News

Genesys overhauls underperforming portfolio

After six years of underperformance and desertion by its advisers, Genesys Wealth Advisers has overhauled its model portfolio.

The dealer group acknowledged its previous model portfolio had “produced disappointing performance and volatile outcomes for clients” and “exposure to problematic funds”.

The group said it had “become apparent that many advisers have discontinued using the model”. Genesys viewed this as concerning – with advisers taken away from their “core business activity” of providing advice.

The previous model portfolio had underperformed its benchmark for six years to May 2010. In overhauling the portfolio the Genesys research team, now amalgamated with AXA’s research team and under the guidance of AXA’s Robert Thomas, has made a significant number of manager, as well as thematic, changes.

The group has dropped funds classified as ‘alternatives’ from the portfolio altogether, with Genesys noting “many advisers have stopped using alternatives as (broadly speaking) many of these funds did not live up to their promises when needed most”.

“Genesys Research is of the opinion that for a model portfolio designed for a broad audience it is preferable that funds/sectors that may discourage full usage of the model be avoided,” the report stated.

BlackRock and Mercer have both lost their mandates within the Genesys model portfolio, while the ETFS Physical Gold fund was also removed. Alternatives will remain on the Genesys approved product list for those who wish to use them.

Other changes include a repositioning of the portfolio to account for what Genesys expects will be a “continued period of market turbulence and uncertainty”, as well as a reduction in the “concentration of risk to the investment themes of China and credit risk”.

The Genesys research team said it had also undertaken deeper research to identify managers with complementary investment themes, while making changes to defensive asset class allocations to “reduce risk and increase the reliability of outcomes”.

The group has also committed to “transparent monthly reporting”, while adding the changes, implemented on August 1, have led to a reduction in fees for growth and high growth clients of 20 and 25 per cent respectively.

Fund managers losing spots in the Genesys model include Pengana, Merlon, CFS Acadian and Antares Lodestar on the Australian equities front, Hunter Hall, CFS and Walter Scott for international funds, Magellan on property and EQT Pimco on fixed interest.

Some of the beneficiaries of the changes included Fidelity’s Australian equities fund and Aberdeen, Megallan and Zurich Investments for international equities, while a number of retained managers such as Schroders, Vanguard, Perpetual, Platinum, Perennial, Ausbil and Aviva Investors had their weightings adjusted.

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  • As the reserach team that designed the underperforming model have now moved to Retireinvest, you would have to be worried if you were one of their advisers!

    William | 18 August 2010 at 12:11

  • Yet another example of investment portfolios for the benefit of the adviser and not the client.

    Not surprised | 18 August 2010 at 12:16

  • You sure would have to worry if you are a Fortnum or RI Advice adviser. The ex-genesys team seem to have a strong bias towards active boutique funds with a limited scope or view of ETF's and index fund managers. It's a bit too constrained for my liking.

    bob | 18 August 2010 at 15:40

  • Not surprised...i can't see how these portfolios benefited the advisers. The article suggests advisers stopped using the model portfolios. To me, that means they care about their client's money.

    GB | 18 August 2010 at 15:41

  • Yes William- The research team went to RI Advice and what AXA is getting rid now, sounds exactly like the Retireinvest model portfolios now.

    Jason M | 18 August 2010 at 15:59

  • Do you really think desertion from Genesys over the past 6 years is because of portfolio performance, who are they trying to kid here? The research team must have been doing something right, certainley those who left Genesys for Fortnum must rate them, voting with their feet perhaps! From what Ive seen over the past 12 months at RI, the performance of the models has been great- outperformance - yes. I and my firm are very comfortable to support and use them. By the way, a little birdy told me that maybe the research being replaced is the research team that replaced the guys that left to join RI and not the RI guys as the article seems to suggest. All the facts not accuratley reported here it may seem.

    Grant | 18 August 2010 at 18:18

  • From reading the comments, it appears the current Genesys Investment Team have all had a say. As Julia would say "can we please move foward?". Also not sure way the comments relate to Fortnum and RI when this is an article focused on Genesys. Track record before the old team left was above market. End of story. Considering the models were off loaded to a couple of contractors who spent all their time putting out their own fires, I'm surprised the performance is where it is now. Advisers had confidence in the old team and showed their support through using the models. I am disappointed as an adviser to read the recent review and see 14 funds had been removed from the models, particularly the alternatives sector. Sure, this may be justified as a tactical decision, but to me, it heads down the path of complete incompetence. Let's look at the new models for a "conservative" portfolio - an allocation to high growth and growth managers in the aussie shares and emerging markets in international. That decision is up there with the equity offer. And then there is the removal of a world class international manager because they are forecasting currency – I was unaware the investment team liked to gamble. Or maybe the NAB currency boys are already taking over. Either way, I’m glad the Genesys investment team aren’t presenting to clients, so at least I can sleep at night. Now I understand the Fortnum and RI comments....do you have their number?

