Category: Australian Fixed Interest

Perpetual kicks goals with Mainstream SMA

When it comes to managed accounts, Real Asset Management punches well above its weight, taking out the Australian Fixed Interest category at the IMAP Managed Account Awards. 


IMAP congratulates all the finalists in the Australian Fixed Interest category.

  • JB Were
  • Mason Stevens
  • Prime Financial Group
  • Real Asset Management
  • Royston Capital

Get used to the name Real Asset Management (RAM). Established in 2013, over the past six years, RAM has steadily built a reputation as a leading business focused on providing tailored investment solutions to high-net-worth clients and family offices across the Asia Pacific region. Since 2017, RAM has expanded into traditional Australian funds management via managed accounts and a growing wholesale fund range in fixed income and property.

And after taking out last year’s IMAP Award in the Other Asset Classes category with its Diversified Fixed Income & Credit Strategy, the Aussie owned wealth and asset management firm has again stepped up to the plate, taking out the 2019 IMAP Managed Account Award for Australian Fixed Interest. Not a bad effort for this young business!

But with $950 million in FUM, RAM has some serious runs on the board, led by a management team with over 150 years of collective experience gained through working at senior global and regional management positions in the world’s largest financial services firms.

RAM took out the Australian Fixed Interest category at the IMAP Managed Account Awards with its Diversified Fixed Income & Credit Strategy, which forms part of its managed accounts offering to advisers and dealer groups.

The managed account comprises government bonds, cash, subordinate/senior debt and hybrid securities via direct securities and exchange traded products (ETPs).

According to RAM Director – Portfolio Manager, Michael Frearson, winning the award for a second consecutive year speaks to the quality of processes, performance track record, investment team and the hard work RAM is putting into its investment portfolios and adviser resources.

“Winning this award again is great industry recognition of the quality of our offering, including the investment strategy and the support material we provide to advisers who recommend this strategy to their clients,” he says.

“And given the judges are all very experienced, with a strong understanding of investments, it’s wonderful external validation of RAM’s Diversified Fixed Income & Credit Strategy.” 

Philosophy and investing 

According to Michael, as part of RAM’s approach to investing, it aims to bring institutional quality investments and strategies to private clients in a simple and transparent solution, and the managed account structure closely aligns with that philosophy.

“We are an active manager with a quality focused approach to portfolio construction,” Michael says. “This focus is designed to ensure we deliver on the investment objective.” 

Aligning with that investment objective is the selection of high 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.”

As an active manager, RAM takes a risk-adjusted approach to portfolio management. Michael says the starting point for RAM’s investment process begins with careful analysis of the issuer, which includes both the quality of the issuer and the quality of the security. 

According to Michael, RAM scores company issuers on a range of criteria, such as management, capital position, earnings outlook, and the risks that the issuer faces.

“We have a detailed process reviewing the terms of issue on each ASX-listed credit instrument and also ETPs. 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,” he says. 

“The increasing complexity of hybrid securities requires specialist knowledge to appropriately determine relative value.”

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.

Still early days

With RAM’s Managed Account Strategy only kicking off in 2017, Michael says it’s still early days to measure the overall success of this offering, although admits that clients are already attracted to the risk-adjusted approach to portfolio construction and the specialist expertise available. 

But 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.

“It’s been another strong year for our strategy, delivering above average returns over the last 12 months on the back of strong tailwinds and low levels of volatility,” Michael says.

He attributes this result to the current environment, which has seen positive performance from listed credit securities, and Australian and global bond markets, as well as sound portfolio construction and active management, which protected clients from market volatility in late 2018.

In fact, since the inception of this managed account strategy, the standard deviation of monthly returns has only been 1.26 per cent, which Michael says is surprisingly low, given the types of securities RAM invests in.

“But that’s due to our style and our diversified approach to portfolio construction, blending a range of security types and structures,” he adds.

“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.” 

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