Charles Levinge

A $34 billion Australian superannuation fund has awarded a $700 million mandate to GSFM fund manager partner Payden & Rygel. The mandate funded in Q4 2023 at $400 million, with two additional contributions to the portfolio in 2024.

GSFM head of institutional business, Charles Levinge, said the super fund was looking for a diversified credit portfolio to complement its high-grade bond exposure, and the Payden Multi Asset Credit (PMAC) strategy was a good fit.

“This mandate is a reflection of the continued interest we’re seeing in strategies offering high yield-like return, with lower volatility, giving investors an attractive risk-adjusted option, within public fixed income,” Mr Levinge said.

“The strategy invests in a multi-sector portfolio of global government, corporate, securitised, and emerging market debt. It takes an active approach and moves dynamically across sectors and individual securities with the aim of achieving its return objective of overnight deposit rates plus 3-to-5 per cent.”

The strategy takes advantage of Payden’s broad investment resources by incorporating the most compelling risk-adjusted opportunities from each sector team.

Mr Levinge said the strategy is appropriate for those who are seeking to diversify away from traditional fixed income investments, and who are looking for diversified sources of income-producing assets.

“The strategy’s portfolio managers have the ability to opportunistically rotate in and out of sectors to capture compelling yield, optimal relative value, and potential price performance. They also take advantage of select and targeted opportunities with an overall credit quality below investment grade, to help achieve the return objective.”

Payden & Rygel portfolio manager, Eric Souders, said the mandate had been awarded at a time when investors are increasingly required to question what worked in the past, and whether other opportunities should be considered.

“The past few years have been unprecedented in terms of outcomes that should cause investors to ask questions about processes, behavioural biases, and lessons learned. Three distinct experiences that most investors have never experienced in their lifetime, let alone career, are: a global pandemic, developed market inflation approaching double digits, and developed market central banks increasing interest rates by hundreds of basis points within a 12-month time horizon.”

During this time, Mr. Souders said, the portfolio management team has learned that a repeatable and reasonably simple process is the ballast to consistent and informed outcomes.

“Understanding all positions in a portfolio and being able to remain flexible and adjust when currents change is key to mitigating downside and capitalising on opportunities. But perhaps most importantly, reflection on experiences, both good and bad, including honest evaluation of what is working well and what can be done better, is key. This includes a sober reflection on roles that asset classes play, behavioural tendencies, and reducing the proclivity for group think.”

“This is Payden & Rygel’s sixth mandate in the Australian market,” Mr Levinge said.

Payden & Rygel has A$236 billion in assets under management for clients around the world (at 30 September 2024).

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The PARI strategy is represented by GSFM in the Australian and New Zealand markets.

Charles Levinge, GSFM’s Head of Institutional Business, said the mandate will see the PARI strategy sit within Rest’s absolute return asset class.

“The key focus of the PARI strategy is on downside risk protection – with low correlation to equities, bonds and mainstream credit – and an overarching investment philosophy to preserve capital. It is a good fit with Rest’s portfolio. We are looking forward to partnering with Rest to deliver the best investment outcomes for its members” Mr Levinge said.

“In addition to preserving capital, the PARI investment approach aims to limit volatility and outperform the Benchmark over time using a multi-sector, absolute return fixed income approach,” he said.

Over each rolling three-year period, the portfolio aims to outperform the Bloomberg AusBond Bank Bill Index by two-to-three per cent gross per annum.

“The central pillar of the strategy is income generated from a highly diversified and rigorously vetted portfolio of global bonds. This stream of income provides the foundation from which the team adds shorter-term tactical views.

“Risk management is also key to the strategy’s investment philosophy. It relies heavily on the team of analysts and strategists to thoroughly understand the entities in which they invest and determine sectors that provide the most risk-adjusted value opportunities,” said Mr Levinge. 

In order to achieve its objectives, the PARI strategy focuses on the concept of smart yield. Smart yield seeks to capture income from front-end maturity fixed income, with an emphasis on the steepest portions of global yield curves by investing in quality names that have a high probability of ultimate pay-off.

“GSFM has an eight-year relationship with Payden & Rygel who manage over $2.8bn in Absolute Return and Global Corporate portfolios on behalf of Australian institutional and retail clients,” Mr Levinge said.

