PR OFILE
(L-R): Leila Khazaneh, General Counsel; Mark Cecil, Founding Partner; and Philippe Riachi, Managing Partner, Jabre Capital
that the Swiss relationship with other countries should get easier over time.
Straight after arriving in Geneva, Jabre volunteered to be regulated in Switzerland – many years before this became compulsory in April 2013. Jabre also chooses to follow the Swiss regulator’s principles- based remuneration guidelines even though these are only obligatory for banks. Elsewhere, however, Jabre defers to US and UK standards, which they find are currently more well developed than those in Switzerland. Compliance consultants have, for instance, drawn up strict industry-standard personal account trading policies, require pre-approval of trades, and set minimum holding periods. Other standard policies apply to inside information “wall crosses”, and trade allocation amongst funds and accounts, according to Khazaneh. Co-founder and managing partner Phillippe Riachi insists he was intent on “institutionalising the business from day
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one, and since we launched with substantial assets, we were not budget constrained.” There are now 45 people, five funds and two UCITS. Jabre trades around the world so “we have to make sure we have compliance everywhere,” and everything is “checked and double-checked,” says Riachi.
Whither an institutionalised industry? So, Jabre’s operational infrastructure is institutionally palatable: as a Swiss-regulated firm, also reporting to the CFTC, and running regulated UCITS reporting to Luxembourg’s CSSF, with segregation of duties and independent reporting lines to an independent board. Why, then, are assets in the low single-digit billions? Jabre thinks that investment consultants are the culprit. Cecil makes no attempt to hide his perception that investment consultants are “playing it safe” by recommending low-volatility hedge funds that often produce mediocre returns. Cecil cites recent research
from Oxford University’s Saïd Business School as supporting his view. The title of the research paper appears to begin with the rhetorical question Picking Winners? but the content of the paper may suggest that consultants are doing anything but that. The 53-page paper, by Tim Jenkinson, Howard Jones and Jose Vincent Martinez, says, “We find no evidence that these recommendations add value to plan sponsors.” Page 28 of the paper compares products recommended by consultants with those not recommended. On an equal-weighted basis, the former underperformed the latter by a statistically significant 1% a year in absolute terms, and by 0.86% a year in risk-adjusted terms; on a value-weighted basis the recommended products still underperformed, albeit the order of magnitude was not statistically significant. On page 36 the academics argue that the main reason for underperformance is the “consultants’ tendency to recommend relatively large products”, yet even
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