Melbourne-based financial advisory and investment consulting firm DFS Advisory has launched its proprietary risk-based multi-manager portfolios into the broader IFA market, after recently being selected to manage five portfolios for independently-owned dealer group MyPlanner Australia.
DFS Portfolio Solutions, a subsidiary of independently-owned licensee DFS Advisory Services, was established in 2009 after the Global Financial Crisis exposed that the portfolio risk in the majority of superannuation and investment funds substantially exceeded the risk tolerance of investors.
DFS currently manages over $250 million.
According to Stephen Romic, principal of DFS Advisory, investment portfolios should do what they say they do and perform how they’re meant to.
“We’re bringing our capabilities to market because many investors and advisers believe that their portfolios are being actively-managed in accordance with their risk tolerance but that’s not always true,” he said.
“Conventional portfolio management keeps the strategic asset allocation more or less constant and permits portfolio risk to vary irrespective of changing market conditions. In contrast, we change the asset allocation when we observe meaningful changes in market conditions to better stabilise portfolio risk. Better risk management improves portfolio outcomes and this is central to our investment process.”
“The risk in a traditionally managed portfolio can fluctuate by a considerable amount. This occurred during the GFC when many supposedly balanced options lost some 25-35 per cent. To help investors and advisers avoid such nasty surprises, we established DFS Portfolio Solutions and built an investment process where we explicitly control portfolio risk.”
The group currently offers risk profile models under two versions: Alpha and Indexed. This is designed to suit different preferences and fee budgets. As their names suggest, one is populated by active fund managers and the other by passive managers.
DFS Portfolio Solutions utilises a managed discretionary account structure in partnership with ASX-listed MDA specialist, managedaccounts.com.au. Underlying models invest in a combination of unlisted managed funds and Exchange Traded Funds, which have passed DFS’ comprehensive research process. The MDA structure enables DFS to efficiently implement the trades required to stabilise portfolio risk levels when changes in market conditions are detected.
“There are many advisers who have a strong strategic advice focus and don’t want responsibility for fund manager selection, asset allocation, portfolio construction or ongoing portfolio management,” Romic said.
“Our risk-based approach suits investors that prefer to increase wealth in positive increments rather than accepting significant portfolio fluctuations associated with traditional portfolio management.”
“By partnering with a specialist investment consultant on a B2B basis they can spend more time with clients and deliver an efficient and effective portfolio solution.”
DFS’ dynamic risk-based asset allocation process, which can result in a portfolio deviating significantly from the benchmark, has led to some meaningful outperformance since inception in January 2012.
For example, the DFS Moderately Conservative Portfolio – Alpha and Indexed models have delivered 12.8 per cent and 13.2 per cent respectively since inception, both outperforming the Morningstar Multi-sector Moderate Index by over 3 per cent per annum.
Similarly, the DFS Balanced Portfolio – Alpha and Indexed, returned 15.3 per cent and 15.8 per annum respectively since inception, outperforming the Morningstar Multi-sector Balanced Index by 1.8 per cent and 2.3 per cent respectively.
Source: DFS Advisory
