Passive strategies’ popularity grows: CFS
[[{"fid":"28374","view_mode":"default","fields":{"format":"default"},"type":"media","attributes":{"alt":"Financial trends with CFS","class":"media-element file-default"}}]]
The second largest pension product provider in Australia, is fund manager, Colonial First State (CFS), who ranked in second behind the Commonwealth Government. So, we caught up with CFS to find out, what trends were taking place in financial markets.
Colonial First State (CFS) head of investment sales, Laird Abernethy, said he had seen a massive shift in the market with researchers, dealers and advisers, allocating more assets to both lower costs and passive strategies.
They were also spending their risk and fee budgets on higher conviction strategies, he said.
At that lower cost end, he noticed flows into traditional index products but also into what CFS calls smart beta products or products that aimed to provide an alternative to traditional market capitalisation, weighted index funds.
For CFS that meant their real index funds, which employed a fundamental indexing methodology, Abernethy said.
Their real index funds were some of CFS's best performers, which had produced returns over 30 per cent and 29 per cent year-on-year, according to Money Management's Investment Centre. As noted, when it came to the best performers on a year-on-year basis, CFS' real index funds were ranked 20th, 22nd and 26th.
Money Management Investment Centres top performers' year-on-year
[[{"fid":"28375","view_mode":"default","fields":{"format":"default","field_file_image_alt_text[und][0][value]":"Top performers ","field_file_image_title_text[und][0][value]":"Top performers "},"type":"media","attributes":{"alt":"Top performers ","title":"Top performers ","class":"media-element file-default"}}]]
Alternative type strategies also saw strong flows, with the likes of global macro, managed futures, and equity market neutral strategies increasing in popularity.
"We are also seeing global equities win over Aussie equities, in terms of flows. A lot of this has to do with the deprecating Australian dollar. In terms of what CFS offers in global equity strategies, we've seen a strong increase in interest in sustainability global equity strategies", Abernethy said.
And as for what the future held, he said advisers would continue to search outside traditional investments options, for new and uncorrelated sources of returns.
"From a valuation perspective, resources are looking attractive. But advisers and researchers need to be aware that cheap can also be nasty. So, active management is critical," he said.
Recommended for you
Pendal has told investors it will start winding up its Enhanced Credit fund from December, its third fund closure this year.
Fund managers made a “big shift” into bond-sensitive sectors like utilities in September and away from cyclicals, while risk appetite is at an 11-month low.
Ahead of the RBA’s upcoming monetary policy meeting next week, BlackRock Australasia has reaffirmed the market’s view that rate cuts are likely out of the picture for 2024.
Two investment professionals have underscored to advisers why integrating a broad range of fixed income exposures in client portfolios is critical for optimal returns.
