times greater than that of a long-only fund. This is a real challenge. Beyond the investment universe, which must be carefully considered, long/short equity market neutral management obviously presumes the fund manager knows how to choose the right "shorts": our main criteria are above all long-term (market positioning, governance) but may also be tactical (cyclicality and/or valuation). Lastly, it is essential that a fund manager controls growth in assets under management in order to preserve the quality of their track record.
*The Hedge Fund Journal UCITS Hedge Awards 2019.