February marks the second anniversary of Hollard Investments’ unit trust funds, with every one of them beating its benchmark and six out of eight producing top-quartile results. The investment team’s understanding of clients’ needs resulted in them creating five building-block funds (one for each key asset class) and three funds of funds (FOFs) which each combine several asset classes.
The two-year anniversary has also seen a reduction in fees on Hollard’s funds, ensuring that they deliver value not only through their performance but also by minimising the cost to clients. Hollard has reduced most of the funds’ fees by between five and fifteen basis points and has never charged performance fees, believing that clients deserve all the benefits of upside performance.
Positioning themselves between multi-manager and single-manager funds, Hollard Investments selects a single manager for each of the building block funds who specialises in that specific asset class. The Hollard FOFs are then constructed from these building blocks, managing the asset allocation strategies to achieve their multi-year performance objectives of inflation + 2%, 4% or 6%. All three of the FOFs have achieved top quartile performance, with the Strategic Balanced fund coming in the top five funds within its sector, countrywide.
“Our unique single manager approach helps us to outperform the funds’ benchmarks, freed from the dilutionary impact on performance that results from multiple managers in the same asset class,” explains David Green, Hollard Investments’s Chief Investment Officer. “We choose not to diversify at manager level, but to focus instead on carefully diversifying across asset classes and making sure we capture the most powerful drivers of performance.”
This makes the selection of the manager for each building block crucial to the success of their strategy. Hollard Investments undertakes thorough due diligence, involving both quantitative and qualitative analysis of each manager’s investment style, through-the-cycle performance, experience and skill set. The investment team not only tracks their own managers but also a benchmark of peers to understand the selections being made by other managers and their drivers of over- and under-performance.
“One of the things we do well is to ask ourselves the hard questions and be honest when things occasionally go wrong. Proactively engaging with our managers to oversee how they position our portfolios given the uncertainty of the world’s financial markets, has also been an advantage,” adds Conlias Mancuveni, the fund manager of the three FOFs. “We are crystal clear about what we believe drives performance, which allows us to ensure that the value we capture will help our clients achieve their objectives.”
The four key factors that determine asset allocations (economic regime, expected returns, potential risks and a “reality check”) are rigorously assessed, both discreetly and in an integrated manner each month. This includes a focus on capital flows globally and likely returns, which may lead to a progressive tilting of portfolios away from expensive and toward cheaper assets.
Although the future is always uncertain, 2016 looks set to be even more uncertain than usual. Hollard Investments’ view is that the team’s process is well suited to deal with the complexities, and that times like this will continue to prove the value of their rigorous approach to investment fundamentals and limiting downside risk.
“Our understanding of investment risk is based on world-leading theory from the foremost academics in the field. We are however clear that risk can’t be reduced to a single number. Models and processes help you get to a decision but it’s at that point that the process ends and judgement must be applied. Model-based systems learn slowly because they have to accumulate data over many years – human beings adapt more quickly. So we encourage robust debate across the specialist focus areas in our team to ensure that we typically make high-quality decisions,” concludes David.
Hollard Investment Managers (Reg. No. 1997/001696/07) is an authorised Financial Services Provider.
