By Craig Phillips
MODERN Australian fund managers are significantly more risk averse and are likely to follow the consensus view with regard to investment strategy compared to their pre-1987 counterparts, according tovan Eyk Research.
“The risk appetite of top level management has declined and we feel that has now filtered down into the investment process,” van Eyk Research analyst Suzanne Tavill says.
According to Tavill, specialisation of the investment process following the disempowerment of the fund manager role post-1987 has reduced managers’ ability to stand out from the pack.
In this era of specialisation, everybody is feeding off the same input, Tavill says.
“The brokers on the sell side are not providing any real input or the value add they were in the ’80s and speaking to company management, regulatory issues have ended any useful information that may come from that source,” she says.
This means stock analysts are having to speak to buyers/sellers of a given company’s competitor in a bid to gather more information — but given their peers are doing likewise, it is increasingly difficult for stock analysts to develop a view different to that of the broader industry, Tavill says.
“How does a manager achieve above average performance if ultimately the input and the key source of alpha generation is becoming very consensus orientated?” Tavill says.
