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
Perpetual has seen AUM rise 6 per cent in the last quarter but the departure of a longstanding JOHCM fund manager led to outflows of $2.2 billion from his strategy.
In the latest Meet the Manager profile, Money Management speaks with Michael Skinner, founder and managing director at Blackwattle Investment Partners.
Global fixed income fund Bentham Global Opportunities has been added to several major platforms, enabling it to be accessed more easily by financial advisers.
Following yesterday’s news about First Sentier Investors closing four investment teams, a second global asset manager has announced it is closing its only dedicated Australian fund.