Payden & Rygel originated in Los Angeles and is an independent global investment manager. It was founded in 1983 and is privately owned by 30 senior executives. It currently has $175 billion in funds under management, $17 billion of which is invested in the PARI strategy.

Rest is an industry superannuation fund supporting Australian retail workers, and currently has around two million members with $57 billion in funds under management.

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Ian Patrick

Sunsuper has awarded US based fund manager, Payden & Rygel, a $150 million mandate to manage a customised version of the Payden Absolute Return Investing (PARI) strategy.

Payden & Rygel is represented in the Australian market by Grant Samuel Funds Management (GSFM) and manages over $1.3bn in Absolute Return and Investment Grade Corporate portfolios on behalf of institutional and retail clients.

PARI is an actively managed global fixed income strategy that is unconstrained by traditional benchmarks. It aims to produce stable returns over time, regardless of how the overall market performs, and to provide a gross return of 2 – 3% per annum above the Bloomberg AusBond Bank Bill Index over time. By comparison, Sunsuper’s customised mandate will target an excess return (before fees) of 1.75%.

Sunsuper is one of Australia‘s largest and fastest growing super funds with $50 billion in funds under management and more than one million members. Chief Investment Officer, Ian Patrick, says this mandate will benefit members investing in the Fund’s Balanced, Retirement and Conservative options.

“This mandate is one of the many innovative ways we’re adding value to our members’ investment returns to meet their retirement savings needs,” Mr Patrick said.

“Sunsuper’s size and experienced investment team allows us to access specialised overseas investment strategies and tailor portfolios that generate an attractive risk/return profile, provide diversification and deliver greater value for money.”

The customised PARI strategy will be used as an additional alpha source alongside Sunsuper’s internally managed cash plus portfolio.

Charles Levinge, GSFM’s head of institutional business, says this is Payden & Rygel’s second absolute return fixed income mandate in the Australian market.

“Being awarded this mandate is not only a reflection of the continued interest we’re seeing in PARI but also Payden’s ability to work with clients to tailor and customise portfolios to meet their specific objectives,” Mr Levinge said.

The PARI approach has been developed and refined over more than nine years, and has over $7 billion in assets invested on behalf of clients globally.

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Mr Levinge joins GSFM from Franklin Templeton Investments, where he has held the position of senior manager, institutional sales for the past nine years. At Franklin Templeton he was responsible for raising institutional assets across Southern Australia.

Prior to this he was head of business development for MMC Asset Management. Before moving into business development, Mr Levinge spent over 10 years in human resources management and consulting for a range of organisations including PricewaterhouseCoopers, Westpac, AMP and Clayton Utz.

GSFM has also promoted Mr Stephen Fletcher to head of retail distribution. Mr Fletcher has been with GSFM since 2008, most recently as state manager for Victoria and Tasmania. He will also report to Mr McIntyre.

Mr Fletcher has over 24 years’ experience in the financial services industry, spanning funds management and financial planning. He has worked in funds management business development for the past 15 years and this broad experience provides him with in-depth product knowledge across a broad range of asset classes, including Australian and global equities, fixed income and alternative investments.

Mr McIntyre said Mr Levinge and Mr Fletcher will be responsible for marketing the investment strategies of GSFM’s four local and international fund manager partners – Epoch Investment Partners (global equities), Payden & Rygel Investment Management (global fixed income), Tribeca Investment Partners (Australian equities) and Triple 3 Partners (managed volatility) – to institutional and retail investors respectively.

“These senior appointments will ensure GSFM maintains a dedicated focus of senior staff on servicing clients in the institutional and the retail space,” Mr McIntyre said.

“In line with our business growth goals, GSFM now has funds under management in Australia of $6.4 billion, made up of $4 billion from institutional clients and $2.4 billion from retail clients, and we are on track to expand on this during 2017.

“Charles has a proven track record of success at Franklin Templeton, and his experience in business development and human resources management means he brings a unique skill set to the role.

“With more than eight years experience at GSFM, Stephen brings a solid understanding of the retail business as well as established industry connections to his new position.”

Mr Levinge has an MBA from Macquarie University Graduate School of Business and a post graduate diploma in Human Resource Management from Macquarie Graduate School of Management.

Mr Fletcher has a Graduate Diploma of Commerce and an Advanced Diploma of Financial Services. He is currently studying towards a Master of Commerce at Deakin University.

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