But as delegates to International Adviser’s Expert Investor Forum in Singapore discovered on Thursday, asset managers are finding ways to make the challenges of today’s markets work for them, rather than against them.
Among these enterprising asset managers is Schroders, according to Garth Taljard, a multi-asset product manager at the company, who explained how his team is using asset allocation to good effect to make money for investors in what he called the current “low-yield world”.
At Schroders, the strategy relies mainly on actively investing in equities and bonds, but also in such other asset classes as real estate investment trusts (REITs) and commodities, Taljard explained.
“We quite like alternatives, because they give you, firstly, a bit of diversification away from the rest of your portfolio, but they also give you yield,” he added.
Citing the fund house’s Luxembourg-domiciled ISF Global Multi-Asset Income Fund, which has assets under management of $1.3bn, Taljard said that the Schroders strategy begins with a focus from the start on yield, and works back from there.
“Yield is at the root of every decision that we make in our portfolio, [whether it’s] buying stocks or doing asset allocations.
“Being a multi-asset [fund manager], we believe asset allocation can add value; that markets can be incorrectly priced; and that too much investor joy and euphoria can push prices too high, just as investor fear can push prices too low.”
In addition to the Global Multi-Asset Income Fund, Schroders also manages an Asian multi-asset income fund,
which Taljard said is by definition “dependent on the fortunes of Asia”, and also is “run a bit more aggressively”, tending to have “a higher equity allocation, and more high-yield bonds” in its asset mix.
Generally speaking, though, Schroders is taking a “quite cautious” approach to Asia right now, particularly Asian equities, Taljard said.
The property ‘alternative’
At Creechurch Capital, the Isle of Man-based boutique asset management company, property is seen as the asset class that enables investors to ride out some of the pressures currently subduing returns in other investment areas.
Chief executive John Greenwood makes no apologies about promoting the Victus European Student Accommodation Fund, in spite of the less than spectacular results some student accommodation funds have posted recently.
Victus, is different because, unlike some UK accommodation funds that have not done well, it invests in “the ‘greenfield’ European market”, where, Greenwood noted, “the supply/demand dynamics are favourable”.
Another product in the Creechurch stable is the Luxembourg-domiciled Castel UK Residential Property Fund, currently with £6.5m in AUM.
According to Greenwood, this investment is well-suited to the current economic climate because UK residential property “has outperformed all mainstream asset classes over the past 20 years, on the basis of total returns” – and that’s without counting the inflation-linked rental income element.
The case for alternatives
Croesus Capital is a relatively new (2012), Cayman Islands-domiciled asset manager that is mining the opportunities in the alternative investment space during these challenging times, company director James Allen told his Singapore audience.
Croesus’s Absolute Return Fund, now up to $4m, invests in a range of hedge and specialised alternative funds, and has been designed to perform well (“medium to long term” returns of 8% to 13% per annum) no matter what the market does, Allen said.
“If the volatility [in the market] seems to be increasing, we can change the strategy and basically enhance the returns.”
Croesus outsources key elements of its due diligence and administration processes to such external experts as Netherlands-based regulated investment advisers Privium, fund administrators Vistra, and Cayman Islands-based lawyers Maples & Calder, to ensure the best advice, which Allen says pays off regularly, as these entities are constantly flagging up concerns that might escape asset managers who lack such backing.
The fund invests in six strategies through institutional class managers: commodity trading adviser (CTA); convertible bond arbitrage; volatility and tail risk; long/short emerging market; long/short specialised equity, and land strategy.
“Why Croesus? Why actually deal with us?” Allen said, posing a question he evidently suspected may have been on the minds of some members of his audience, given the company’s relative youth.
“Expertise and experience in the alternative and hedge fund class; strong performance in the sector; very low volatility; very low entry level, at $50,000 for retail clients to access this portfolio; and [the ability to] access institutional-class funds. Normally you’d have to have a portfolio of around about $5m to $6m to access these funds individually.”