Genesys overhauls underperforming portfolio

After six years of underperformance and desertion by its advisers, Genesys Wealth Advisers has overhauled its model portfolio.

The dealer group acknowledged its previous model portfolio had “produced disappointing performance and volatile outcomes for clients” and “exposure to problematic funds”.

The group said it had “become apparent that many advisers have discontinued using the model”. Genesys viewed this as concerning – with advisers taken away from their “core business activity” of providing advice.

The previous model portfolio had underperformed its benchmark for six years to May 2010. In overhauling the portfolio the Genesys research team, now amalgamated with AXA’s research team and under the guidance of AXA’s Robert Thomas, has made a significant number of manager, as well as thematic, changes.

The group has dropped funds classified as ‘alternatives’ from the portfolio altogether, with Genesys noting “many advisers have stopped using alternatives as (broadly speaking) many of these funds did not live up to their promises when needed most”.

“Genesys Research is of the opinion that for a model portfolio designed for a broad audience it is preferable that funds/sectors that may discourage full usage of the model be avoided,” the report stated.

BlackRock and Mercer have both lost their mandates within the Genesys model portfolio, while the ETFS Physical Gold fund was also removed. Alternatives will remain on the Genesys approved product list for those who wish to use them.

Other changes include a repositioning of the portfolio to account for what Genesys expects will be a “continued period of market turbulence and uncertainty”, as well as a reduction in the “concentration of risk to the investment themes of China and credit risk”.

The Genesys research team said it had also undertaken deeper research to identify managers with complementary investment themes, while making changes to defensive asset class allocations to “reduce risk and increase the reliability of outcomes”.

The group has also committed to “transparent monthly reporting”, while adding the changes, implemented on August 1, have led to a reduction in fees for growth and high growth clients of 20 and 25 per cent respectively.

Fund managers losing spots in the Genesys model include Pengana, Merlon, CFS Acadian and Antares Lodestar on the Australian equities front, Hunter Hall, CFS and Walter Scott for international funds, Magellan on property and EQT Pimco on fixed interest.

Some of the beneficiaries of the changes included Fidelity’s Australian equities fund and Aberdeen, Megallan and Zurich Investments for international equities, while a number of retained managers such as Schroders, Vanguard, Perpetual, Platinum, Perennial, Ausbil and Aviva Investors had their weightings adjusted.