The purpose of index funds and ETF’s are being misused by placing too many of the growth assets of the portfolio into these options. It will only be apparent to investors when they retire as to what price they have paid while accumulating by being in low MER funds.

“Index funds are exposing investors to 100% of the volatility of the equity markets. With such a volatile outlook, investors would be much better served by having a portion of their equity investments in strategies that have the potential to soften the blow in a falling market”.  Investors should be made aware that the cost savings resulting from investing in these passive strategies will be insignificant in the event of a severe market correction” said Russel Pillemer, Chief Executive Officer, Pengana Capital.

Financial advisors should also be investing their clients into equity strategies that are designed to generate positive returns irrespective of movements in equity markets. Examples of these strategies are equity market neutral long short and special event strategies.

Pengana is finding strong demand from independent groups who have moved quickly to restructure their approved product lists and models in order to include these strategies in the face of increasing uncertainty and volatility in Global and Australian equity markets.

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The product is primarily a fundamental strategy seeking equity market exposure to companies in the Asia-Pacific region, with a historical concentration in China and Hong Kong shares.  

In our view, Pengana is a fundamentally focused long/short equity manager seeking to provide intelligent equity market exposure that incorporates global macro and currency assessment and minimises drawdown through reducing beta exposure during negative market environments. 

“We see the strength of the team is in their demonstrated understanding of multiple factors that drive equity returns in the region including China government policy, investor sentiment, and global macro risks,” said S&P Fund Services sector head Michael Armitage. 

Historically, the manager has exhibited low correlation with Asia-Pacific equity market indices providing diversification benefits for investors. 

Over an investment cycle of five or more years, we would expect the manager to outperform and deliver returns with lower volatility of the relevant index.

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