    BS | 18 August 2010 at 19:13

  • So how many advisers have left Genesys recently? I lost count at 40

    Concerned | 18 August 2010 at 19:36

  • More negativity inside Genesys. I can hear Ray Miles laughing all the way to the bank

    NB | 18 August 2010 at 21:28

  • "produced disappointing performance and volatile outcomes for clients” - I think this refers to genesys as a group.

    Andrew | 18 August 2010 at 21:33

  • Seems like some of the above commenters failed to read model performance results up to and including the date the previous team left. What was the performance then? Has Underperformance taken 2 years to ID???? Does the corporate machine really have to resort to this sort of press? Models are not for all advisers nor for all clients. Seems a shame some people have to make comments about where other personnell have gone in response to their own problem....

    B | 18 August 2010 at 22:34

  • The day of the model portfolio is long gone. Advisers are responsible for their own product research and should be responsible for their own portfolio construction given that the investment portfolio should obviously reflect the advice. It is good to hear that advisers are taking back control provided they are not making the same mistakes that their dealergroups are. Model portfolios are not the answer. They are expensive, poorly constructed, they are not actively managed or monitored and are unsuitable for all concerned. I pity the poor client who is invested in one of these. They are likely to incur large costs now to get the portfolio back to where it should be.

    Modelthis | 19 August 2010 at 9:43

  • The model portfolios were outperforming the day the previous team left to RI(full stop). The team had a 10 year tracking record of outperformance. Ask Genesys to provide you with a copy of the report presented on their annual conference before the team left. Every adviser was present that day. The team left for a very good reason. That is, pressure from AXA to approve their sub par funds. It has been on the press may times If the two contractors appointed by Kirk managed to kill that record is Genesys problem and cannot be blamed on the previous team. The AXA team is trying to fix the dog's breakfast that the contractors left by changing the models once again and aligning them with the AXA ones. End of story and good luck to AXA with it or NAB in due course. Yes, you can expect that they will change them again!

    love kirk | 19 August 2010 at 11:21

  • I agree with some of the comments here about the limited use of "model portfolios". But they are far from dead! Just walk into any major bank bank and see what you are provided with.... and why do they do it? because the vast majority of advisers they have are not able to make the investment decisions themselves! Given the choice between corporate controlled models and portfolios constructed by advisers (with the basis most likely being a combination of the best BDM sales pitches!) Well we cant blame the dealer groups for going the model path now can we?

    Brent | 19 August 2010 at 11:27

  • Previous investment team provided investment returns information at the conference before they left and this was showing outperformance of the model portfolios. Genesys management are expert at blaming everyone else but themselves for any issues they have. With all the firms that have left, I would be willing to bet that not one of those firms have been asked why they have left by Genesys management. Genesys management need to start managing on the basis that the buck stops with them rather than telling everyone it is someone else fault. You reap what you sew!

    Mark | 19 August 2010 at 14:11

  • There is no such thing as performance of a model portfolio. They take no account of real world concepts like transaction costs, timing of cashflows, allocation shifts etc. If research teams like the ex-Genesys crew were serious about their "portfolios" they should unitise what they are doing and compare themselves with multi-managers and fund-of-funds.

    Horse | 19 August 2010 at 16:23

  • I tend to agree with 'Horse'. As an adviser we can never rely on the returns stated by our dealer group model portfolios as none of our clients ever get the returns they tell us they have generated. Show me one client who did and I will eat my words. Is there a survey that compares model portfolio performance? If you know of one please send to me. PS - Why the hullaballo about the ex-Genesys crew???

    JJ | 19 August 2010 at 20:03

  • Let me get this right. THE greatest financial crisis since the Great Depression. Storm, Basis, Agribusiness, Westpoint, Chartwell, Chimera, Trio/ Astarra, Opes Prime...should I go on? Global Bond Funds coming off 10% in a month, dividends in property and Fixed Interest suspended. Funds closed to redemptions. The $A going from high 90s to 60 and back. Investors losing faith. Fund Managers having heart troubles. The dealer group itself sold off and passed on like a slave across Eurasia to the highest bidder, and an_underperforming_portfolio is a story??? Huh So how much money did Genesys advisers lose in this? How many clients lost their homes out of this? What % of the portfolios were allocated to Centro, Allco, B&B? And people want to dump on the research team? If I recall there was a dealer group that had 15% of its conservatice clients allocation in Basis capital. 15%. How much did Genesys model portfolio underperform again? How man of their funds blew up? None wasn't it? Hmm IF a question is asked (and the only people with a right or need to ask that are Genesys and RI advisers fwiw) can they also ask- how did they go to Feb 2009? And wow would their portfolios have stood up if armageddon did come like many thought it would? Did having these underperforming funds in their Model enable them to pursue alpha or satellite strategies at the same time that did deliver in the upside as well? Ths story here for me is why are these jokers being singled out? I smell a rat.

    BDM | 23 August 2010 at 11:32

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