Six fund managers will brave an expert panel and an audience of advisers in Sydney on December 5 to pitch their best investment ideas for 2017 and beyond.
The first ever investment Idea Factory has been designed by the InvestSense director Jonathan Ramsay as a forum where fund managers get to expose ideas that will help advisers “re-engage and reconnect your clients with their own wealth”.
Ramsay says advisers have been telling the research firm that “there are too many investment products, but not the right ones”.
“Where are the new investment ideas that you would want to put in front of your clients, with full confidence in the assurances that you’re making?” Ramsay says.
“We’re challenging fund managers to bring them right to your doorstep.”
There’s no cost for advisers to attend the Idea Factory, which Ramsay describes as being like TED Talks, but for investment. On the night, Magellan, Allan Gray, Monash, Triple 3, Macquarie, and Dalton Street Capital will detail their best insights and advisers will have a chance to critique the presentations, Shark Tank-style, as well as picking up tips on the best way to pitch those ideas to clients. (See box, below, for managers’ details.)
VOTE IN PROFESSIONAL PLANNER’S ONLINE POLL: Do fund managers have a legitimate role to play in helping advisers explain investment concepts and strategies?
Ramsay says fund managers understand the importance of getting a message across quickly and in a way that is memorable, and need advisers’ help to do that. Ramsay says when a message is conveyed the right way, investors and clients are less likely to fall victim to past performance as the main driver of behaviour.
“This is not about active versus passive but about value for money, communicating well and delivering on our collective promises,” he says.
“We, collectively, are at the centre of people’s lives. Our industry is uniquely placed to help people realise their retirement dreams, give them financial security and peace of mind. We are a notoriously creative industry (particularly in Australia) – surely we can do better, and we’re up for the challenge.”
New themes and structures
Ramsay says the Idea Factory pitches could be based on investment themes or new product structures.
“The main criteria is that it must represent an outstanding opportunity that not only promises alpha but is likely to inspire your clients to engage with the investment management industry,” he says.
“This kind of financial innovation should be a two-way conversation. We are not building iPhones, but tailoring investment outcomes for your clients with their money. Therefore it doesn’t have to happen behind closed doors. There will be a panel of tough judges coupled with audience participation. InvestSense is funding the evening, but we will let the managers buy you a drink at the bar afterwards.”
In a video interview with JD de Lange, the chief operating officer of Allan Gray, Ramsay says the there are two components to the Idea Factory.
“It’s bringing six investment ideas we think will be good for investors over the next few years,” he says.
“But more than that, it’s about how do we communicate those ideas – how do we get investors engaged, not just on the basis of past performance?” Ramsay says.
De Lange says it has been “an interesting journey, to say the least” through the GFC and beyond, particularly for a contrarian investor trying to explain to clients how its process works.
“Like everyone else, we do a lot of education around what we stand for, who we are, how we believe you should invest,” de Lange says.
“That’s the one leg. And then the other is just [being] absolutely brutally honest with your clients – be they advisers or direct consumers, it doesn’t matter. That honesty is what creates the trust and the longevity of the relationship over time and gives them the confidence to stay the course when their patience is really tested.”
Capitulate at the wrong time
De Lange says that when things are not going as investors would like, they often capitulate at exactly the wrong time simply because they don’t understand how a fund manager operates, nor appreciate that a particular strategy might have downs as well as ups. He says managers and advisers need to explain strategies and processes to investors effectively, so they are more likely to stay the course. In Allan Gray’s case, that means explaining the world as viewed through the lens of a contrarian.
He says the manager’s approach boils down to three simple things that are easy to get across to clients: understanding what they’re buying; buying it when no one else is; and being patient.
“If you communicate that, and you communicate it in a transparent and honest way to your clients, they tend to stay,” de Lange says.
Often the explanation is about a philosophy, not a product.
“[You give] them as much information as possible upfront,” he says.
“You try to communicate to them that we’re going to test your patience and explain to them how difficult it is in periods when your performance is very different to that of your peers or the market.”
InvestSense Idea Factory
1. Allan Gray
2. Dalton Street Capital
3. Macquarie Investment Management
4. Magellan Financial Group
5. Monash Investors
6. Triple 3