Macquarie’s tactical advantage

In another turbulent quarter, Macquarie’s Master Diversified Fixed Interest Fund produced positive returns, outperforming the UBS Composite Bond Index, and scoring a win for Macquarie in the Fixed Interest (Diversified) category of the Money Management/Lonsec Fund Manager of the Year awards.

Raj Gohil, head of product management at Macquarie, attributed the fund’s consistent success to the discipline employed in identifying cheap and expensive sectors.

“Many research houses have commented on our tactical asset allocation process and the way in which we identify and allocate parts of the portfolio to those cheap sectors over expensive ones,” he said.

“Our investment approach is to provide returns better than the Australian fixed interest, but do it at comparable levels of risk.”

According to Gohil, the fund was designed as a ‘one-stop-shop’ solution for fixed interest, and with one of Australia’s largest investment teams dedicated to fixed interest, it was little wonder that the fund was a finalist.

“In total, we have 35 people who work in the fund … and we have 15 people monitoring the markets every day and making that determination on whether something is cheap or expensive.”

With a five-year track record, the fund began in September 2002 with total returns on a per annum basis at 7.6 per cent, whereas the benchmark sat at just 4.9 per cent.

“In the last 12 months the benchmark performance was 4.29 and our fund did 4.58 per cent, so it outperformed by 29 basis points. That’s a reasonable outcome given the volatility seen in the markets and the severity of the liquidity crisis,” he said.

Schroders is a finalist in this category for its Fixed Income Fund.

Launched in January 2004, the fund is a low volatility defensive fund that invests in a range of domestic and international fixed income assets with the objective of delivering stable absolute returns over time.

Schroders head of fixed interest Simon Doyle said the fund seeks to tick all the boxes of a defensive asset.

“Our goal is to provide an asset that is purely defensive. It provides liquidity and a low correlation to equity markets, which means it does well when equity markets aren’t doing well,” he said.

Doyle said this goal has been achieved, as “over the last six to nine months the fund outperformed equities by a long way… The fund returned 4.4 per cent, which may not seem that high, but if you consider that Australian equities have returned -7 per cent, that’s an 11 per cent outperformance.”

According to Doyle, Schroders’ fixed income fund offers a clear differentiator between other strategies in the market.

“Other funds operating in a similar space are largely credit plays, and you’ve seen in the last few months where many heavily dependent credit strategies have blown up,” he said.

— Justin Lim