Active approach worthwhile for fixed interest

Research by InvestorWeb has found against a prevailing notion by researchers that active fixed interest management doesn’t add value after fees.

The 2006 Traditional Australian Fixed Interest Sector Review has found that managers “are providing excess returns while reducing overall portfolio risk”, according to Angela Ashton, general manager — managed investments research.

Ashton said this finding contradicts the “view of many research houses that active fixed interest management doesn’t add value after fees”.

She said that any lack of added value in the past was “predominately a function of a market coming to grips with rapid change in the financial landscape”.

“Some managers have now adjusted to the new market environment, and are using multiple sources of value-add (duration, credit, swap, structured product and so on) to appear to be adding value for clients.”

The majority of 12 surveyed managers, which were rated on a three-year time horizon, were in the “preferred risk/return survey quadrant, the holy grail of funds management, and providing excess returns after fees”, she added.

Eight out of the 12 managers were rated by InvestorWeb as investment grade or better, with Credit Suisse Asset Management (CSAM) receiving the highest ‘strong buy’ rating.

BT Enhanced Bond Fund, Colonial First State, Deutsche Asset Management, Equity Trustees, IOOF/Perennial, and Tyndall were all awarded a ‘buy’ rating.