Investment advisory research firms merge

Research houses Delta Research & Advisory and Farrelly’s Investment Services have announced a merger to form a combined entity, operating under the name Delta Portfolios.

Established in 2004, Farrelly’s is a specialist asset allocation research house serving investment advisory firms across Australia and New Zealand, founded by Tim Farrelly, a former executive of Macquarie Group.

The firm offers consulting services and a web-based subscription service with a foundation in client-focused, forward-looking risk and return forecasting framework, as well as creating portfolios designed for investors’ needs.

Meanwhile, Brisbane-based Delta Research is a quantitative investment research firm specialising in delivering investment research and asset consulting services to Australian Financial Services Licensees (AFSLs), financial advisers, superannuation funds, and other sophisticated investors, founded by Michael Furey.

Its offering is primarily focused on the investment committee function, including governance framework, manager selection, asset allocation, approved product lists (APLs), and model portfolio design.

Through this partnership, Furey and Farrelly will be joint leaders of the new Delta Portfolios brand, with both taking up the role of co-chief investment officer and director, utilising their respective skills to steer the firm.

Furey, the firm explained, offers key skills in portfolio design, quantitative analysis, as well as being the developer of fund analytics systems, Delta Factors. Meanwhile, Farrelly brings dynamic asset allocation, benchmark development, and asset allocation committee leadership skills to the joint venture.

To help run the firm, Delta has appointed James McCowan as general manager to be responsible for business operations and strategic growth initiatives, while also strengthening the firm’s managed account and advice process capabilities.

Speaking on the announcement, Furey said both parties’ wealth of experience will help inform their decisions going forward, referencing the current performance of gold as an example.

While gold had risen in popularity in recent times as investors look to hedge against inflation, he said learnings from historical data “tell us something very different”, suggesting that gold likely won’t deliver in the way investors may expect.

“The data does support the idea that gold normally performs well when equities sell off. It is a valid form of insurance. Unfortunately, the data also shows that gold may well be the most expensive insurance you will ever buy. In the 20 years between 1980 and 2000, gold fell in value by 80 per cent in real terms. Over that time cash was a far more effective way to reduce portfolio volatility,” Furey said.

“This is what makes us different. We simply don’t accept any conventional wisdom before we see what the data says – and then we check it again. This scepticism helps our clients avoid a lot of traps.”