The Founding President of TC Stratégie Financière SAM established three years ago, Thierry Crovetto is also Professor of Finance at the University of Monaco (IUM, Inseec Group). This finance lecturer and professional moves from theory to practice through his rapidly evolving management company.
In our last interview you were spotlighting the academic validation of models…
I’m convinced of the need to bridge the gap between academic and professional activities. We draw on academic notions that we transform into investment solutions. This rigorous approach allows us to prevent certain errors upstream from the investment securities selection process.
Take, for example, volatility - that is often considered as the measure of risk par excellence, but wrongly so in our opinion. In fact, for us volatility is an uncertainty measurement indicator, not a risk indicator. Loss of capital is the real risk for an investor! So we consider maximum drawdown to be the main risk measurement, while the customer’s main constraint is their investment horizon. Accordingly, the notion of portfolio risk needs to be redefined, no longer stopping at the different asset classes to determine it.
You focus on absolute performance strategies, can you outline them?
We believe that the performance of customers’ portfolios must depend on their investment horizon and risk budget (according to their tolerance and risk-taking capacity) but not on market performance. It’s easier said than done and this name "absolute return" should not be a simple marketing name…
Historically, alternative management, as opposed to traditional "long only" management, was done through hedge funds – not very liquid, opaque, little or unregulated, and with high fees. Today, this type of alternative management can increasingly be done in a UCITS format (defined by a European Union Directive) with better control through compliance with a stricter regulation, increased transparency and greater liquidity. This new legal structure has everything it takes to reassure investors, who benefit from a more secure framework.
Do you seek to reduce emotional bias?
Indeed, we use behavioural finance and quantitative filters to erase emotional bias that could lead us to make bad decisions. The quantitative model takes action upstream from the initial selection process, then during the final stage of portfolio building with constrained optimisation. Between these two stages, the quantitative and qualitative analysis is more discretionary.
How do you advise your customers?
We have consultancy mandates for funds analysis and selection. We develop innovative investment solutions that can be tailor-made for a customer or group of customers.
We don’t stop at selecting the best funds, we aim to determine the best combination, among the funds thus selected under the constraint of risk. We work with niche products a lot. Our niche is absolute performance: the yield of a fund or a combination of funds and derivatives (as in the case of Alpha Portable strategies) expected to be positive, regular, and uncorrelated with the development of the markets over the defined investment horizon.
Who are your customers?
We focus on B2B: our customers are professionals: institutional, banks, management companies, multi family offices and single family offices, located in Monaco, France, Switzerland and other European countries. We do a unique job: from research to investment solutions!
