FMOTY 2023: Spotlight on Alternatives
Ahead of the 2023 Fund Manager of the Year Awards on 22 June, Money Management spoke to finalists for the Alternatives Fund of the Year.
The finalists in the category are:
- Australian Retirement Trust — Super Savings — Diversified Alternatives
- CC Sage Capital Absolute Return Fund
- Hamilton Lane Global Private Assets Fund (AUD)
Click here to view the full list of finalists.
The three funds nominated for this year’s award cover a range of sectors: infrastructure, absolute return, and private markets.
Superannuation fund Australian Retirement Trust (ART) said it used the Diversified Alternatives option as a way to provide access to the fund’s unlisted programs.
ART’s head of investment strategy, Andrew Fisher, said: “There has been some recent consolidation of unlisted asset investment options in the industry super space. Australian Retirement Trust is proud to be able to continue delivering investment solutions to members working hard to secure a better income in retirement. The alternatives option provides access to ART’s tried-and-tested unlisted programs.
“Not only does this harvest the illiquidity premium — that has been valuable through recent volatility — but the investments in the option provide a greater scope of bottom-up diversification against listed investments while adding value through attractive deals and active management.”
Fisher said the fund intended to expand this offering in the future with the inclusion of mezzanine lending, distressed debt, and special situations within its private alternatives credit exposure.
James Martin, head of international client solutions at Hamilton Lane, said the fund had seen strong outperformance over the public markets with a target of 10–12 per cent net of fees on a rolling five-year basis. Demand for private markets had grown significantly over recent years as more companies opted to stay private for longer, he said.
“In 2022 particularly, we saw strong outperformance over the public markets, which was largely driven by the strength of the underlying assets in which we are invested. Over last year, we saw the average EBITDA of our direct equity holdings increase by ~17 per cent,” Martin said.
“Another major driver of performance has come from the tactical tilts made by the portfolio management team. When valuations were at record highs in 2021, our portfolio team stopped allocating to venture capital/growth equity and instead focussed on the value-orientated ‘buyout’ part of the market.”
Over at Sage Capital, its Absolute Return Fund had returned 7 per cent after fees over the year to 31 May 2023 that the firm said was driven by strong performance in financials and healthcare.
“We run a broad, diversified portfolio of long and short positions with risks controlled across broad sector groupings. As such, performance is always driven by the success rate of the investment process rather than a handful of stock positions,” it said.
“Highlights for the year included strong performance across financials where insurance companies delivered strong premium rate rises while banks were pressured by competitive intensity. Healthcare was solid and some individual performances like Telix Pharmaceuticals added significant value while nimbly trading lithium stocks across a boom-bust inventory cycle also helped.”
Looking ahead, the firm felt the ability of the fund to deliver uncorrelated returns with liquidity was an appealing option in an environment where central bank policy actions were driving higher correlations among traditional asset classes.
“As the recognition of the diversification benefits of alternative asset classes continues, the foundation supporting increased asset allocations becomes stronger. By incorporating these assets into investment portfolios, investors can position themselves to navigate market uncertainties, unlock new sources of returns, and potentially achieve their long-term objectives,” it said.
Winners of the 2023 Fund Manager of the Year Awards will be announced on Thursday, 22 June 2023 at a black-tie gala awards ceremony at The Star in Sydney.
Click here to buy tickets to the awards ceremony.
AUTHOR
Laura Dew
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