New Vertium fund to target retirees


By Daniel Paperny

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Current retirement income funds failed to account for the different investment needs of retirees and a new approach was needed to help deliver regular income, preserve their retirement savings and grow capital in a risk-controlled way, according to Vertium Asset Management.

Speaking at a media briefing in Sydney hosted by Copia Investment Partners, Vertium Asset Management chief investment officer Jason Teh announced the launch of Australia’s first triple-objective portfolio aimed at retirees and investors seeking lower-risk equity market exposure.

The Vertium Equity Income Fund would focus on delivering higher income, lower risk and outperformance relative to the market as the fund manager sought to deliver a multifaceted approach and more robust solution for Australian retirees in the drawdown phase.

“The days of outperforming the market by XYZ over a certain time frame, that’s fine in the accumulation phase, but [a retiree in] the decumulation phase has got very specific needs that have to be met,” Teh said.

“Because of those specific needs, you need a fund that actually specifically caters for those outcomes, so higher income, lower risk and greater return over the long term is what we believe will provide a more holistic solution for retirees.”

In 2006, initial equity income funds in Australia were centred on a high-income objective, followed by a second iteration of funds that combined high income and lower risk for investors, he said.

“Income’s not enough and retirees will get situations where they will be selling units and so they have to produce other objectives … if you think of it from that perspective, [blending] high income and low risk, you could get situations where a fund manager may be a bad stock-picker so your total returns will be very low … which is still a bad outcome for the client,” he noted.

“Or you might get another scenario where higher outcome [is blended with] outperformance … but what if there’s a bear market? That’s something that retirees don’t want to wear, so by having these three objectives it just makes us accountable.”

He said the Equity Income Fund aimed to raise $5 billion in funds under management, built on a portfolio of about 25 stocks comprised of quality Australian companies with attractive valuations and sustainable distributions.

The fund manager was undeterred by the increasingly fee-conscious nature and short-termism of Australian investors, arguing Vertium’s investment philosophy meant the firm was confident of generating reasonable returns for its equity income fund over a rolling five-year period, he said.

“We can draw a line in the sand and tell clients this is what we’re trying to achieve … [and] if we can deliver a lower risk outcome … with a slightly better return, that pushes the nest egg out further so that nest egg does last longer,” he noted.

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