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How a winning multi-manager picks funds for your portfolio

28 February 2018 Absa

One of the most effective ways to gain access to the best investment minds is through a multi manager investment offering that provides investors with a complete solution via a single investment portfolio.

Jonel Matthee-Ferreira, Head of Absa Multi Management, said the company advocated a “sensible investment strategy and try to achieve absolute returns for our clients with minimal risk”. “Our strategy over the past five years has been to try minimise volatility in portfolio and only take risks where you are being rewarded.”

Awards, like the Raging Bull Award in the ASISA South African Interest Bearing Variable Term Category which the Absa Multi-Management team won this year for the third time in four years, show that this strategy is bearing fruit. The Absa Multi-Managed Bond Fund had an annualised return of 7,77% over a five-year period ending 2017.

One of Absa’s advantages is that they have had the same managers since the inception of the fund nine years ago. “We have a long term focus on only taking risks where we are rewarded,” said Absa Multi-Managed Investment fund manager Sheetal Rama, who works alongside fund manager Neville James.

James said the vast majority of the industry tracked the all-fund index with a narrow duration band, which was not relevant to an investor. “In the past few years this has gone up from 5 to 7, which has made the all bond index a lot more sensitive to changes in interest rates.

Absa Multi Management manages a series of collective investment schemes and institutional portfolios, as well as a range of target return and lifestage investment portfolios. “The Multi Managed bond fund is a building block in our solution. An investor gets a one-stop solution from us. We select managers for our clients, and give the solution. We build a complete solution and take responsibility away from the investor.”

Two themes that filter the team’s processes are managing risk and diversifying. “A mistake that clients and investors make is that they use past performance as a measure of future success, which is irrelevant – they should rather construct their portfolio with risk management in mind. A multi-managed bond fund is a nice example of how that risk management process translates into superior results in time. It is a simple philosophy,” James said.

“It is important for us to win risk adjusted performance rewards because it shows consistency – since our philosophy is risk management, risk adjusted awards shows our strategy is working.”

Quick Polls

QUESTION

Financial behaviour experts suggest that today’s risk modelling methodologies ignore your client’s emotional ability / behavioural capacity. What are your thoughts on spicing up risk profiling tools to make allowance for your client’s financial behaviours

ANSWER

[a] Bring it on; my client’s make too many irrational financial decisions
[b] Existing risk profiling tools are adequate
[c] Risk profiling tools should be based on the model / rational client
[d] The perfect risk profiling tool is science fiction
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