They say practice makes perfect and, as journalist Hannah Kantor finds, as one of the earliest providers of SMAs in Australia, Antares has no shortage of that.
Antares picked up on the potential of SMAs way back in 2010.
Head of equity trading, Bruce Rose, says that as soon as the firm saw the technology that enabled SMAs, they knew that they needed to be offering them.
“Once we saw that [potential], we thought we’ve got to get in now to understand it, to find out the kinks and work out how to give our clients the best possible outcome,” he says.
“That’s why we now have institutional grade SMAs that we provide to retail investors.”
And that’s a key benefit of SMAs – as Rose says, they allow Antares “to treat a $10,000 account the same as a $1 billion account”.
With an SMA investors actually hold stocks themselves.
“From an end-user perspective, clients like to know what they own, they like the transparency. Clients want to see what they own and that’s sometimes not there in a trust structure,” co-head of Antares Equities Nick Pashias says.
Lower fees also make them appealing, as SMAs don’t have the steep brokerage and administration costs of unit trusts. Add in the tax advantages, and it’s clear why everyone is talking about SMAs.
As regulations change for advisers, the fact that they are licenced to recommend SMAs as they are registered managed investment schemes holds appeal to advisers too.
The Antares investment team itself has a wealth of investment experience to draw on when providing these solutions, too.
Its nine members have 19 years’ industry experience on average, 14 of which are with Antares.
“We’ve got a lot of experienced people who’ve worked together for a long time and are convinced that the best results can only be achieved through a disciplined and sceptical investment approach. We are stock pickers and we use fundamental bottom up research that involves looking at companies and industries, and modelling cash flows to come up with our valuations. Then we buy and sell using the results of our research process and based on the objectives of the product involved,” Pashias says.
“We have the experience, but lots of people have that. We have the experience in getting it right. And our resolve and commitment [to that] has only gotten stronger with time.”
A COMPREHENSIVE OFFERING
With four SMA model portfolios covering a variety of investment styles and types, Antares covers a range of investors’ needs.
“We have a number of different model portfolios that sit well with different investor appetites and lifecycles,” Pashias says.
Should a client want a growth focus, for example, advisers could point them toward the Ex-20 Australian Equities Model Portfolio. For those after income, the Dividend Builder or Listed Property Model Portfolios could serve them well.
The Core Opportunities Model Portfolio does as its name suggests; provides investors with a portfolio of core stocks. The portfolio contains only Antares’ highest conviction investment ideas.
“I thought about how I’d want my money managed,” says Pashias, who has managed the strategy at Antares for 12 years.
“There’s broad appeal for investors; it’s not narrow or a high dividend or yield type product. It’s broader than that,” he says.
It’s suitable both as a core holding itself or to marry with other investments depending where investors are at in their lives.
It could complement both income and growth portfolios, for example.
Antares’ philosophy that the market is inefficient and can be exploited is evident in the SMA Model Portfolio’s success.
It invests in both core and trading components in an 80:20 ratio to ensure that investors have exposure to both longer-term core holdings and more opportunistic situations.
“I want exposure to both of these,” Pashias says.
Suited to income-oriented investors, the Dividend Builder Model Portfolio aims to deliver regular income and achieve moderate capital growth by investing in a diversified portfolio of Australian companies.
And the Dividend Builder Model Portfolio which has returned 10.2%* net per annum since inception^ shows the Antares team has delivered. The firm was one of the first to offer a yield-focused product like this in a market now flooded with them, so its experience is once again a key advantage for investors looking to that market.
Antares investment manager, Brett McNeill, also points out that the strategy is grounded in putting fundamental assets first much more than many other dividend income products.
“It’s not a Johnny come lately yield product,” he says.
The simplicity of the strategy is suited to SMAs specifically too.
“It’s perfect … because it lends itself to a very efficient administration procedure like the SMA handles and transparency,” McNeill says.
“It’s a very simple vanilla product structure. We don’t short stocks, we don’t invest in any illiquid securities, and it’s all 100% liquid securities. So investors can look at their holdings with our direct SMA structure and feel comfortable with what they see.”
Ex-20 Australian Equities
According to Antares investment manager John Guadagnuolo, the main appeal of Antares’ newest SMA Model Portfolio, the Ex-20 Australian Equities, lies in where it invests.
An actively managed, highly concentrated portfolio, it looks to Australian shares outside the 20 largest companies by market capitalisation for significant long-term capital growth.
Guadagnuolo says that the midcap space is an ideal hunting ground for such growth.
“These companies are typically mature enough to fund themselves to grow, but young enough to have ample growth opportunities in front of them.”
“That allows them to display superior earnings growth to other sub-sectors of the market, which we can capitalise on.”
“In May 2018, we celebrated the three-year track record, with net returns of 12.8% per annum delivered over this period, it’s clear that the investment team is succeeding in taking advantage of this.”
Labelled a “satellite strategy” rather than a core holding by Guadagnuolo, he suggests that it would suit portfolios looking for some capital growth.
The specialist area of property can be tough for retail investors to break into. With the Listed Property Model Portfolio that invests actively in listed Australian property and property-related securities, McNeill believes that this can make property investment easier.
“The key attribute of the Model Portfolio is it gives ordinary investors, retail investors, the opportunity to invest (through AREITs or listed Australian companies operating in the property industry) in some very high quality commercial properties that they wouldn’t otherwise be able to access.”
McNeill points to Chadstone shopping centre, Australia Square and Grosvenor Place as examples.
The cyclical nature of property highlights the need for active management in this area not just to open investments up to retail clients but also to make quality investments.
“With our SMA Model Portfolio, investors can get this without the price tag of a unit trust.”
Then, of course, there’s the traditional benefit of specialist asset classes like listed property to investors: diversification.
McNeill says that it can offer balance to portfolios that have bonds and equities, plus a nice blend of income focus to a broader equity portfolio.
“Listed property stocks stack up very well, based on quality, liquidity and pricing. It’s got a good place in a diversified portfolio.”
*As at 31 May 2018. Past performance is not a reliable indicator of future performance. Returns are not guaranteed and actual returns may vary for any target returns described in this document.
^ Inception date is 22 November 2010.