Russell: Markets return to rewarding fundamentals over fear
Active management advantage reasserted
October 15, 2009 –Skilled active investment managers are emerging from the toughest recessionary environment in a generation and are adding value to equity and fixed income portfolios. Pete Gunning, Chief Investment Officer for Russell Investments, noted that not only are many of the more than 400 Russell multi-manager funds worldwide performing above benchmark year-to-date, but 2009 also currently ranks as an exceptional period for active managers generating above the benchmark returns.
“Fear no longer dictates the markets, and fundamentals have begun to matter again. We are now in an environment where skilled stock-picking by active investment managers adds value,” said Gunning. “The market is rewarding companies based on price, earnings, sales and other fundamental measures that differentiate the winners from the losers, so the opportunity for active management remains significant.”
Since the current market bottom at the start of March of this year, the Russell Australian Shares Fund, for example, has outperformed its benchmark by 6.8% through September 30. Similarly, the Russell Emerging Markets Fund outperformed its benchmark by 5.0%, the Russell Global Opportunities Fund by 3.5% and the Russell International Bond Fund - $A Hedged by 7.1% during the same period 1.
“Looking across our funds complex worldwide, we are feeling a sense of normalcy about the value of active management,” Gunning said. “We see an investment approach that stayed the course through an extraordinary market event and came out of it with our Investment Division’s value proposition intact.”
He added that in the build-up to the market collapse and in its aftermath, the market simply did not care about the value of individual stocks and gave investors practically no opportunity to discriminate between the winners and the losers. But all of that has changed in recent months with an increase in the performance differential between stocks and a continued shift toward a fundamentals-driven market.
“We’ve observed that during periods of high performance differential, managers who select outperforming stocks versus the benchmarks can be rewarded beyond normal expectations,” said Gunning. “Even still, the active managers that succeed always need more than volatility across sectors and within sectors. In constructing its multi-manager funds, Russell looks for active managers that are highly engaged and highly skillful and that have a clearly definable investment process that is executed with discipline.”
Gunning added that as the equity markets once again offer skilled managers with opportunities to add value, Russell’s Investment Division also emerges from the recessionary period with a restructured and streamlined operation globally with several key personnel shifts and additions as well as an intense review of risk management and oversight procedures.
“We’ve built our team structure in a way that aims to ensure global consistency of process, points-of-view, innovation, performance, operating standards and accountability,” said Gunning. “We’ve also organised around asset classes and solution sets. This approach strengthens our investment deliverable and allows us to build on our core strengths, while also recalibrating our model to allow us to function more efficiently within the global capital markets.”
112 month excess returns to 30 September 2009.
Fund Excess Returns over Benchmark, 12 months to 30 September 2009 |
|
Russell Australian Shares Fund |
4.70% |
Russell Global Opportunities Fund |
5.14% |
Russell Emerging Markets Fund |
3.95% |
Russell International Bond Fund - $A Hedged |
0.56% |
Issued by Russell Investment Management Ltd ABN 53 068 338 974, AFS Licence 247185 (“RIM”). This document provides general information only and has not been prepared having regard to your objectives, financial situation or needs. Before making an investment decision, you need to consider whether this information is appropriate to your objectives, financial situation and needs. This information has been compiled from sources considered to be reliable, but is not guaranteed. Past performance is not a reliable indicator of future performance. Any potential investor should consider the latest Product Disclosure Statement (“PDS”) in deciding whether to acquire, or to continue to hold, an investment in any Russell product. The PDS can be obtained by visiting www.russell.com.au or by phoning (02) 9229 5111. RIM is part of Russell Investments (“Russell”). Russell or its associates, officers or employees may have interests in the financial products referred to in this information by acting in various roles including broker or adviser, and may receive fees, brokerage or commissions for acting in these capacities. In addition, Russell or its associates, officers or employees may buy or sell the financial products as principal or agent. MKT/2260/1009