In a telephone conference with several hundred financial advisers, MLC informed advisers that active managers with strong investment processes and strong investment discipline, are more likely to pick up stocks at very attractive prices relative to their medium-term growth
opportunities.

Jonathan Armitage, MLC’s Global equity portfolio manager said: “It’s times like this, where we continue to witness not just market volatility but individual stock volatility, that the critical role of an active manager, in producing strong returns, becomes really clear.

“If you look at the top 10 moves in the Dow Jones index since it was created in its current form back in the 1920’s, over that period, four of them have happened in the last two weeks.

“In the same two week period, we have also seen our managers, some of whom have been holding quite high cash positions which has held them in very good stead in the recent volatility, put that money to work and invest in some high quality stocks,” said Mr Armitage.

“Interestingly, last week we saw a surge in insider buying, not seen since March 2009. It was reported that 50 managers in over 60 companies in the US bought stock in their own companies, last week.

“The point is that an active manager will use this period of uncertainty and volatility to pick up very high quality stocks at what should prove to be extremely attractive valuations for the medium term,” he said.

MLC also launched a brand new online Market Volatility Toolkit, built in response to the market volatility of the last two weeks, which supports financial advisers have conversations with their clients during these uncertain times and provides them with a range of useful tools and the
latest information.

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Russell’s Volatility Toolkit offers daily perspectives on changes in capital markets relying on its strong team of over 500 global investment professionals. It also contains a range of educational articles covering topics such as: ‘behaviours that threaten your financial security, ‘investment strategies for the worried and confused; and ‘how you can learn from volatility’ with historical overviews of previous market cycles.

Investors are also given tips on how to ride what Russell has coined the ‘cycle of market emotions’, enabling them to better distinguish between points of maximum financial risk and maximum financial opportunity in the markets.

The new toolkit follows the launch of Russell’s Helping Advisers website in July this year. Russell’s Chief Executive Officer for Australasia, Chris Corneil, said the toolkit was part of Russell’s ongoing commitment to improving investor education. 

“Given the recent market movements and the likelihood of continued volatility, it’s not surprising investors are experiencing some anxiety and uncertainty. We have a responsibility to give investors as much guidance as possible so they can make more informed decisions about their investments now and in the future,” he said.

The toolkit also offers institutional investors up to date information on how Russell’s own portfolios are being managed and adjusted to deal with and take advantage of market volatility. To support clients through this period and help them manage stakeholder concerns, Russell’s institutional and adviser clients will be able to re-issue any materials from the online toolkit. Materials, including videos, will be accessible to all online and via Twitter.

Russell’s market outlook

Russell’s believes the US and global economies will continue on a path of gradual recovery, even though that recovery is fragile and sub-par.

“We think market sentiment is fluctuating more dramatically than changes in the underlying economic fundamentals. For this reason, we don’t recommend investors reposition their portfolios to cash at this time. Well-diversified portfolios will cushion the effects of market volatility,” said Andrew Pease, Chief Investment Strategist, Asia Pacific at Russell.

According to Russell, for many investors with well-diversified portfolios and a medium to long-term perspective, staying with their strategic asset allocation is in most cases a preferred option.

“The current market volatility may cause actual asset allocations to diverge from their strategic benchmarks. We would encourage investors to rebalance their asset allocation as volatile markets take them away from their long term strategic asset allocation,” Mr Pease added.

“Like all investors we are riding the rollercoaster of volatility but we are confident our team of experts have the knowledge and experience necessary to guide us and investors through this challenging time,” Mr Corneil concluded.

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