Kev Toohey

AXA Investment Managers (AXA IM) has launched its first ever fully integrated ESG SmartBeta strategy in the Australian market. The AXA IM ACWI SmartBeta Equity Fund (the fund) offers long term investors a more efficient way of capturing equity market beta, while avoiding the limitations of both market cap-weighted indices and alternative weighting schemes.

Powered by AXA Rosenberg, the quantitative investment arm of the global AXA IM group, the fund is now accessible via the Asgard platform, having been seeded with A$55 million from local Australian Financial Services Licensee, Financial Index Wealth Accountants (FIWA).

Kathryn McDonald, AXA Rosenberg’s director of investment strategy, said while smart beta and ESG might seem unrelated, both approaches reflected a move by investors away from standard index tracking.

“Overlaying smart beta with ESG is quite a new and novel concept but it’s one we feel is a very positive step. Our extensive research shows ESG smart beta can offer investors a lower risk and higher return than index investing, along with a defensive strategy with improved diversification and ESG performance – an attractive concept for long term investors.”

The fund also extends AXA IM’s well-established SmartBeta capability from developed to emerging markets via the All Country World Index (ACWI) ex Australia benchmark, offering  Australian investors a one stop shop for their global equity smart beta exposure.

New AXA IM fund now core part of FIWA’s global equity strategy

Advised by independent asset consultants Atchison Consultants, FIWA has said that based on a number of factors, the dealer group is open to increasing investment in the fund over the coming years.

Commenting on the partnership Kev Toohey, General Manager, at Atchison Consultants said the AXA IM ACWI SmartBeta Equity Fund was now a core element of its global equity strategy within the FIWA diversified strategies.

“We saw real value in moving away from a standard passive mandate towards a more effective means of harvesting the global equity beta. We were also attracted by the diversification play the fund’s emerging market exposure offers investors,” he said.

AXA IM’s SmartBeta strategies gaining positive traction

Today’s announcement follows Mercer’s A$150 million allocation to AXA IM’s global credit strategy in April this year. Globally, AXA IM’s smart beta strategies have garnered approximately US$2.5 billion from investors in the past 18 months.

Craig Hurt, AXA IM’s Director of Australia and New Zealand said a greater number of investors were implementing these intelligent, yet cost-efficient solutions:

“Since bringing our SmartBeta credit and SmartBeta equity strategies to the Australian market we’ve seen an increasing number of investors, both institutional and retail, look for a more intelligent and pragmatic approach to capture the market return. It’s exciting for Australia to be leading the charge on smart beta and ESG integration and that more investors, especially those in the post-retirement phase, can benefit from these types of solutions,” he said.

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The Dalton Nicol Reid Australian Equities High Conviction portfolio is managed by six full time staff, including Jamie Nicol, Chief Investment Officer and Scott Bender, Portfolio Manager. The team is also supported by two independent consultants, taking the total investment team to eight.

CEO and Director, Harley Dalton, said the result was pleasing as it recognised the strength of the investment team’s experience and investment strategy.

“This is the third time our capability has been reviewed by an asset consultant and it is pleasing to achieve another strong result.  We believe our investment approach and performance track record in difficult market conditions, is now well proven. We are continuing to expand our investor base and this rating is another step in that process,’” Mr Dalton said.  

Among the strengths of the capability, Atchison Consultants pointed towards the stable investment management team and a proven investment process tested over the complete investment cycle.

Dalton Nicol Reid’s independent Investment Committee member oversight was seen as a positive, to ensure rigour around the investment process.  Atchison’s also noted that the low turnover of stocks and concentrated portfolio made the offering suitable for an SMA model given it minimises trading costs and is relatively tax efficient.

Mr Dalton said;“Dalton Nicol Reid was established in 2001 and the Australian Equities High Conviction portfolio has returned12.1per cent p.a. over 10 years to October 2012.  Our investment style is based on buying quality stocks at reasonable prices and not deviating from this fundamental view has been the key to our success through the cycle. Couple this with a stable investment team for 10 years and we have put ourselves in a strong position to consistently outperform.”

“We currently manage more than $400 million for retail, institutional and wholesale investors.”

Dalton Nicol Reid uses a five-point quality matrix to identify relative quality of listed companies.  This includes balance sheet assessment, industry structure, management strength, earnings strength and ESG (environmental, social and governance).  Mr Dalton said there is a growing body of evidence that supports ‘quality’ investing.

“Research on quality investing has largely focused on the back testing of various quality screens to determine the impact of quality on returns.  On the whole, this research has shown a strong linkage between quality and performance over the medium and long term.”

“A quality portfolio will be agnostic to value or growth.   Following a quality investment approach allows us to identify companies that are mispriced by overlaying this quality filter with a strong valuation discipline.  It also allows us to enhance returns by identifying companies when they are out of favour.”

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