Global institutional asset management group WestAM has launched an Australian presence, following its acquisition of HSBC Quant last December.
The boutique fund manager is a division of Germany’s fourth largest bank WestLB, and operates with what managing director Greg Vaughan calls individual centres of investment competence, in eight worldwide destinations.
WestAM (Australia) has $480 million currently under management and focuses on Australian equities for mainly wholesale corporate superannuation clients. It uses a quantitative investment approach that is based on a style neutral, moderate risk investment strategy that Vaughan says has increased in popularity in Australian investing.
“The wholesale Australian equities superannuation allocation has grown from 2 per cent to 10 per cent in the last six years. The US currently has $250 billion invested in this way; we are small in proportion but growing fast,” Vaughan says.
Portfolio construction is a sophisticated business, says Vaughan, and a style neutral strategy is core to the new way of mixing portfolio managers, representing a change in style tides.
“It goes beyond returns, yo-yo managers are distracting to the different divisions in a portfolio,” he says.
The approach moves away from high risk investing, where research has shown greater risk does not lead to greater reward. Vaughan says there is no rationale behind this type of investing.
He says in quantitative investing the core is reactivated and built up from style neutrality, and moderate risk is achieved by spreading your bets.
“Quant investing is the ying and yang of investing,” he says.
