This article originally appeared in Australian Financial Review
CATEGORY: Other Asset Classes
A relative newcomer to managed accounts, Real Asset Management took out the Other Asset Classes category at the IMAP Managed Account Awards.
IMAP congratulates all the finalists in the Other Asset Classes category: DFS Portfolio Solutions, Mason Stevens, Prime Financial Group, Real Asset Management and Royston Capital
You would be forgiven for not recognising the name Real Asset Management (RAM). Established in 2013, RAM is an Australian owned wealth and asset management firm, focused at providing tailored investment solutions to high-net-worth clients and family offices across the Asia Pacific region.
With $800 million in funds under management, RAM provides portfolio based solutions that focus on generating reliable income for clients, with over 53 per cent of FUM in fixed income and 39 per cent in direct property.
Whilst the RAM brand is relatively new, the investment and senior management team have decades of experience with Australian managed accounts, direct property and within private banking. As a growth opportunity, RAM launched SMAs to deliver its high quality SMA strategies to a broader audience.
RAM took out the Other Asset Classes category at the IMAP Managed Account Awards for its Diversified Fixed Income & Credit Strategy, which forms part of its managed accounts offering to advisers and dealer groups.
“We are an active investor and take a risk-adjusted approach to portfolio construction. We blend a range of security types and structures to deliver on the investment objective.” — Michael Frearson
The SMA comprises government bonds, cash, subordinate/senior debt and hybrid securities via direct securities and exchange traded products (ETPs).
According to RAM Director – Portfolio Manager, Michael Frearson, winning the award speaks to the quality of process, performance track record, investment team and the hard work RAM is putting into its investment portfolios and resources for advisers. “We are very pleased that our Diversified Fixed Income & Credit Strategy SMA was recognised by our peers, given the high quality of entrants,” Michael says. “We’re pleased that the judges liked our risk-adjusted approach to portfolio construction, our strong demonstration of adding value and the managed account specific resources we can offer dealer groups and advisers.”
PHILOSOPHY
According to Michael, as part of RAM’s approach to investing, it aims to bring institutional quality investments and strategies to private clients in a simple and transparent solution, and the managed account structure closely aligns with that philosophy
“We are an active investor and take a risk-adjusted approach to portfolio construction,” he says. “We blend a range of security types and structures to deliver on the investment objective.”
As part of RAM’s philosophy to investing, it also takes advantage of the retail trading behaviour in listed markets to add value with limited risk. As a manager with a nimble amount of FUM, RAM looks to actively exploit shorter
term opportunities to add value within the discretionary environment, drawing on its bottom-up research process.
“We believe strongly in diversifi cation and look closely at the quality of the issuer of the debt or hybrid instrument.”
INVESTMENT PROCESS
The investment process at RAM revolves around the active management of the portfolios, which requires taking a risk-adjusted approach at all times. Michael says the starting point for RAM’s investment process begins with careful analysis of the issuer, which includes both the quality of the issuer and the quality of the security.
According to Michael, the RAM scores company issuers on a range of criteria, such as management, capital position, earnings outlook, and the risks that the issuer faces.
“We have a detailed process reviewing the terms of issue on each ASX-listed credit instrument and also ETPs. From there, we have a proprietary ranking system, where each security is given a specifi c RAM security score based on structural subordination and the company scoring. This provides us with a consistent score that we can use to rank the universe of eligible investments,” he says.
“The increasing complexity of hybrid securities requires specialist knowledge to appropriately determine relative value.”
In addition to applying its proprietary scoring for companies and securities, RAM also models the investment universe on an aft er-tax basis, using in-house modelling. This gives the managers a snapshot of valuations at any point in time, providing a consistent approach to aft er-tax valuation when selecting investment opportunities.
RAM’s uses a top-down overlay to guide subsector positioning, which is about 20 per cent of its alpha delivery and process, with the remaining 80 per cent from bottom-up analysis and portfolio construction.
“From top-down, we’re looking at the outlook for interest rates, credit, risk premiums, the economy and infl ation. We also have a strong focus on the global outlook and global risks, because that really does fl ow through to Australian interest rates and credit spread movements,” Michael says.
EARLY DAYS
With RAM’s Managed Account Strategy only kicking off in 2017, Michael says it’s still early days to measure the overall success of this off ering, although admits that clients are already attracted to the risk-adjusted approach to portfolio construction and the specialist expertise available.
But when it comes to measuring the success of its investments, RAM is old school, with success measured by ensuring the investment delivers what the client wants.
“When advisers invest their clients’ wealth with us, they’re expecting we achieve the required investment objective, which is to provide a tax-eff ective income stream with low levels of volatility. So, that’s what we’re aiming to deliver.”
“The increasing complexity of hybrid securities requires specialist knowledge to appropriately determine relative value.” — Michael Frearson