Proactive Managed Fund Model SMAs are actively managed portfolios that invest in a range of wholesale priced managed funds, carefully selected because they are expected to consistently outperform the benchmark return in each asset class.
Why Managed Fund Model SMAs
Ongoing portfolio alignment
Ensuring investments and asset allocation continue to match return objectives and risk profile
Providing diversified management of return within risk parameters
Faster portfolio implementation and rebalancing
Avoid delays in timing – an advantage during volatile market conditions
One for each risk profile
How they work
1. Asset allocation over time between the major asset classes (Australian Equities, International Equities, Property Securities, Alternative equities, Fixed Interest and cash
2. Asset selection within each asset class
People and process are key
How we select funds
1. those fund managers in each asset class, who have persistently outperformed the index and added value and are likely to continue to do so
2. a number of value added fund managers in each asset class because it is by no means certain that any particular fund manager will add value over all time periods
The process is both rigorous and systematic and has added significant value to portfolio returns over the years.
1. The Sharpe Ratio (SR) This ratio measures how much the fund beats the cash rate over time. It measures how much additional return a fund provides in excess of the return on cash per unit of return volatility. The Fund Selection process uses a preferred level of at least 0.3 for the Sharpe Ratio, measured over a five year period.
2. The Information Ratio (IR) This ratio measures how much the fund beats its benchmark over time. It measures the excess return of the fund over its benchmark per unit of volatility. The Fund Selection process uses a preferred level of at least 0.5 for the Information Ratio, measured over a five year period.
3. The Batting Average (BA) A measure of how consistently a fund outperforms its benchmark over time. The BA is calculated by dividing the number of outperforming periods by the total number of periods over a specific time frame. The Fund Selection process uses a preferred level of the BA of 50% or more.
4. Benefit-Cost Ratio (BCR) A measure of the value for money achieved by a fund. The BCR is calculated by dividing the outperformance of a fund versus a relevant index fund, by the difference between the fund’s Investment Cost Ratio (ICR) and the index fund’s ICR. The Fund Selection process uses a preferred level of 1.6 times for the BCR.
All funds which met or exceeded the four quantitative filters were then evaluated to determine whether the good performance was a matter of skill rather than luck.
Qualitative evaluation process
*The Morningstar Analyst Rating for funds is the summary expression of Morningstar’s forward-looking analysis. Morningstar analysts assign the ratings globally on a five-tier scale with three positive ratings of Gold, Silver, and Bronze, as well as Neutral, Negative, and Under Review designations. The Analyst Rating is based on the analyst’s conviction in the fund’s ability to outperform its peer group and/or relevant benchmark on a risk-adjusted basis over the long term.