Portfolio management: analysing your investment selection

3 min read

At a recent Barron’s Summit in Sydney, Corrin Collocott, BT’s Chief Investment Officer, moderated a panel discussion where he shared insights about our investment philosophy, the current investment backdrop and operating in a low interest rate environment.

Here’s a rundown of some of the key themes that were discussed. 

What is the underlying philosophy of the way BT manages clients’ money?

“Managing clients’ money requires a careful blend of capabilities and behaviours to drive an unwavering investment philosophy”

Collocott said that in his view, this can cushion market volatility and effectively survive bouts of underperformance.

“Focus on what matters most, build and maintain best practice investment processes and exercise patience and humility” he said.

Pointing to the types of capabilities that are evident in best practice models, Collocott believes the following three attributes were top of the list in terms of BT’s differentiators:

  • Highly experienced people who can conduct meaningful research and apply both quantitative and qualitative judgement;
  • Strong processes that underpin investment governance, investment decisions and investment operations; and
  • Commitment to global research programs and partnerships to find, monitor and jointly develop the best global strategies and portfolios.

In determining the most appropriate portfolio construction solutions or services to offer to your clients, Collocott believes managers who have the above capabilities could help improve the chance of successful outcomes.

Where do you think we are in the investment cycle?

In response to the question of where exactly we are in the economic cycle, Collocott believes we’re late cycle, not end cycle. Volatility is likely to continue as short term traders excessively influence markets through this late cycle period.

“What matters most is a consistent and deliberate diversification of styles, sectors, industries and asset classes, down to the underlying holdings, which is critical to portfolio resilience” he said.

In this environment, what are examples of some defensive investments?

To take a bit of risk off the table and get more defensive, options for investment portfolios could include cash, fixed income, liquid alternatives and private markets.  

While fixed income continues to be a common tool to help provide short term defence in investment portfolios, there may be other opportunities such as emerging ‘liquid alternative’ solutions.

Ultimately, Collocott suggested that rather than counting on a single factor to buffer portfolios, adopting a multi-factor approach could be beneficial.

What part of the “alternatives” universe do you feel could be most effective in this environment?

In his view, Collocott believes appropriately constructed liquid alternatives, private debt and real assets were showing the best value.

“While it’s difficult to see aggregate good value, good managers will still be able to navigate opportunities in this environment” he said.

Has the era of ultra-low interest rates made asset allocation a less valuable tool?

Collocott acknowledged that interest rates have hovered at very low levels for a long time and valuations are difficult to size up as a result of quantitative easing.

This has made traditional valuation based strategies more difficult and macro influences (such as US-China’s rising trade tensions, global growth slowdown, monetary policy challenges etc.) have continued to play out since quantitative easing commenced.

Find out more 

Take a closer look at how these themes are put into practice within CoreSeries.

CoreSeries is now available on Panorama and has been designed to meet the core investment needs of a wide range of clients in a transparent and attractively-priced structure.

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