Since the emergence of “Modern Portfolio Theory” and the “Capital Asset Pricing Model” in the late 1960s, institutional investors have taken a quantitatively driven approach to portfolio construction, looking to create portfolio diversification and obtain better risk-adjusted returns by balancing their asset-class exposures. This journey has seen several important advancements in thinking about how to optimally achieve desired results.
Funds that want to take the total portfolio approach first need to get the total portfolio view. To do that they not only need data – and lots of it – but a rock-solid understanding of exactly how they’re going to use it.
Ignis helps Tyndall ride new defensive assets trend
(Pictured: Mike Davis)
Ignis Asset Management, a diversified UK manager with a strong capability in alternative fixed income strategies and liability driven investments, is entering the Australian market via a third-party arrangement with Tyndall Asset Management.
For Tyndall, the deal rounds out its debt offerings and sets up its growing range of strategies, thanks to parent Nikko AM’s capabilities and balance sheet, to capitalize on two strong trends in the marketplace – a search for new defensive assets and a demand for outcome-oriented investments.
Mike Davis, Tyndall’s managing director, said the new third-party relationship was not a philosophical shift for the group – from manufacturer to distributor. Tyndall has a multi-manager vehicle in Australia and Nikko has its World Series Fund Platform in Asia.
He referred to the seminal report by Goldman Sachs in 1994, of which he still has a copy, which predicted funds management firms would have to decide on one or the other: manufacturer or distributor. As it turned out, this was wrong. Or, it was at least 19 years ahead of its time.
The Ignis strategies to be initially offered in Australia are: the Absolute Return Government Bond strategy and Liability Driven Investment (LDI) solutions for institutional investors. It may also offer other Ignis investment strategies, such as emerging market debt, as part of its multi-manager and World Series Fund platform offerings in future.
LDI strategies have had a much slower take-up rate in Australia than in Europe or the US, primarily because Australia has the highest proportion of defined contributions funds in the world (more than 90 per cent of the super market).
However, as Davis points out, the trend to outcomes-oriented investing will require a new product suite and LDI is well-placed to add to that mix.
“There’s a change in mindset,” he says. What this means is that strategies originally designed for defined benefit schemes or insurance companies, both of which are focused on end-of-the-day dollar amounts, can be applied to the portfolios of retirees who, also, are less interested in relative returns or traditional benchmarks.
Nikko AM announced last month that it had acquired Australian-owned Treasury Asia from the Treasury Group, to round out its Asian equity capabilities, based in Singapore.
Ingis is part of the Phoenix Group of companies and has about A$110 billion under management. The offering includes equities, real estate and an alternatives fund of funds businesses.
