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Australian equity managers reassess their product suites

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Australian Equity managers are starting to realise that their traditional benchmark aware, long only strategies aren’t likely to be enough to maintain a competitive advantage and sustain their businesses in coming years.

Some clear trends in product development have begun to emerge, as managers reassess their product suites in relation to the changing needs of investors and fund executives.

Absolute returns and downside protection have been a focus for investors since the GFC, particularly those in retirement or transition to retirement where sequencing risk is a major concern.  Managers recognise that they need to deliver growth to address longevity risk but also provide more consistent returns and some capital protection.

Income orientated equity funds were a significant development, but now an increasing number of traditionally benchmark aware long only shops are incubating long/short absolute return strategies including Market Neutral and Variable Beta, bringing in derivative specialists to run overlays or partnering with an external capital protection provider to offer packaged up solutions.

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The absolute return products have appeal in that they typically have much lower volatility than the market, can avoid large drawdowns in down markets and aim to deliver a return similar to the equity market or a long only fund over the cycle.  While not capturing all the upside in a bull market, the lower drawdowns have been seen to lead to superior returns due to the effect of compounding.

Other major trends emerging among local managers are the development of ‘smart beta’ strategies which are typically factor-based approaches and offer an alternative to inefficient cap-weighted indices.  These have appeal with cost being more of a focus in a MySuper environment and with portfolio construction preferences moving toward a barbell approach, utilising smart beta or cap weighted index combined with punchier high alpha strategies for a more efficient allocation of capital.


www.colonialfirststate.com.au/specialist


Sonia BluzmanisSonia Bluzmanis
Investment Manager
Colonial First State

Sonia joined the Colonial First State, FirstChoice Investments team in 2006.  In her role as Investment Manager, Sonia is responsible for undertaking research of investment managers and portfolio construction for the FirstChoice multi-manager product range, which accounts for circa $30Bil of AUM on the FirstChoice platform.  Sonia is the Australian Equity sector specialist and manages the large cap, small cap and lower volatility strategies.  Before taking the lead on Australian Equities she was portfolio manager of the FirstChoice Global Listed Infrastructure and Emerging Market Equity portfolios for over 5 years.  In addition, Sonia is heavily involved in implementation strategies, and manages the transition manager relationships and panel.

Prior to joining the FirstChoice team Sonia held roles in Colonial First State Global Asset management, the Commonwealth Bank and HSBC Bank of Australia.

Sonia has a Bachelor of Commerce/Bachelor of Arts (Asian Studies) from Curtin University of Technology, Perth, WA, majoring in Finance and Chinese (Mandarin).  She has also received the CIMA designation from the Investment Management Consultants Association Australia.

 

Australian equity managers reassess their product suites
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