Mr O’Dea said, “It’s fantastic to receive this acknowledgement from Zenith, and we very much appreciate their ongoing encouragement to the industry to provide innovative solutions for retirement.”

According to Mr O’Dea, one of the biggest investment challenges facing people who are close to retiring, or already in retirement, is how to generate a sustainable return as well as manage end-of-cycle risks when defensive assets, such as cash and bonds, offer returns lower than inflation.

Mr O’Dea commented, “We believe it is important to have alignment between what clients need to retire comfortably and portfolio construction decisions. Perpetual’s Diversified Real Return Fund is designed for investors looking for a smoother investment journey without sacrificing returns over the investment cycle. Every investment decision is linked to a simple overarching objective which is to make our clients’ retirement savings last for as long as possible.”

The Perpetual Diversified Real Return Fund is a multi asset strategy which invests across a range of strategies, regions and sectors. The Fund targets a pre-tax return of 5% per annum above inflation, before fees, over rolling five-year periods.

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Michael O’Dea

Advisers and investors are increasingly turning to real return investing as part of modern portfolio construction.

Real return funds have grown exponentially in recent years. In the past five years, real return funds have more than quadrupled to almost $10 billion in assets,^[1].

Real return funds are designed to provide a higher certainty of achieving a real return objective with a lower level of risk and lower sensitivity to extreme market events.

Perpetual Head of Multi Asset, Michael O’Dea, believes investors and advisers have gained a greater appreciation of the benefits of using real return funds.

“Real return strategies offer investors the convenience of an expanded set of investment opportunities within a single fund. In addition, these funds have tremendous scope to adjust the asset allocation, based on the manager’s view of the likely returns and risks of any asset class.

“Leading real return funds can also utilise investment strategies such “relative value” to exploit risk and return imbalances between asset classes. This enables investors to better diversify risk and enhance their return.

“At Perpetual, we focus on providing investors with genuine diversification by investing in high quality opportunities at reasonable prices with a specific return target.

“Our investment philosophy is based on value as the key driver of investment decisions across all asset classes. We construct the portfolio from investments with the highest probability of achieving the investment objective, rather than managing portfolio risk to a peer group. This promotes a close alignment between the client’s investment goals and the portfolio we manage on their behalf.”

Commenting on the importance of diversity in portfolio construction, Mr O’Dea cited a recent WealthInsights report noting multi asset strategies now compose up to 19% of investor portfolios, up from an average of eight per cent in 2007,^[2].

“Real return strategies offer a breadth of investment ideas and portfolio construction that can protect and grow investors’ capital.

“We monitor these opportunities and manage the portfolio on a continuous basis, to ensure the right balance between risk and return,” said Mr O’Dea.

The Perpetual Diversified Real Return returned 7.9% net per annum over the past five years to 31 May 2017, exceeding the CPI+5%p.a. objective over a five year period,^[3].

The fund has a ‘Recommended’,^[3] rating from Zenith and Lonsec in recognition of its strong performance and experienced team.

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Zenith’s and Lonsec’s confidence is underpinned by the well-resourced investment team and strong collegiate environment upheld by Perpetual Investment’s Head of Multi Asset Michael O’Dea.

As at 31 December 2016, the Perpetual Diversified Real Return Fund returned 9.0% p.a. (before fees and taxes) exceeding the CPI+5%p.a. objective by 1.9% p.a. over a five year period.[4]

The Fund has also delivered volatility of just 3.4% p.a. compared to the Mercer Balanced Growth Median Fund of 6.3% p.a. since inception.[5]

The Fund leverages Perpetual’s 20 years of success in active asset allocation, and is managed by a six-person investment team with an average of 17 years’ industry experience.

Mr O’Dea said that in his opinion the upgrades were testament to the team’s expertise and ability to deliver attractive returns and protect capital during periods of market volatility.

“Multi-asset investing continues to be increasingly attractive to investors seeking investment opportunities which balance the desire for return with risk management.

“This year will likely once again be challenging, with ongoing uncertainty over the post-US election outlook and potentially rising bond yields,” said Mr O’Dea.

Mr O’Dea believes the current environment is an ideal time for investors to explore multi-asset offerings to diversify and protect their portfolio against such risks.

