Category Investments

Award winning portfolio managers combine skill and expertise to a fund that outperforms the index

01 August 2018 Fairtree Capital

Last week was Thundermark time, when the country’s investment manager’s donned their pinstripes and presented their wares to Financial Advisor’s around the country, keen to stay up to date with the latest products and best investment options for their clients.

With a year’s track record, the flagship Fairtree Balanced Prescient Fund has flourished under the curatorship of some of the brightest minds in the industry – Bradley Anthony, Stephen Brown, Paul Crawford, Jacobus Lacock and Rademeyer Vermaak.

“We have a few Raging Bull winners looking after respective allocations in a very popular fund category,” said Bradley Anthony, Chief Investment Officer at Fairtree Asset Management.

“Not everyone can lay claim to accessing an investment that blends and combines award winning skills,” he added.

This multi-asset class fund is designed to benefit from exposure to Fairtree’s proven equity and fixed income success plus the innovative smart beta capability, for both local and global exposure. The Fund follows a disciplined strategic asset allocation philosophy and process and is Regulation 28 compliant, which means that the solution can be used in the wealth creation phase of a medium to long-term retirement plan.

Asset allocation is a cornerstone of the fund and is the most important driver and input of the fund’s risk or return profile. The multiple approaches to asset allocation reduce tail risk and improve the risk-adjusted returns of the fund. Tactical asset allocation (TAA) decisions are made within the framework of the fundamental, top-down macro view. The key attribute of TAA is identifying when the market is overvalued. Asset class diversification is multi-dimensional and is monitored across assets, factors and sectors.

Equity exposure is the most important driver of capital growth and capital preservation over the long-term. The role of fixed income is to reduce overall portfolio volatility, enhance the fund’s yield and act as a hedge during periods of economic recession. Risk is multi-dimensional and is also measured as a composite of volatility, drawdown risk and not achieving the return objective.

“The graph shows that as a team (and fund) we manage the solution at similar levels of risk or volatility as the indices or benchmark, but we do so with higher returns. So, effectively our risk-return profile is better than simply buying into the index.”

Graph footnote: The above graph (blue line) illustrates various blends or combinations of the ALBI and Top 40 (traditional bonds and equity blends) The orange line illustrates a simple combination of two Fairtree building blocks i.e. Fixed Income and Equity. The outcome or end state is that a standard efficient frontier displays superior return outcomes for the same or very similar level of risk as represented by a higher return stream for given level of risk.

“We produce institutional quality products into the retail market. We actively manage our funds and are flexible and nimble enough to implement ideas. Our solutions are often uncorrelated to peer group and traditional asset classes. We are also comfortable to embrace both the disruptive smart beta technology that is driving investment flows globally – alongside traditional active equity management (alpha generation),” said Anthony.

The multi-asset Balanced Fund combines traditional, active equity management alongside new, disruptive smart beta technology when allocating to equities. The Fund diversifies further by following a credit strategy in terms of the allocation to fixed income, which means that the ‘sum-of-the-parts’ is greater than the whole.

The Fund provides several points of differentiation in a popular multi-asset, high-equity category.

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