This performance[1] is ahead of its objective of cash + 5% per year, gross of fees, over rolling 3-year periods. The volatility of the fund over the four year period has been just 4.5% compared to global equity volatility of 10% (12.8% for Australian equities).

The GARS fund aims to offer investors a level of return that in the long term is likely to be similar to what they might expect from equity markets, but with lower levels of volatility. Specifically its target is cash + 5% measured over rolling three year periods. Established in 2006 for the UK market, the multi-asset strategy has been providing consistent returns with lower risk for investors globally.

Guy Stern, Head of Multi-asset and Macro Investing and Executive Board Director, Standard Life Investments, gave his views on why the fund and asset class have been so successful:

“We are pleased that an increasing number of Australian investors have been able to benefit from the strong returns and low volatility of this multi-asset vehicle. Since the global financial crisis in 2008, investors have increasingly searched for solutions that provide the return they need to stay ahead of their future liabilities, but also that this return be provided on a consistent basis with low volatility.

“GARS consists of typically 25 to 35 strategies that span global markets, each one selected for its return potential on a three year horizon. Crucially, we seek for the strategies to complement each other so the portfolio can work as a whole even when unexpected things happen in the markets. Aiming to deliver a positive return every year irrespective of market conditions requires a very well diversified investment portfolio.

“Our risk-based approach prevents concentrations of risk and ensures no individual strategy dominates the portfolio. The portfolio’s successful track record has been delivered through getting the right balance of investment positions to grind out a positive return rather than have any ‘star’ strategy dominating

“For example, in 2011 during the European sovereign debt crisis and the US Government losing its AAA credit rating, we were able to make money from a range of interest rate and volatility positions whilst equity markets declined. Then in 2012, we had a year dominated by a demand for yield, so our strategies in credit and Mexican Government bonds paid well, in addition to long equity.

“2013 was a year of the markets recognising the uneven nature of global economic recovery. Therefore being long the US Dollar and short both the Canadian Dollar and Australian Dollar provided good contributions, as well as being long equities.

“Going forward into 2014, GARS will continue to adapt its holdings to encompass the opportunities we see. In recent times the portfolio’s allocation has been moving away from yield-generating credit towards assets with earnings potential, including Global REITS and specific parts of equity markets. Investors have had increased appetite for risk assets which has created a wide range of investment opportunities for us. 

“Diversification is ever critical to the stability of our multi-asset portfolios, so a number of the GARS positions reflect the multi-speed nature of growth across different economies, the rebalancing of China, as well as the ongoing role that central banks will play in the coming quarters.”

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