In the recent bi-annual recalculation of FE Crown Fund Ratings, four strategies witnessed a fall in the number of Crowns from four to one, while one strategy saw a declined from five Crowns to two.
Yarra Australian Real Assets Securities
The Yarra Australia Real Assets Securities strategy has seen its FE Crown Fund Rating fall from four Crowns to one.
The fund’s objective is to achieve a balance of income and medium to long-term capital growth by investing primarily in Australian listed infrastructure and utilities securities.
The strategy aims to outperform the UBS Infrastructure and Utilities Accumulation Index over rolling three-year periods.
Yarra Capital Management declined to comment on the performance.
Principal Global Credit Opportunities
The fund aims to achieve a total return above the Bloomberg Barclays Global Aggregate Corporate Index (hedged to Australian dollars), before fees, over rolling three-year periods.
The strategy employs a global multi-credit fixed income strategy that invests predominantly in a wide range of fixed-income securities and investments across a number of sectors, and actively manages volatility to seek to mitigate downside risk and enhance returns.
Principal Global Investors were unable to provide comment on the performance of the strategy.
PM Capital Australian Companies
The fund’s objective is to provide long-term capital growth and outperform the greater of the S&P/ASX 200 Accumulation Index or the RBA cash rate over rolling seven-year periods – it is not intended to replicate the index.
Portfolio manager Uday Cheruvu indicated in the fund’s most recent quarterly report that positive contributions from holdings such as Macquarie Group had been counteracted by the portfolio’s cash position and lack of exposure to the strong resource sector.
The performance of BHP in the quarter, he said, was a good example of where PM Capital felt that “resources companies were being mis-valued”.
Looking ahead, Cheruvu said PM Capital continued to believe there will be dislocations in the market arising from a trade war between China and US.
“In addition, we believe the market’s elevated expectation for earnings growth to result in a wider dispersion in the performance of stocks. We believe this will create an opportunity to invest the cash position of the fund into good quality companies at good prices,” he said.
Mosaic Specialist Income (name changed to Specialist Diversified Fixed Interest Fund)
Formerly known as the Mosaic Specialist Income strategy is the Mosaic Specialist Diversified Fixed Interest Fund, a strategy which aims to provide a level of investment return that is reasonable when compared to both the medium-term investment horizon of the fund and the medium level of investment risk.
The strategy has seen its FE Crown Fund Rating fall from four Crowns down to one.
Chief investment officer of the fund’s responsible entity IOOF Limited, Dan Farmer, explained that the specialist series of Mosaic funds were part of IOOF’s acquisition of wealth manager Shadforth a few years ago, and that the funds are used by most clients as satellite investments to complement IOOF’s strategic funds.
Over the course of the past 12 months, Farmer said IOOF had been reviewing the Mosaic specialist funds with a view towards their relaunch in late July.
“We’re effectively rejigging those funds and those funds will now gain their underlying market exposure by effectively replication of the equivalent MultiMix strategy,” he said. “So, the Specialist Income Fund will now be renamed the Specialist Diversified Fixed Interest Fund and that specialist fund will replicate our MultiMix Diversified Fixed Interest strategy.”
Farmer pointed out that prior to the rejig, the Specialist Income fund had basically no duration and just one manager in the fund, being T. Rowe Price. However, it has now taken on some duration with several managers now in there to provide greater diversification.
“So, we think it will pick up advisers … were very happy with the changes, maybe there’s slightly higher running yields, more diversified managers, and it really complements their strategic core strategies as well,” Farmer said.
He also said the relaunch had been very well received by advisers, and that the past performance of the strategy which had resulted in the reduction in Crown ratings would have been largely due to the previous structure where there was just one manager inside the fund, being the T. Rowe Income strategy which “had a reasonably tough little period in there”.
A different T. Rowe strategy with longer duration and greater diversification is still in the revamped Mosaic fund, Farmer said.
At the end of the day, Farmer said the rejig is an effort to improve outcomes for advisers: “We’ve put a package together which advisers have told us they find pretty attractive.”
Lazard Australian Diversified Income
The Lazard Australian Diversified Income Fund seeks to achieve an annual income return above the Reserve Bank of Australia cash rate, a total return that exceeds the cash rate over the longer term and lower volatility in total returns than the S&P/ASX 200 Accumulation Index.
Lazard were unable to be reached for comment regarding the strategy’s performance.
Aberdeen Multi-Asset Real Return
Also witnessing its FE Crown Fund Rating fall from five Crowns to two is the Aberdeen Multi-Asset Real Return strategy, the objective of which is to achieve a real return equivalent to 5 per cent a year above inflation (before fees) over a full market cycle (generally three to five years).
The fund will apply dynamic asset allocation to a diversified portfolio of traditional and alternative assets, without reference to a benchmark.
Josh Hall, a senior investment specialist at Aberdeen Standard Investments, said the fund has continued to meet and in fact exceed its performance objective since its inception almost six years ago in September 2012.
“The fund invests in a wide range of asset classes, including many growth assets, which means the fund’s performance won’t be delivered in a perfect straight line over time,” Hall said.
“However, the fund’s performance history has reasonably neatly oscillated around its performance objective since inception … We remain confident in the fund continuing to meet its objectives going forward.”
