In early 2011 the New York Federal Reserve Bank President, William Dudley, was in Queens communicating the success of the bank’s monetary policy efforts. Whilst the crowd members were concerned about the rising cost of food and gas, Mr Dudley tried to explain that other costs were falling and used the example of an iPad. Then came the famous heckle, “I can’t eat an Ipad”, which has now entered into folklore.
In many ways this basic misunderstanding of what matters most to ordinary people is reflective of the investment management industry and its focus on relative returns. Relative returns is an investment strategy based around matching or outperforming an index or benchmark, such as the Australian sharemarket. In many cases it matters not whether the index has fallen or risen, but simply how the performance has compared. The retort one could make to such an investment philosophy is that you can’t eat or live off relative returns.
Our focus is on achieving absolute returns. What this means is that our starting point is the clients’ own objectives. We then design investment portfolios that we believe are best placed to meet these objectives. We have the freedom and the flexibility to include the assets and investments best placed to match the clients’ needs and expectations, rather than replicate an index.
With this investment philosophy, we are seeking to capture the upside during the good times, but protect the capital through the bad times. Ultimately, we believe that over the full investment cycle this will provide a much better outcome for clients and provide them with the greatest probability of meeting their objectives.