Advisers flock to real returns amid volatility


By Elizabeth Somerville

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Sustained market volatility is hampering the ability of traditional portfolios to deliver solid returns as forecasts for bonds and equities remain low.

That had resulted in advisers increasingly turning to objectives-based investment approaches to gain better control over portfolios and deliver returns for their clients, Association of Real Return Investment Advisers (ARRIA) general manager Rebecca Jacques told financialobserver.

“[Due to] the volatility that’s out there in traditional asset classes, the traditional way of building a portfolio is not going to work,” Jacques said.

“Everybody can see that now.

“There are very few people that would admit now that a 60/40 balanced portfolio with a strategic asset allocation is going to work.”

Last year, the maximum return from a balanced fund was about 5 per cent, which hit home for many advisers who realised increasing active exposure was not going to help.

“We’re starting to see a whole growth of managers that are emerging that are essentially pulling out a factor that they’re going to target,” Jacques said.

“They’re increasingly starting to come to the forefront in the retail space, whereas traditionally it’s only been institutional land that’s had access to them.”

Advisers had also begun to talk about investment in a different light and focus on a real target or objective for return and build portfolios to that, she said.

“It flips everything on its head because you don’t start with [the mentality of] ‘I have to have Aussie equities’, as you might not need Aussie equities,” she said.

“You might only need Aussie equities that are exposed to consumer discretionary and that could be the only play you’re going to make in that area to get that return target.”

As a result of the change of investment focus for advisers, she said she expected ARRIA’s membership numbers to swell over 2016, which would also be boosted by the appointment of three new independent directors.

Profile Financial Services chief executive Sarah Abood, MGD Wealth director Stephen Furness and Winston Capital Partners founding partner and managing director Andrew Fairweather have all taken up director roles with ARRIA in Sydney, Brisbane and Perth respectively.

“The new board directors will make a massive difference as they will be chapter heads and also advocates,” Jacques said.

“They will broaden the depth we have and it will all start to come together this year.”

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