Start-up Fund Manager Hunts for ‘Joy’ During Pandemic

What brings you joy can be a powerful insight into what you spend your money on. This is the concept that underpins Infusive Asset Management’s investment strategy, which is being used to navigate recent market volatility.

The investment approach, called Consumer Alpha, includes both passive and active investment strategies, and is based on consumption patterns, human behavior, and emotional responses to products and services. At the very core of the philosophy, it invests in products that elicit joy, says Andrea Ruggeri, CEO of Infusive Asset Management.

“The idea is that human beings, globally, respond to immutable and irresistible impulses when they go out and spend their money,” he says. “These impulses are what guides people towards pleasure, joy, happiness, and satisfaction that we can get from the products and services we purchase, and this translates over time into the superior financial performance of those companies that meet such needs.”

For the portfolio construction process, Infusive takes in traditional market data from Bloomberg and research from FactSet, and weaves in analytics and search data from San Francisco-based start-up Sentieo, which uses artificial intelligence to create a finance-specific document search engine and fuses traditional datasets with alternative data.

The asset manager, which was founded in 2013, is kicking the tires on incorporating other alt data providers, such as Neudata and 7Park Data, but Ruggeri says that the firm is being selective with who they work with, as “value-for-money” is crucial for a start-up and some providers offer “overweight data packages.”

“It’s rare to see companies that provide digital data that can do very customized stuff, and there is potentially more value right now on spending money on customized providers to run our own surveys and our own analysis, as opposed to buying big packages in bulk from providers that are offering you something amazing, but maybe it goes beyond what we really need,” Ruggeri says.

For Infusive’s active investment processes, its team of portfolio managers and analysts look to identify long-term strategies by cobbling together information from market-research provider Euromonitor, Google analytics, face-to-face discussions with companies, and consumer surveys, using third parties such SurveyMonkey. The asset manager employs 15 people divided between two offices—one in New York, where its investment team is based, and another in London.

The Book of Joy

At its core, the Consumer Alpha strategy looks at human drivers tied to convenience, indulgence, entertainment, status, beauty, health and performance.

Under Covid-19 conditions, the fund manager has seen an “acceleration” in the use of products that are fitted to the investment criteria. Take, for example, the increase in online activity. As citizens are required to stay home, streaming services, social media platforms, and digital retailers are seeing spikes in demand.

Under normal circumstances, these products and services are typically expected to grow year on year, but over the last few months, there has been a significant jump in demand, Ruggeri says. Netflix, for example, saw 16 million new subscribers register on its platform between January 1 and April 22. A notable trend is that older generations, or non-digital natives, are now turning to online services more than ever, says Jacques Jenny, portfolio manager at Infusive Asset Management.

“It could be as simple as your parents using Netflix for the first time, and them having their eyes open to that unprecedented kind of catalog of on-demand content, the convenience of being able to watch [new] things, both what they want and when they want,” Jenny adds.

As Infusive Asset Management’s portfolios have a low turnaround, it is light on its use of technology but leverages managed-IT-services provider Eze Castle for its core operational management needs. The primary work is driven by its underlying Consumer Alpha strategy which is managed by two portfolio managers—Jenny and Alex Connor—who are also supported by a team of four research analysts.

The firm’s investment aim is not only to create a portfolio that reflects “the world’s shopping basket” across all income levels, but to be able to predict what it will look like in the future.

“What we’re trying to achieve is what that shopping cart looks like five to 10 years from now, which factors in some of those secular shifts that we see—be it moving from brick-and-mortar retails to more digital retail, moving from traditional entertainment consumption to more digital streaming of entertainment content—and so that’s how we think about the portfolio construction process,” Jenny says.

Infusive was originally set up as a research house by Luca Padulli and has been using its investment strategy privately for over 30 years. In 2013, Padulli decided to formalize the investment approach into a public strategy and launch as an asset manager. The firm currently runs a UK-regulated Ucits fund and received approval from the US Securities and Exchange Commission (SEC) for its equities-based ETF, listed as JOYY, in September 2019.