Advisers call for alternative beta strategies
Financial advisers are demanding low-cost, easily accessible beta strategies to better diversify their portfolio needs and reduce correlation to equities due to the risky market environment, according to Capital Funds Management (CFM).
CFM head of Asia Pacific, Steve Shepherd said advisers had signalled increased interest in the pursuit of benefits beyond indexing, and said alternative beta strategies, which aim to be market-neutral in construction, and therefore exhibit little equity beta risk.
“They are strategies which have historically been associated with hedge funds, which aim to produce absolute returns – in other words, performance in all market conditions,” he said.
“Portfolio diversification is improved at the same time, because alternative strategies look to produce a return profile which has little or no correlation to traditional asset classes.”
Shepherd said advisers had shown interest in long-term trends for portfolio management, and that the potential to improve returns and reduce drawdowns by using alternative beta was significant.
“Advisers can have the impression that smart and alternative beta strategies are simply two ways of describing the same thing, which isn’t true,” Shepherd told Money Management in August.
“What advisers need to understand is that if we have done our job properly, then our alternative beta strategies are truly de-correlated to the markets.
“If you are looking for something that is diversified, has little equity risk and absolute returns, then alternative beta is the better fit.”
Recommended for you
The Federal Court has issued its verdict in ASIC's first greenwashing case against Vanguard Investments Australia regarding the use of ESG exclusionary screens.
Investment managers who plan to implement artificial intelligence in the next five years expect to see increased productivity, but views are mixed on whether it will boost revenue and assets under management.
A former corporate adviser has been sentenced in the Supreme Court of Western Australia for insider trading to realise a profit of more than $57,000.
Private markets expertise is sought-after for investment operations hires as allocations to alternative assets rise, according to a recruitment firm, but there is a gap between demand and supply.