Investment Education
Forum
This newsletter addresses industry issues or advanced investment topics suitable for supplementing your investment knowledge. Copies of the papers listed below can be found under the investment education section of ClientLINK.
Fundamental Indexation: Revolutionary or just another quant value strategy?
First Released: July 2008
Are market capitalisation (cap) weighted indexes an inferior species that should be replaced by fundamental indexes? In this edition of Forum, Rob Pereira argues that replacement of market cap weighted indexes as the benchmark of choice is inadvisable. The historical outperformance by fundamental indexes is intimately related to the performance of value stocks. For investors who want increased exposure to value strategies, there are more effective approaches than simply adjusting the index. In any case, it is Russell’s belief that a more balanced multi-style strategy that is carefully constructed around market cap indexes will provide more consistent alpha over time.
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Members or Investors
First Released: July 2008
Superannuation funds (and those that operate them) are subject to a bewildering tapestry of laws, regulations and general law principles. In an ideal world, these rules would all emanate from a single, cohesive and coherent set of assumptions. But is this an ideal world? In this Forum, Scott Donald, Director of Fiduciary Research, demonstrates that far from being
an ideal world, the laws relating to superannuation contain fundamental inconsistencies.
These inconsistencies are evident in the way different parts of the law characterise members
of superannuation funds as alternatively ‘beneficiaries’, ’employees’, ‘customers’, ‘investors’
or ‘citizens’. In the end, trustees and others with responsibility for superannuation funds must focus on the best interests of those they serve, recognising the unique role that superannuation plays in the provision of post-retirement income for the Australian population.
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Boutique Investment Managers
First Released: May 2008
Are boutique managers a good way to add some spice to your equity portfolio? What are the risks of being left with a bad taste? This Forum examines the growth and lifecycle of boutique equity managers in the Australian market. In the recent past, the typical boutique has generated attractive returns in the years following inception, even after adjusting for risk. However, excess returns tend to fade over time, and not all boutiques succeed. Maximising the benefi ts of investing in boutiques requires identifying the right managers; accessing them early; and monitoring their portfolio, performance and organisational structure for signs of a shift in focus. Effective manager research is an essential ingredient, particularly in the current diffi cult market environment where business models as well as investment processes could come under pressure. Now more than ever is the time for prudence and careful research when looking to ‘spice up’ your portfolio..
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A Model for Portfolios
First Released: May 2007
Investors today are besieged by new investment ideas and by risks they cannot quantify. This is a perennial issue, but at times it also seems as if the rules of the game have changed. Should they be calculating risk budgets, porting alpha, enhancing beta and pursuing skill-based strategies? Or should they be exploiting the illiquidity premium by investing in alternative assets? In this Forum, Scott Donald and Andrew Lill discuss how Russell’s Model Portfolio helps investors make sense of the opportunities and manage the risks they face.
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Buying Australian: A Down-Under Perspective on the Rise of Private Equity
First Released: May 2007
Money has been flowing into the coffers of private equity funds, driving a flurry of buyout activity which has most recently extended interest to Australian icons like Coles and Qantas. After coming to terms with the proposition ‘buy Australian’ is good, we are now faced with daily warnings that private equity funds ‘buying Australian’ firms is bad. In this edition of Forum, Andrew Lane and Dr. Andrew Goddard place the recent buy-out activity in context, and conclude that whilst there are consequences for Australian investors, our financial markets and the economy, they are mild and not altogether negative.
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The importance of being focused in fixed interest transitions
First Released: March 2007
The convergence of liability-led strategies and a renewed focus on risk management may potentially lead to major changes in super funds’ asset allocations. Such asset movements can add a significant amount of opportunity costs – risk and performance drag – as they occur. In this edition of Forum, Russell’s John Moore explains how the risks of equity-to-fixed transitions are typically higher, and therefore the performance impact can be as high or even higher, than is the case for equity-to-equity transitions. Super funds will be well-advised to pay the same attention to the risks and costs of fixed interest transitions as they routinely pay to equity transitions.
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Forum: Infrastructure - A public good for private investment
First Released: March 2007
In this edition of Forum, Dr. Andrew Goddard follows the trend towards private provisioning of infrastructure, drawing examples from the more developed markets in the UK and Australia. Dr. Goddard then outlines the major characteristics of this unique asset class and its appeal to superannuation funds.
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Australasian Investment Summit 2006
First Released: January 2007
What are the issues of tomorrow? How will the superannuation and investment industry change in the coming years? What are the implications for particpants today?If you were unable to attend last year's summit, this special online feature highlights the major trends and findings of the topics addressed.
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Note: These articles are presented in PDF format. You must have Adobe Acrobat Reader installed on your computer to view PDF files.
