Susan Gosling, MLC; Andrew Yap, Zenith. Photo: Matt Fatches
Category: Multi-asset – real return
Winner: MLC
Analyst: Andrew Yap
Sector overview:
Against the backdrop of heightened volatility, with regular intervention from global central authorities, the diversified sector has continued to deliver consistent returns. While generally anchored to a Strategic Asset Allocation (SAA), these funds have benefitted from maintaining higher allocations to the Australian and global bond sectors, relative to their unconstrained counterparts (i.e. real return sector). At a time where return expectations across a range of asset classes are supressed, Zenith believes that investors have once again been drawn to those strategies that have a greater emphasis on asset allocation as an avenue through which portfolio outcomes may be enhanced. With advancements also noted in the areas of implementation techniques and risk management practices, the sector remains well positioned to navigate an ever dynamic and complex set of market conditions.
Zenith says …
MLC offers three actively managed inflation-plus strategies. These funds are managed by a dedicated capital markets team under the leadership of Dr Susan Gosling, a highly experienced investment professional and architect of the scenario-based investment process. Representing a “best expression” of the fund’s differentiated process, Zenith believes significant progress on portfolio management systems, risk management capabilities, portfolio execution and implementation techniques strongly position these funds to generate returns consistent with targeted outcomes.
Interview
Susan Gosling
Head of investments
MLC
We have a very distinctive approach to managing real-return portfolios. In particular we have a much deeper understanding of the future risks that we face in the portfolio. That’s of fundamental import for a real-return fund because we’re seeking to get an acceptable outcome for investors, regardless of what the future holds. And if you don’t understand all of the risks that you may potentially face, then clearly you’re not going to be able to do that in a robust manner. It’s important not to use backward-looking measures of risk, which unfortunately our industry tends generally to rely on. Instead, you’ve got to generate that forward-looking insight. We’re finding this a really tough investment environment, because it’s a very stark trade-off between risk and return. With real-return funds, with our inflation-plus portfolios, we have to maintain that downside discipline. When risk is high and there are limited opportunities for diversification, what we have to do then is to move to a defensive position and keep some powder dry. And that’s hard – we’re in a risk-on, risk-off environment. The 12 months to the end of September have been more risk-on, which means we’ve captured some of those returns, but not as much as we would have done. That’s challenging, and it’s in these times that you need to have a really strong discipline, and it’s that deep understanding of risk, of future risk, that allows you to hold that position, because that’s the key to generating the result for investors at the end of the day.
