By Jayson Forrest - Managing Editor - IMAP Perspectives
Michael Frearson - RAM Director and Portfolio Manager
Winning the IMAP Award for a third consecutive year in the Australian Fixed Interest category speaks highly to the quality of processes, people and performance track record at Real Asset Management.
With a philosophy built on keeping its investment process simple and transparent, while monitoring and minimising key risks, Real Asset Management (RAM) continues to provide its clients with capital protection and yield enhancement by providing investors with a reliable income stream, along with low levels of capital volatility.
It’s little surprise then that this approach to investing is paying off for RAM, with the established and proven wealth manager taking out this year’s IMAP Award for the Australian Fixed Interest category - an impressive third straight year for its Diversified Fixed Income and Credit Strategy.
It is an achievement not lost on IMAP judge and Chief Executive Officer at Douglas Funds Consulting, Nigel Douglas, who said that as an asset class, Australian fixed interest is “quite challenging” to do in managed accounts.
Assessing this category, Nigel said the judges were looking for managers that stuck to the fundamentals of fixed interest, that maintained diversification in their strategies, and that were conscious of risk management. As well as consistency in performance, the judges were also looking for stability of leadership. And with the RAM management team enjoying over 150 years of collective experience gained at senior global and regional management positions, the judges were well pleased.
“As we all know in the fixed interest market in recent years and months, we’ve had a lot of volatility, which has been a good test of these managers. So, this year’s winner, Real Asset Management, was able to clearly demonstrate its capability across the criteria that the judges were looking at,” said Nigel.
Indeed, during this period of investment market volatility, RAM’s diversification strategy has paid off, with its Diversified Fixed Income and Credit Strategy continuing to deliver income for clients in a low yield world, where the cash rate is at an all time low of 0.25 per cent.
“This particular strategy continues to deliver reliable income stream to clients with a yield of around 3 per cent,” says RAM Director and Portfolio Manager, Michael Frearson.
As we all know in the fixed interest market in recent years and months, we’ve had a lot of volatility, which has been a good test of these managers. So, this year’s winner, Real Asset Management, was able to clearly demonstrate its capability across the criteria that the judges were looking at.
Processes, people and performance
The Diversified Fixed Income and Credit Strategy forms part of RAM’s managed accounts strategies and comprises government bonds, cash, subordinate/senior debt and hybrid securities.
An 18-year veteran of managed accounts, Michael says winning the IMAP Award for a third consecutive year speaks to the quality of processes, people and the performance track record of its portfolios and client resources.
As an active manager, RAM’s approach to portfolio construction is focused on ensuring it delivers on the investment objective. And aligned with that investment objective is the selection of quality companies and securities that have a higher likelihood of delivering on their terms of issue and delivering a reliable income stream for investors, along with low levels of capital volatility.
“We’re a strong believer in diversification. We diversify across a range of sub-sectors, security types and companies, with strong risk management and clear concentration risk rules. We select securities on an after-tax basis, which is particularly relevant in the managed account space,” says Michael.
RAM takes a risk-adjusted approach to portfolio management. Its investment process begins with careful analysis of the issuer, which includes both the quality of the issuer and the quality of the security. RAM then scores company issuers on a range of criteria, such as management, capital position, earnings outlook, and the risks that the issuer faces.
“From there, we have a proprietary ranking system, where each security is given a specific RAM security score based on structural subordination and the company scoring. This provides us with a consistent score that we can use to rank the universe of eligible investments,” Michael says.
In addition to applying its proprietary scoring for companies and securities, RAM also models the investment universe on an after-tax basis, using in-house modelling. This gives the portfolio managers a snapshot of valuations at any point in time, providing a consistent approach to after-tax valuation when selecting investment opportunities.
RAM uses a top-down overlay to guide sub-sector positioning, which is about 20 per cent of its alpha delivery and process, with the remaining 80 per cent from bottom-up analysis and portfolio construction.
“From top-down, we’re looking at the outlook for interest rates, credit, risk premiums, the economy and inflation. We also have a strong focus on the global outlook and global risks, because that really does flow through to Australian interest rates and credit spread movements,” Michael says.
We’re a strong believer in diversification. We diversify across a range of sub-sectors, security types and companies, with strong risk management and clear concentration risk rules. We select securities on an after-tax basis, which is particularly relevant in the managed account space.
Old school metrics
When it comes to measuring the success of its investments, RAM is old school, with success measured by delivering on the investment objective for clients, even during times of market volatility.
“When advisers invest their clients’ wealth with us, they’re expecting we achieve the required investment objective, which is to provide a tax-effective income stream with low levels of volatility. And that’s what we’re aiming to deliver,” says Michael.
“So, we’re delighted to be recognised again by a panel of experienced industry consultants in this year’s IMAP Awards. Winning this award for a third year highlights that our philosophy and focus on diversification continues to provide an attractive investment strategy for clients chasing yield in a low yield environment.”
When advisers invest their clients’ wealth with us, they’re expecting we achieve the required investment objective, which is to provide a tax-effective income stream with low levels of volatility. And that’s what we’re aiming to deliver
IMAP congratulates all the finalists in the Fixed Interest category
- JB Were
- Real Asset Management
- Royston Capital