The partnership, involving a minority equity purchase by Pinnacle, ushers in the next phase of growth for the $4 billion Melbourne-based boutique investment manager on the dawn of their 10-year anniversary.

Omega co-founders Andrew Gruskin and Mathew McCrum, together with the Omega team, will retain majority ownership and control of the business.

“We are thrilled to enter into this new phase of Omega’s growth that will be bolstered by our strategic partnership with Pinnacle which brings perfect alignment to our core values and culture” McCrum said.

“Pinnacle has one of the most proven distribution teams, providing a strong boost to Omega’s market profile and penetration, that will help us to use the breadth of our investment experience and capabilities to bring to market a greater range of products and services to new and existing clients. In addition to bolstering Omega’s distribution efforts, Pinnacle will provide strategic, commercial and governance input to the Omega management team,” he said.

“We are seeing strong investor demand for Omega’s smart beta strategies and portfolio solutions and this partnership will accelerate our ability to deliver on that demand. This strategic partnership with Pinnacle brings renewed energy to our business and creates longevity for staff and clients, while continuing to deliver our most important objective of producing outstanding outcomes for our clients.”

Pinnacle Managing Director Ian Macoun said, “We are excited to enter into a new strategic partnership with Omega at a time when factor based, smart beta investing is at a major positive inflection point. Omega will enhance our ability to bring multi-asset smart beta solutions to the market. Omega has a strong reputation for delivering high quality client solutions combined with innovative global investment capabilities off which we are eager to build future investment products.”

Omega Global Investors was advised by Nelson Lam and Glenn Dunn of Berkshire Capital as sell side advisors and Hall & Wilcox as Legal Advisor.

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The late George Vassos

Omega Global Investors (Omega) will host a February tribute to its co-founder and former managing director, Mr George Vassos, and all the money raised will support the Rare Cancers Australia charity.

George passed away in December 2016 from cancer aged just 46 years. He was survived by his wife Shannon and three young daughters. A tribute and celebration of George’s life will be held on 6 February 2018 at the offices of PwC in Melbourne.

Mr Vassos was a co-founder and former managing director of Omega Global Investors, a $4 billion Melbourne-based global investment manager launched in 2008 by Andrew Gruskin, Mathew McCrum and George Vassos.
Mr McCrum said George will be remembered as a committed family man, a trusted mentor and business partner and an important figure in the Australian financial services industry.

“George will be remembered as a loved and valued member of the broader community and as a role model for professionalism and integrity in the funds management sector. This event will commemorate his life’s achievements and celebrate his memory,” said Mr McCrum.

“All funds raised from the tribute will go to support Rare Cancers Australia, a charity close to George’s heart. George believed strongly in bringing people together to make a difference in the community,” said Mr McCrum.
Prior to co-founding Omega, Mr Vassos was employed for several years at Vanguard in Melbourne, where he helped to establish the fund manager’s relationships with financial advisors and others in the financial community. Vanguard has created an internal award in Mr Vassos’s name in recognition of his contribution to the Australian funds management industry. Before Vanguard, Mr Vassos also spent several years employed with the Colonial Group.

Tickets to the tribute are available for $150 per person and bookings can be made here. Guests will enjoy an evening of cocktails and canapes. Two-time Paralympian Kelly Cartwright will speak at the event. A silent auction will be conducted and raffles sold and all proceeds will be donated to Rare Cancers Australia.

SuperEd, the leading digital advice provider, and its Co-Founder, Jeremy Duffield, are also sponsoring the event.  Jeremy was Founding Managing Director of Vanguard Investments Australia when George joined. “I remember George fondly for his effervescence and drive, which helped the firm establish a beachhead in a new market for us. He was great as part of our team. We’re pleased to support this benefit for Rare Cancers Australia in remembrance of George.”

Andrew Gruskin, fellow co-founder, said George’s legacy would be long lasting. “Despite his absence, we are determined to carry forward the legacy and influence of George. The event will honour George, his family and his life.”

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John Moore

Omega Global Investors (Omega) has revealed details of a new equity income investment strategy, to be managed by recent senior hire to the firm, seasoned portfolio manager John Moore.

John is a specialist in structuring and managing strong-performing investment funds targeting after tax returns designed for specific outcomes, including low volatility, low drawdown and consistent income to investors.

“That pretty much describes the brief for the Omega Australian Equity Income Fund strategy,” John said.

“We are on track for an April hard launch. The regular income needs of Australian retirees, who want less worry about their capital and the opportunity for longer-term growth in their retirement savings, is the target market for the Australian Equity Income Fund.”

The strategy aims to deliver income of 4-6 per cent per annum whilst delivering half the volatility of the underlying sharemarket.

Mathew McCrum, Omega co-founder said John’s approach complements a groundswell by investors towards risk-managed, outcomes focused investment solutions.

“John’s proven background managing Australian equities to a defined outcome using various investment and protection overlays dovetails perfectly with our existing Smart Beta Plus capability,” Mathew said.

The strategy will have an effective market exposure of 50%. Our equity income strategy invests in a diversified portfolio of Australian shares allowing us to deliver more income from your shares but also provide protection from market falls.
“In combination the options and shares display quite different risk/return characteristics to other equity income funds,” John said.

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Ms Chai worked previously with AMP in the role of graduate actuarial analyst.

She holds a PhD in Applied Finance and Actuarial Studies. Her hire follows the recently announced appointment by Omega of Scott Lawrence as Head of Investment Solutions.

Mathew McCrum, Co-Founder and Director Investments with Omega, said Celeste will perform an important strategic support function within the investment team.