“Perpetual’s Diversified Real Return Fund is designed to act as a ‘shock absorber’ during periods of extreme volatility, offering a simple solution for investors looking to diversify their portfolio without sacrificing the potential for growth,” said Mr O’Dea.

The Fund has a broad investment universe and employs an objective-based approach, allowing the team to alter the asset allocation in response to market changes and risk expectations.

“Perpetual has a proven value investing philosophy that has stood the test of time. With market volatility expected to continue, we expect this Fund will increasingly be an important part of client investment strategies moving forward,” said Mr O’Dea.

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[1] ‘Recommended’ products are deemed strong investments within their respective asset class, typically rating first quartile on most criteria. Source: Zenith.
[2] Source: Lonsec, Fund Review: Diversified Real Return Fund; Zenith Product Assessment: Perpetual Diversified Real Return Fund
[3] Ratings is only one factor to be taken into account when deciding whether to acquire or hold units in the Fund.
[4] Source: Perpetual, FactSet. Australian CPI is at 31 December 2016. Past performance is not indicative of future performance.
[5] Source: Perpetual, Mercer MPA Investment Performance Survey of Wholesale – Balanced Growth as at 31 December 2016.

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Michael O’Dea

The Perpetual Diversified Real Return Fund (the Fund) has exceeded its targeted return of CPI +5%p.a. to deliver net returns of 7.5% per annum over a rolling five-year period to 31 December 2015.

The Fund delivered volatility of just 3.5% per annum compared to the ASX200’s annualised volatility of 12.2% during the same five-year period[1].

In an environment of low interest rates and climbing equity market volatility, the Fund’s active and value driven approach offers investors a prudent alternative to protecting and growing capital.

Head of Multi Asset, Perpetual Investments, Michael O’Dea said: “Real return funds are becoming increasingly attractive to investors and advisers seeking investment opportunities which balance the desire for return with risk.

“Perpetual’s Diversified Real Return Fund is designed to act as a ‘shock absorber’ during periods of extreme volatility, which means investors are less likely to suffer large losses when the market falls.

“By actively and continually altering the asset allocation in response to changing market conditions, the Fund aims to provide greater certainty of investment outcomes in volatile times and give investors peace of mind.”

Continuous risk management and a broader range of investments are key features of the Fund, ensuring a lower level of sensitivity to extreme market events.

Real return funds provide investors with greater diversification beyond the more popular asset classes, such as equities, cash and bonds, by including listed commodities, currencies and derivatives markets as well as access to unlisted property and infrastructure.

“In a climate of low cash rates and low government bond yields, selecting less risky investments merely results in achieving low returns. When inflation is also taken into account, there is a genuine risk of not growing capital above rises in the cost of living.

“Real return funds offer a simple solution to today’s complex problems faced by investors, helping them access a wide variety of asset classes they may not be able to hold directly, without taking on more risk than they can afford to take,” Mr O’Dea said.

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[1]Morningstar Direct. Figures are net of fees.

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Mr O’Dea will join Perpetual Investments in late May from JANA where he is currently Head of Investment, Implemented Consulting.

Having spent 13 years at JANA, Mr O’Dea brings to the role deep experience in investment and implemented consulting, multi manager search and selection and strategic and dynamic asset allocation.

Michael Gordon, Group Executive Perpetual Investments, said Mr O’Dea’s client focus and proven investment abilities make him the right choice for the role.

“Michael is an experienced investment professional with a strong track record in asset allocation and investment management.

“With his broad range of skills and expertise, Michael is well placed to lead the team, meet client objectives and achieve further growth for Perpetual,” Mr Gordon said.

Mr O’Dea will be responsible for leading the team’s wholesale balanced, diversified and conservative growth strategies, with a focus on delivering client centric products and capabilities and FUM growth. Perpetual currently has $3.0 billion of FUM in Diversified Strategies*.

Prior to his role as Head of Investment, Implemented Consulting at JANA, Mr O’Dea held a number of positions at JANA including: Principal, Alternative Investment Solutions; Consultant and Head of Absolute Return Research Team and Research Associate (Alternatives and Global Equities).

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