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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

Active management

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

The Proactive Portfolios Managed Fund Model SMAs use a Managed Investment Scheme (MIS) structure and offer a range of investment possibilities for varying risk preferences.

How they work

There are two key elements of the Managed Fund Model (MFM) investment portfolio strategy. The Investment Committee actively manages the:

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

People and process are key to producing portfolios and performance. That’s why the Investment Committee’s evaluation process uses both qualitative and quantitative evaluation techniques to discriminate between luck and skill in the production of good investment results. Learn more about our Investment Committee.

How we select funds

Fund selection is an important source of added returns. That’s why our Investment Committee focuses on identifying:

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.

Quantitative evaluation

The Committee initially considered over 5,000 funds available in Australia. We reviewed 5-year track records using a comprehensive database sourced from Morningstar and assessed four critical quantitative measures for each fund.

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

All funds that meet or exceed the four quantitative filters are evaluated as to the underlying factors which cause good performance, using independent ratings from Morningstar. A Morningstar Analyst Rating™ of Bronze, Silver or Gold is preferred*. Finally, the decades of experience of the Investment Committee was brought to bear on the final selection.

*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.

Learn more

About the people driving our investment process