Investor demand prompts accessible alternative beta funds


Steve Shepherd

Australian financial advisers are demanding low-cost, easily accessible alternative beta strategies as they seek to diversify portfolios and reduce their correlation to equities in face of ongoing concerns around risk.

That’s according to Steve Shepherd, Head of Asia Pacific for alternative beta manager Capital Fund Management (CFM). Mr Shepherd says demand for the CFM IS Trends Trust (CFM IS Trends), which offers investors a global diversified exposure to long term trend following strategies, has been growing steadily since it was launched in Australia in July this year.

“Financial advisers want to offer their clients alternative investment strategies, which provide diversification benefits beyond indexing. Long term trend following provides diversification benefits to portfolios. It is a strategy which takes advantage of trends in 5 global asset classes and in over 100 markets, bringing a diversifying strategy to portfolios. It has the potential to improve portfolio returns and reduce drawdowns,” said Mr Shepherd.

Mr Shepherd explained that recent ‘Recommended’ ratings by Lonsec and Zenith, and the addition of CFM IS Trends to the HUB24, Netwealth and Macquarie Wrap platforms, means that more investors can access the fund, and that advisers have confidence that it is true-to-label.

“At the same time, our fees are very competitive. Lonsec actually stated that CFM’s lower fees give it the potential to disrupt what has been a high margin sector,” Mr Shepherd said.

Mr Shepherd went on to explain how alternative beta strategies work and why they perform an important diversification role in a portfolio.

“Alternative beta strategies seek to identify and exploit alternative betas, or risk premia, via a rules-based, quantitative approach.

“They are strategies which have historically been associated with hedge funds, which aim to produce ‘absolute returns’ – in other words, performance in all market conditions, regardless of whether the market is rising or falling.

“Portfolio diversification is improved at the same time, because alternative strategies look to produce a return profile which has little or no correlation to traditional asset classes,” he said.

In conclusion, Mr Shepherd said that CFM’s point of difference is the rigour of the academic techniques used to stringently test every investment strategy, and CFM’s ability to harness the opportunities on offer from massive shifts in data proliferation globally.

“This is how we identify the diversified, liquid and cost effective scalable strategies more and more investors are looking to invest in,” he said.

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