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