Key benefits of the Russell Investments Dynamic Real Return Funds
Best of breed
We don't place artificial restrictions on the products or styles that we use.
We don't limit our options to proprietary strategies.
We scour the globe for the best investment opportunities, no matter where they reside, to include our funds.
Our Dynamic Real Returns Funds are managed by Russell Investments' global multi-asset team with a robust track record.
The team has spent decades refining our approach to multi-asset investing, both through empirical research and direct observation. When you invest in one of our funds, you gain access to all of this experience and expertise.
Direct global insight
Our scale allows us to place specialist researchers 'on the ground', closer to the markets they manage. With direct access to underlying managers, they have greater insight into their portfolios. Ultimately leading to higher quality investment insight within our funds.
Why are advisers and investors turning to real return funds
Investments built for the times
In todays' low return, high volatility environment, traditional investments are increasingly unlikely to achieve your long-term goals. Term deposits are no longer outperforming inflation. While Australian shares have potential, they come with substantial downside risk. A risk that could see you fall short of your investment goals.
By contrast, real return funds target a shares-like, inflation plus return, with substantially reduced downside volatility.
Real return funds are able to achieve this through three main characteristics. Greater asset allocation, allowing portfolio managers greater discretion to align the portfolio with real time market dynamics. Increased use of downside protection, offering greater cushioning during a downturn, at a marginal cost during growth periods. And a CPI+ objective, more closely aligning the portfolio objective with investors expectations.
With these fund characteristics in mind, we are seeing advisers and investors shifting to real return funds for 3 main reasons:
To increase growth potential, without increasing volatility.
To help reduce draw-down risk in volatile markets.
Greater alignment of client expectations with fund objectives.
Russell Investments Dynamic Real Return Funds
The Dynamic Real Return Funds give investors access to traditional and non-traditional asset classes - including equities, fixed income, real assets, alternative yield sources, non-directional absolute return strategies and esoteric investment strategies - that may not be accessible to the average investor.
For example, your portfolio could benefit from:
- long or short-term absolute return strategies that do not depend on the underlying direction of the share market
- volatility strategies that reduce the funds' reliance on traditional equity risk premia
- robust strategies that invest in quality high-yield credit securities
- alternative yield sources, such as senior bank loans, that reduce exposure to rising interest rates
- alternative real assets, such as global listed property, infrastructure and commodities
- specialist insights into regional share and bond markets, including emerging markets in Asia, pan-Europe and Japan.
We manage short-term market impacts through dynamic-asset allocation and other sophisticated overlays positioning the portfolio for current and expected conditions. This means asset allocations are rapidly adjusted if the portfolio manager perceives the risks to be too high or when attractive new investment opportunities appear.
Beyond asset allocation and manager selection, the funds use a number of strategies to reduce downside risk. Two notable active strategies include shares substitution and shares downside protection. These strategies are particularly important in market environments like today, when share valuations and downside risks are both high.
Shares substitution strategies see the funds invest in asset classes that offer equity-like returns, but with less risk. For example, in 2016 high yield bonds and Australian bank loans were key share replacement strategies. In 2017, emerging market local debt and global bank loans have been successful strategies. These strategies have enabled share exposures to be reduced to one third of the portfolio, while maintaining growth expectations.
Shares downside protection is utilised for the remaining shares exposure. Both our US and European equity exposures employ option protection, executed by Russell's fiduciary team, further protecting downside risk.
These strategies enable the funds to meet the reduced volatility targets.
Senior Portfolio Manager
& Managing Director,