It’s not unusual to spend an hour with an asset manager discussing the finer points of their portfolio and filling pages with scribbled shorthand only to realise after you’ve left that you never truly got to know the people behind the business.
Getting beyond initial impressions in a single conversation isn’t easy, but the complete honesty of partners Fabio Poma (pictured opposite, right) and Nicola Wullschleger really sets them apart. Far from the usual polished presentations and refined rhetoric, the Lugano duo are refreshingly blunt about the growth trajectory of WMM Group.
Founded in 1972, the group was first set up as Pagani Wullschleger by two founding partners and was a tax and business consultancy firm. Forty-five years and a couple of name changes later, the company is now named after three key partners, Wullschleger, Martinenghi and Manzini, and has a team of 49 employees.
WMM Group Holdings began life in 2001 and is the umbrella company for WMM Asset Management as well as its real estate firm, tax consultancy and business consultancy branches.
Operating under its umbrella group, the asset management firm is highly competitive, as customers can access the group’s tax and business consultancy as well as real estate solutions without having to form relationships outside the organisation.
The group’s structure hasn’t always been so clear cut, and indeed it proved quite a task to outline the evolution of the firm during our conversation.
After calls to colleagues and a couple of corrections, we finally established a timeline for the firm.
Not long after the core tax and business consultancy firm was established, it began to double up as a real estate service provider and asset management company.
The asset management arm was first set up in response to popular demand for portfolios and has since grown substantially, reaching a team of 17 today.
With more than CHF1 billion in assets under management, the advisory firm has come a long way and is primed for further expansion, with portfolio manager hires already under way to take the team up to 20 by the end of the year.
Ripped in two
By the year 2000, the asset management business had a solid team of seven and was enjoying fast growth, but its biggest challenge lay around the corner.
Shortly after the death of Enrico Pagani in 2001, his name was removed from the group’s title and replaced by that of an existing partner: Giovanni Manzini.
Soon after, the firm’s numbers plummeted as three of the seven in the asset management team followed Pagani junior, Matteo, who left to set up his own independent asset management firm.
Poma and Wullschleger were left with the difficult task of rebuilding the company and starting again with the remaining clients.
‘It was difficult. Just imagine you have an asset management office then half of it leaves due to the break-up of the company,’ Wullschleger says.
Having joined the firm as director earlier that year from an independent asset management firm in Geneva and holding a position at Credit Suisse before that, Poma was part of the core team that rebuilt the business.
‘Our company worked with a set business model, but when you realise that in just a few weeks more than half of your clients will leave you have to restart with existing clients and regrow it from there. It was a challenging time for us.
‘Through it all, the situation was clear for me, and I stayed positive knowing that I was working with serious people and felt assured that I was surrounded by talented people.’
The split unfolded during the 2001 Italian tax amnesty, which saw wealth repatriated to the Italian government from Ticino.
‘As we are in the Italian part of Switzerland, the Italian market is very important for us.’
With many clients based in Italy, the group keeps a close watch on the neighbouring country’s risk profile. Even so, Swiss nationals form the largest part of the client base as they represent half of all WMM’s clients, while the remaining half is from all over the world.
Born and bred
Wullschleger and Poma are both from Lugano, and their natural camaraderie – and good-natured squabbling – is unmistakable.
Their shared interest in art also unifies them, and having joined within two years of each other the two have shared the journey of rebuilding the asset management arm.
Managing partner Nicola Wullschleger formerly worked at UBS and is the second generation of his family to be a partner at WMM Group, as he joined his father in the business in 1999.
It was a natural progression to join the firm, he says. ‘It was a family business so I wanted to join in order to pick up the baton once my father retired.’
Even so, the father and son worked in different areas of the business, as Lorenzo was involved in tax and business consultancy while Nicola took over the reins in asset management.
The legacy of two generations could easily put Wullschleger at an advantage, but he is quick to stress that it hasn’t affected the equilibrium – he is just like all the other members of the team, he explains.
Play to your strengths
‘Our philosophy is to not try to do what we are not able to do,’ Wullschleger says.
In keeping with this core belief, the Luganese colleagues explain that all their investments are made in funds unless a client has a particular stock they want exposure to.
‘We have to keep in mind that we are not specialists. In that sense, it is much better to concentrate on outsourcing to funds rather than doing our own stock picking for all investments across the world.’
Funds they currently invest in include strategies on the Schroders platform, for instance the Schroder UK Dynamic Absolute Return fund, Schroder Gaia Egerton Equity and the Schroder Asia Total Return funds. The group is also invested in the Gabelli Arbitrage fund, Amber Equity fund, GAM Talentum fund range, Marshall Wace, Pictet Agora, the DB Platinum Systematic Apha fund as well as others.
‘It’s hard for a fund to surprise on the upside, frankly speaking, especially with the irrational markets, but one longstanding fund that has performed better than expected is the BlackRock Aletsch fund,’ Poma says.
While actively managed funds represent most of the adviser’s investments, about a quarter of all portfolio allocation goes into ETFs, depending on the portfolio risk profile.
