Chris Briant
Leading US-based fund manager Parametric today announced the launch of its Systematic Emerging Markets equity solutions in Australia for super funds.
Parametric’s Emerging Markets equity (EM) approach, which has garnered over US$15.7 billion in assets under management from its clients, including a recently awarded mandate by an Australian industry super fund, is a transparent, rules-based strategy focused on implementation efficiency in markets well known for their high transaction costs, liquidity issues, capacity constraints and other implementation challenges.
This strategy has been designed as a “third way” to invest into EM given the known shortcomings of both index-tracking and active EM strategies says Parametric’s Chief Executive Officer, Chris Briant.
This EM approach has been developed to efficiently and consistently capture the long-term growth of this asset class, avoiding both the return risks inherent in active management and the concentration risks of the mainstream EM indexes, he added.
“Parametric’s “third way” investment approach is deliberately distinct from both passive and active: it is a disciplined, rules based, engineered approach to investing in EM.
“Our approach emphasises diversification and rebalancing, while avoiding the need for active country or security insights and the use of return forecasts. Unlike many active strategies, this strategy seeks to provide the strategic benefits super funds desire, by maintaining a consistent, broad exposure to a wide range of EM countries, while managing the high cost environments inherent in these markets.
“Further, unlike index-tracking strategies, our ‘third way’ avoids the consequences of concentration, and holds material weights in many of the lesser-known EM countries. Frontier market exposure can also be offered.”
Briant said “Our solutions have enjoyed great success over the past 17 years and have demonstrated higher returns with lower volatility than the mainstream EM indices.”
Tim Atwill, Head of Investment Strategy at Parametric, added that the EM equity asset class has seen great growth over the last 25 years, as perceptions of these developing economies has moved from scepticism to a well-established appreciation of their contribution to global economic growth.
“Accordingly, an asset class which was once considered the realm of the courageous (or foolhardy) is now considered a key part of many funds’ portfolios. However, funds feel like they are between a ‘rock-and-a-hard place’, with active strategies being challenged by high transaction costs and low liquidity, while passive solutions create poorly constructed portfolios which are concentrated in the most developed of the EM countries,” said Atwill.
Briant added “We are excited to offer our proven EM implementation capabilities to the Australian market. This helps to round out our suite of equity capabilities, complementing our recently launched tax-managed factor investing and defensive equity approaches and the tax-managed indexing and Centralised Portfolio Management (CPM) capabilities for which we are better known. In the past year, we have doubled our funds under management in Australia which tells us our implementation capabilities are very relevant to the problems funds are trying to solve today