Best Fund Man­ager

The abil­ity to pick where mar­kets are head­ing, with­out be­ing dis­tracted by all the noise, is the key to suc­cess

Money Magazine Australia - - CONTENTS - SU­SAN HELY

An­drew Sned­don likes to com­pare good in­vest­ing to an A Grade foot­baller run­ning for the ball. Just as the foot­baller knows to run to where the ball is go­ing, he says a skil­ful in­vest­ment man­ager is able to pick where in­vest­ment mar­kets are head­ing.

Rather than fo­cus­ing on past per­for­mance, an ac­com­plished in­vest­ment man­ager scours the globe and analy­ses emerg­ing risks, ad­just­ing the port­fo­lio so it has the most ap­pro­pri­ate fac­tors, styles and man­agers across as­set classes. “It sounds easy to do but be­haviourally it is ex­tremely dif­fi­cult,” says Sned­don, a se­nior port­fo­lio man­ager, multi-as­set funds, at Rus­sell In­vest­ments.

This year Rus­sell In­vest­ments has won Best Fund Man­ager as well as the best multi-sec­tor fund cat­e­gory for two of its eight multi-sec­tor funds: the Con­ser­va­tive A fund, which has 62% in cash and fixed in­come and 38% in growth as­sets, and the Diver­si­fied 50 A, which in­vests 50:50 in de­fen­sive and growth as­sets.

As­set al­lo­ca­tion is the key to suc­cess, with re­search show­ing it ac­counts for 90% of re­turns but it is tricky to be dis­ci­plined and do it your­self, says Sned­don. It is easy to be swayed by the heady emo­tion of a bull mar­ket that can pull in­vestors away from their orig­i­nal goals.

Just look at the buy­ing frenzy in tech­nol­ogy stocks, which helped push up the US share­mar­ket to a string of record gains. Val­u­a­tions soared and in­vestors kept buy­ing. But in Oc­to­ber the mu­sic stopped and the stocks were sold off.

Sned­don be­lieves the best way to achieve good per­for­mance is to re­spond dy­nam­i­cally to the chang­ing na­ture of mar­kets, es­pe­cially when iden­ti­fy­ing op­por­tu­ni­ties. He says re­search is the key, par­tic­u­larly when you are se­lect­ing the best-of­breed in­vest­ment man­agers.

The multi-sec­tor funds blend a mix of as­set classes such as Aus­tralian and in­ter­na­tional shares, prop­erty, fixed in­come, cash, in­fra­struc­ture, com­modi­ties and al­ter­na­tives. Within each as­set class there are a range of in­vest­ment man­agers, in­clud­ing Rus­sell’s own teams.

Look­ing to 2019, Sned­don says there are three im­por­tant strate­gies for the cur­rent in­vest­ment cli­mate: ac­tive man­age­ment in each as­set class; di­ver­si­fi­ca­tion within each as­set class across ge­og­ra­phy and sec­tors; and cur­rency.

He views US eq­ui­ties as be­ing ex­pen­sive and in the “late eco­nomic cy­cle” with the most chal­leng­ing of in­vest­ment en­vi­ron­ments char­ac­terised by high volatil­ity and low re­turns. He is more pos­i­tive on Europe, which have un­der­per­formed even though cor­po­rate earn­ings re­main ro­bust. “The eco­nomic cy­cle is ear­lier in Europe and Asia. There are higher re­turns to be had in those mar­kets.”

Sned­don pre­dicts eq­ui­ties typ­i­cally will de­liver lower ab­so­lute re­turns, in sin­gle fig­ures, and there will be more volatil­ity.

He says cur­rency is crit­i­cal to an Aus­tralian in­vestor. The di­rec­tion of the US dol­lar can im­pact both debt and share­mar­kets, par­tic­u­larly in emerg­ing economies. The soft­en­ing $A means that manag­ing the cur­rency is im­por­tant when buy­ing US, Ja­panese and Euro­pean shares.

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