All long-only ideas for investments are made through ETFs in the first case, Poma adds. If there is a long-only fund that performs better, it is considered, but it needs to tick a lot of boxes, Poma explains.
European equities play a large role in the team’s investment plan, much of which is invested in Swiss small- and mid-cap companies. Both the JP Morgan Highbridge and the world value investor IVA Global Sicav are central to the firm’s European equity exposure.
Even so, it is important to maintain security with a long/short strategy that has a long bias, Poma says.
‘The idea was always that there could be a problem in Europe, for example if suddenly central banks start to taper. We believe there are still very good companies, but we don’t want to be 100% correlated to the market, so we allocate part of our investment to Europe in the long/short space.’
While it may seem obvious, taking your own advice is not always simple, and the two admit they have recently had a tough time keeping to the long/short approach as the market has displayed consistently high beta.
While they are content to hedge their bets in equities, they are not taking any risks with bonds: the firm holds no conventional exposure at the moment.
WMM AM dramatically reduced its investment in fixed income two to three years ago as interest rates and yields started to converge towards zero, and they feel the risk/reward profile remains unattractive.
‘We started to find it difficult to invest in bonds because yields were so low. We couldn’t imagine that they could go even lower and below zero, so we started to allocate to alternative strategies in order to try to replicate the same profile as an investment grade bond: the same volatility and the same yield.’
They instead began allocating to market-neutral equity funds, macro funds, long/short graded funds and systematic strategies.
With refreshing candour, the two say that in hindsight they started reducing bond exposure too early. In fact, this year or last would have been better, when interest rates were at their lowest point.
For the time being, they haven’t moved back into the space, but do have some exposure in long/short credit and high yield, namely UBP’s UBAM High Yield fund. Another unconventional fund they like is a high yield frontier market fund called the Global Evolution fund.
This guarded approach to bonds is understandable in Switzerland, but is the cautious sentiment reflected in their view of the wider macroeconomic environment?
Fabio Poma’s nervous laugh answers my question before he says a word.
From a string of European elections to Donald Trump’s incessant tweets and Italy’s uncertainty surrounding the election plan, there are enough headwinds to watch at the moment, he says.
But that’s one of the best bits of the job, Wullschleger tells me, as he enjoys monitoring what’s happening in the world.
‘For me it’s doing all the research, and we should always be updated with what happens in the world. I think it’s fascinating to sit in Lugano and analyse what’s happening in Paris or Russia.’
His professional interest in global news is also reflected in his personal passion for travelling, he tells me.
While discussing the global macroeconomic environment, the two surprise me by saying the key unifying political event has been Brexit.
‘I think that with the new elections in France, the link between Germany, Italy and France is becoming quite strong as they try to solve the problems together.
Wullschleger adds: ‘We think that Brexit, surprisingly, has made the EU stronger than it was before because the founding partners have come together to try to solve the problem.’
Onwards and upwards
In its 40 or so years, WMM Asset Management has had to overcome one of the biggest tests in business. Having lost half of its staff, it went back to basics and has since repositioned itself as a strong player in the Luganese asset management industry.
Amid a consolidating Swiss industry, it comes as no surprise that WMM Asset Management has caught the attention of leading professionals.
‘We’ve had difficult times and good times, but we always remember the difficult times,’ Poma says. Nonetheless, the two beam with pride as they remember some of their favourite times at the firm.
The ultimate achievement for Wullschleger was when the group started getting job requests from reputable experts, as it was a confirmation of the company’s values.
‘When someone from outside chooses you and asks to be a possible partner for the future, that is the most rewarding thing.’
Connecting with the future
As fathers, Poma and Wullschleger believe it’s important to help the millennial generation both philanthropically but also from a business perspective.
Spearheaded by Martinenghi, the WMM Easy project was launched in January 2017 to reach out to millennials.
The scheme offers low rates for business-savy millennials, fresh out of university, who are starting to work, perhaps creating a new business that needs accounting, tax and business plan services.
The initiative is founded on the principle that like-minded people will have an easier time engaging with each other. With this in mind, the management team has put forward the younger employees at WMM Group to deal with younger clients.
‘We wanted to try to approach young people; the services we are selling like accounting and tax filings are not very sexy and easy to sell to young people,’ Nicola explains.
Younger colleagues aged 20-25 have been given a budget and have since created a special campaign.
‘We think that young people should be approached by young people, because the language and the way of communication has changed so dramatically over the past few years. It is the best way to cope with the social network in the same way as 25-year-olds.
‘We try to keep up with changes in society and have given a clear-cut project for our younger colleagues to go out and approach their own generation,’ Wullschleger adds.
The familiar honesty returns in the form of a casual laugh when I ask if the scheme has worked so far: ‘It’s visible but it hasn’t exploded just yet.’
Even so, it is important to help out the younger generation and get to know their traits better as they could become clients for life.
‘I think there’s a revolution with the young generation changing totally, the behaviour, the way of thinking and this will affect our business,’ he adds.
‘It has been very challenging for the asset management business because what we see is the trend is going towards internet platforms, automation, and digitisation. We see that the young generation is thinking in a different way to their parents, also about wealth.’
This article was originally published in the Summer 2017 issue of Citywire Switzerland.