How do professionals managing discretionary portfolios make their investment decisions? How do they select ETFs and analyze markets? What role should be given to currency risk or to the risk profile of each investor?
In this edition of Expert Word from Café de la Bourse, Clémence Tanguy interviews Olivier Malteste, Chief Economist and Director of Investments at Yomoni. Background, the functioning of investment committees, ETF selection, current market view, and advice for individual investors: he discusses the core principles guiding the decisions of the asset management company.
The occasion also to better understand why pedagogy and diversification remain at the heart of long-term wealth management.
Video: how an expert builds his ETF portfolio
Olivier Malteste, how did you become Chief Economist and Director of Investments at Yomoni?
I joined Yomoni a little over three years ago, after more than twenty years of experience in asset management. After studies at Université Paris-Dauphine, then a master’s in asset management, I began in quantitative management at Sinopia, a subsidiary of HSBC, before joining Lyxor and then Amundi.
My background has allowed me to acquire a dual competence between structured products and diversified management, with substantial use of ETFs. Today, I help develop Yomoni while ensuring both the role of Chief Economist and Director of Investments.
What does your job involve in concrete terms?
The two roles feed off each other. As Chief Economist, my role is to monitor economic and financial publications to try to extract the major trends and understand their consequences for the markets.
I also have an important educational role, with both clients and prospects. At Yomoni, we believe that it is not enough to delegate management. We must also understand the decisions made and put them into perspective.
As Director of Investments, I chair the various committees, whether allocation committees or ETF selection committees. My role is to ensure that the teams have their say and to oversee investment decisions.
How do you make your investment decisions?
Our starting point is primarily macroeconomic. We analyze the different geographic regions, central bank policies, market positioning, and risks that could be underpriced.
I have realized over time that the market often focuses on one or two themes at a time. We are precisely trying to take a step back to identify the next themes that could emerge.
We also pay close attention to behavioral biases. When you have a scenario in mind, you naturally tend to favor information that confirms it. It is therefore essential to step back and ask what you might be forgetting.
How do you select ETFs?
Many investors think that it is enough to choose the cheapest ETF. In reality, ETF selection is more complex.
The replication method, the fund’s legal domicile, the tax treatment of dividends, and liquidity all impact long-term performance. Two ETFs tracking the same index can show different results.
We spend a lot of time selecting ETFs and then regularly reassessing our choices, because new products constantly appear on the market.
Is the World ETF really as diversified as it’s claimed to be?
The MSCI World ETF provides a simple and effective solution, but one must be aware that it involves certain investment decisions, notably regarding currency risk.
Last year, investors could see that there was a significant performance gap between a currency-hedged exposure and an unhedged exposure.
It is also important to keep in mind that the MSCI World remains heavily concentrated in US equities and large technology names. This is not necessarily a problem, but it is important that investors are fully aware of it.
What is your best investment decision? And your worst?
One of the best decisions we have made at Yomoni has been to continue believing in the American economy and in tech stocks. Despite the numerous warnings about a potential bubble, we remain convinced that innovation and artificial intelligence continue to offer significant prospects.
The most striking lesson goes back to 2016. We had correctly anticipated Brexit and the election of Donald Trump, but we were mistaken about how the markets would react. In the end, even with the right scenario, market behavior can be totally different from what we had imagined.
That experience taught me that one must always stay very disciplined and accept that one can be wrong.
What is your current market sentiment?
For the most dynamic profiles, we remain 100% invested in equities. We believe it is impossible to forecast market rebounds and that it is better to stay exposed rather than risk missing recovery phases.
We continue to favor US stocks and to be more cautious on Europe, which, in our view, suffers from weaker growth and a less favorable energy environment.
For more diversified profiles, we are currently slightly underweight in equities and are gradually reintroducing duration in European bonds.
What advice would you give to a private investor?
The first thing is to clearly define your risk profile. Having a long investment horizon is not enough. You must also be able to withstand psychologically periods of high volatility.
Even an investor with a lot of time ahead can be led to sell at the worst moment if they are uncomfortable with market downturns.
Diversification remains essential. Even when you think you have a strong conviction, it is important to maintain a sufficiently diversified portfolio.
Finally, never hesitate to ask questions. There are no stupid questions. Behind the questions that seem the simplest are often the most fundamental concepts.
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