The advice and investment week in focus - 30th August

1) Greg Bright, for those who are somehow unaware, was the previous editor of this publication, as well as the founder of innumerable other financial publications, including InvestorDaily, Money Management, Super Review and Investment Magazine. There likely would not be as diverse a financial news landscape in Australia today without his efforts. For a lot of people, Greg was the first person that really believed them. The industry is littered with his proteges. He had a keen sense for what a person could do and, without them even really noticing, he made them capable of doing it. Greg leaves behind a wife, Christine, four children from a previous marriage, a vast number of friends, and a book on the history of superannuation, asset management and custody and administration that might now never be finished.

2) Ironbark Asset Management's decision to switch investment management of two funds after a botched transition involving Royal London Asset Management's hotshot portfolio management team puts advisers and investors in an awkward position, and raises serious questions about the role of Responsible Entities. Ironbark was forced to find alternative managers for the $3 billion Royal London Concentrated Global Share Fund and and the $700 million Royal London Core Global Share Fund after RLAM's star portfolio manager, Peter Rutter (pictured), announced he was leaving the London firm to start up Sydney operations under a new banner, Lifecycle Investment Partners, but failed to get his ducks in a row. With Rutter tangled in HR issues, Ironbark sent a note to advisers and investors on August 22 informing them that it had chosen Brown Advisory to manage the Concentrated Fund and Robeco for the Core Fund. The implications of these switches are yet to play out, but on first blush they seem more egregious for the Core Fund because the delta between management styles of the old and new managers is greater. "You've been sold a pumpkin and now you're getting a potato," one investment consultant told The Inside Adviser.

3) Infrastructure has come to comprise a larger and larger proportion of portfolios, with investors drawn to its low volatility, consistent returns, and the fact that those returns being mostly inured against inflation given the ability of many assets to pass through costs to the end user. But while nearly every investor understands that infrastructure has inflation hedging properties, what’s “misunderstood” is just how unique that hedge is, according to Shane Hurst, managing director and senior portfolio manager at ClearBridge Investments. “You compare it to property –?and this is my personal view – which is obviously subject to competitive renegotiation of contracts and leases,” Hurst told the Inside Network’s Investment Leaders Forum in Queenstown, New Zealand. “While you do get that inflation hedge through that period, as soon as you go to renegotiate a lease, you generally get an adjustment to the structure of that lease.

4) In mid-August, the market’s seemingly endless march higher was briefly halted by what most analysts attribute to the unwinding of the Japanese Yen carry trade (borrowing in Yen, which has historically had an ultra-low interest rate, to invest in typically US stocks or bonds) with the Bank of Japan hiking rates). The resulting anxiety saw the VIX rise, the S&P fall, prompted plenty of think pieces about whether this was the ‘big one’, and left David Elms, head of diversified alternatives at Janus Henderson, somewhat bemused. “If we look back at recent times we’re going to have people scratching their heads and asking what that was all about,” Elms tells ISN. “The VIX hitting that intraday high was one of the three biggest spikes in its history – 2008, 2020, and August 2024. August 2024, unless something very strange happens between now and the end of the month, the odd one out.”

5) Alternative assets are among the most popular investment products amongst investors and advisers alike. Making the case for alternatives is simple due to their non-correlative advantage, but including them within client portfolios on a broader scale is anything but. Referring to any asset which isn’t a traditional share or bond, alternatives can include anything from hedge funds and high frequency trading, to venture capital, private equity and the flavour of the moment, private credit. The story behind alternatives is clear, as are the apparent benefits; higher returns, better risk-adjusted outcomes and lower correlation with traditional assets which make up the bulk of portfolios. Yet the advice industry remains well behind the institutional and industry fund sectors in alternative investment, having as little as 5 per cent in ‘alternative-lite’ investments compared to as much as 20 to 30 per cent on the institutional side of the fence.