Time to temper ambitions

It is going to become increasingly important for advisers to pick the highest achieving stocks as the boom times have ended, Macquarie Funds Management portfolio manager, high conviction, Phillip Pepe told Money Management yesterday.

Market performance between 2003 and 2007 was not normal and was similar to the boom seen between 1984 and 1988, Pepe said.

“To see that we have had four great years and think that we are going to have another four is very ambitious,” he said.

Stock picking can add around 6 per cent to a portfolio’s performance, and in a boom time this will take a good portfolio from 25 per cent returns to 31 per cent returns, he said.

However, Macquarie’s analysis of the period between 1988 and 2003 shows that the market index performed at an average of 9 per cent, which means that a 6 per cent increase in performance would be very significant, he said.

Pepe will be taking his message to advisers as part of the Macquarie investment road show.

“The message we are trying to get through to advisers in our road show is that investment markets have been strong, but that’s not necessarily going to remain the same,” he said.

“In this climate, stock picking and portfolio selection becomes even more important.”