“Celeste brings strong skills in quantitative research and modelling. As demand for the unique Omega investment capability extends, her contribution to broadening our internal capacity is welcome,” Mr McCrum said.

“Momentum for the Omega partnership approach is building and we are pleased to be able to attract new investment talent to the team,” he said.

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On the contrary, the Omega research has shown that the application of its proprietary risk-controlled methodology is a highly reliable indicator of the likely performance of sovereign bonds issued by a range of nations.

The research is particularly significant because it provides guidance for investors in the face of the dramatic shift in the status of sovereign investing since major world events: the GFC, the actions of major governments in addressing it and the subsequent European sovereign debt crisis. 

“Not so long ago, sovereign debt from major developed nations was considered about as low-risk as you could get,” explained Mathew McCrum, joint head of investments at Omega.  “But post GFC, experience shows us that some of those assumptions no longer apply. The challenge for investors is how to make decisions according to information that’s accurate and relevant in the new environment.”

The desire to pinpoint the factors most relevant to sovereign bond investors in today’s environment has driven this latest Omega research, which back tests the efficacy of the ‘Omega Financial Health Rating’. This is one of a number of risk control tools that’s been used by Omega since its inception in 2008. It is focused on limiting exposure to losses resulting from sovereign defaults and downgrades.

The Omega system assesses both the financial strength and political risks associated with the country it is rating. The financial strength measures focus on a government’s ability to repay debt, and are currently based on the net debt to GDP ratio.  Political risk measures, on the other hand, address a country’s willingness to repay it.

More recently, Omega wanted to explore the potential benefits of enhancing the rating by including additional financial health measures.

“Within a fluctuating financial environment we wanted to see if certain additional measures will help provide a more robust account of a country’s financial health and are therefore a valuable indicator of the likelihood of default,” said Mr McCrum.

Those additional measures include the bonds’ cost based on ten-year-yields; length judged by average maturity; and momentum as assessed bysix-month changes in net debt to GDP.

The research and its findings
The research involved testing the existing Omega Financial Health Rating to see whether it limited exposure to downgrades; and whether it supported improved returns. Proposed additional health measures were also then tested. The benchmark used was the JP Morgan GBI Broad Index.
Ratings downgrades findings: 45 investment grade countries were split into quintiles based on the Omega Financial Health Rating for each year since 1999. The findings show a clear correlation between the resulting rating and future downgrades. For Omega’s investors, this translated to zero exposure to any of the 22 countries that experienced downgrades during the relevant period.

Returns findings: The yearly quintiles created from the Omega Financial Health Rating were compared with the one year forward total returns. The findings show that countries with a superior Omega rating had both larger average returns and reduced volatility of returns. For Omega’s investors this translated to increased return of 9% which was 1.10% over the performance benchmark.

Additional health measures findings:  The next step was to back test performance in relation to each of the proposed additional financial strength measures. For all four measures, the countries with the superior financial health rating tended to have lower volatility of returns, with all but the maturity measures also delivering higher average returns.

“One of our real concerns at Omega was that the current extreme risk aversion in the market would result in an approach that placed all sovereign debt into one basket, irrespective of its quality – and that investors would miss out as a result,” said McCrum.

“However our research clearly shows that using a comprehensive risk-control tool that’s built on a strong platform of objective economic and political measures gives us an accurate picture of the true risks that apply, and helps us make investment decisions accordingly. We’ve had some very good results in our funds this year and one of the key motivations for undertaking this research is that we are keen to maintain the high performance.

“We want to stay in front of changes to help us continue offering investments that deliver both maximum upside potential and protect on the downside. Because that’s what fixed income investing should be all about.”

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Omega has timed the release to capitalise on a renewed interest from institutional investors looking for a high quality investment grade bond portfolio with a stable return profile.  The fund will predominately invest in a combination of Australian government and corporate bonds.

 “Australia is in an enviable fiscal position compared to many other developed nations and Australian government bonds provide an attractive yield, especially on a risk adjusted basis. Australian corporate bonds also compare very favourably to their European and US counterparts, especially in the current market. This gives investors access to increased diversification and higher yields,” said Mathew McCrum, Omega’s Director of Investments. “All in all they carry much lower downside risk than those in almost any other developed country.”

The fund’s diversified portfolio invests in a range of quality Australian corporate, government, semi-government and mortgage backed security bonds, enabling access to issuers such as Rio Tinto, Woodside, BHP, Stockland and ANZ. 

While the domestic bond market is generally dominated by government issued bonds, Mr McCrum stresses the importance of a proactive approach to purchasing securities to avoid the pitfalls of following the herd. 

“It’s important to remember that there are still risks associated with bonds, so simply following the benchmark is inefficient.  At Omega we use a risk-controlled approach specifically controlling return volatility and we undertake a stringent screening process to identify high quality securities for our clients,” said Mr McCrum.

According to Mr McCrum, Australian bonds represent a great opportunity but are currently underrepresented in portfolios.  McCrum says Australians tend to have a total asset allocation to bonds of approximately 13 per cent compared to 50 per cent allocation to shares.  In other developed markets such as the G20 nations, the allocation is around 20-30 per cent.   

With market volatility and demographics of superannuation members migrating from accumulation to retirement phase, investment strategies have shifted focus to defensive assets.  Mr McCrum believes the Australian Bond Fund enables investors to tailor their asset allocation to best suit their investment strategies.

The Australian Bond Fund will be open from 9th September and will start with a $200 million FUM with a view to gradually increase its portfolio size.  The $200m investment into the Australian Bond Fund brings Omega’s total FUM to over $1 billion.

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