Navigating market ups and downs through experience

June 2019

The end of last year kept investors at the edge of their seats as extreme bouts of volatility hit international markets. Global markets have since rebounded, but investors could be forgiven for wondering whether their hard-earned savings are in the right place.

The conventional wisdom among most fund managers is that investors should take a longer-term view, which Investment Manager for QuayStreet Asset Management, Andrew South, generally agrees with.

“One of the least understood factors from an investor perspective is the imperative for people to be in the right investment at the right time. If your investment matches your risk and return appetite and your personal timeframe then you shouldn‘t really worry too much about what the markets are doing. A 75 year old with little or moderate savings and low tolerance to volatility, investing in a high growth fund is totally inappropriate. And on the flip side a 30 year old with a long investment timeframe in a conservative fund can be equally as unsuitable”.

Describing diversification as “the only free lunch” remaining in investment markets, Andrew says that QuayStreet offers the appropriate fund for every life stage. “With a range of ten funds we’ve got something for everyone whether it is early years building up wealth, through to retirement where income becomes more important.”

From the high-risk Altum Fund to the highly conservative Fixed Interest Fund, QuayStreet’s actively managed funds traverse the risk return spectrum. In between there’s the NZ Equity Fund, currently New Zealand’s top performing KiwiSaver Fund*, and the Socially Responsible Investment Fund – the longest running fund of its kind in the local market.

QuayStreet’s investment philosophy saw the growing business win industry recognition as Boutique Manager of the Year at the 2018 FundSource Awards.

While many of the larger players are moving toward using algorithms and computer-based trading systems to arbitrage short term gains, QuayStreet’s Investment Manager James Ring believes that their active management with a focus on medium to long-term investment ideas is the right recipe for sustained outperformance.

“Our focus is on outperforming the market by taking a view two, three and four years out and we’re happy to wait for our investments to compensate us for that longer-term view.”

According to Andrew, “if you can’t understand a business, you shouldn’t be investing in it. That’s a pretty simple investment philosophy for us.” Using traditional research and analysis, there is a relentless focus on the selection of quality businesses with sustainable business models and margins. “Ultimately we look for companies which operate in growing markets with potential to grow their market share” adds Andrew.

Investing in ‘sunrise’, rather than ‘sunset’ industries, with future growth potential is a key factor to deliver performance according to James Ring.

It’s clear that QuayStreet understands how to size its investment positions. “We’re constantly looking at where we are on the risk curve, to ensure we take on enough risk to maximize returns but still stay within the set risk range for each fund” says Andrew.

Not afraid to take a larger position in a stock if they like it, they’re also very aware that “things can go down as well as up” which generally means even the best investment ideas are purchased over a period of time, not all at once.

In a tight knit and nimble team, experience also counts.

Andrew has chalked up more than two decades as an investment manager while James has had more than thirty years in the industry.

Both have probably researched, bought and sold most of the listed securities in the Australasian market a couple of times over during their careers, and they have also been through the roller coaster of several investment cycles. “We’ve had three or four up and down cycles in the last thirty plus years so we think we’ve got quite a decent skill set to navigate both types of markets” says James.

Since its inception five years ago, QuayStreet has experienced rapid growth with the funds under management nudging $900 million. It’s a figure which James believes is “very scalable” given their investment experience in managing much larger sums - and the relationship with parent Craigs Investment Partners.

“We get the best of both worlds, being able to operate with Craigs providing both administration and compliance resources, whilst we focus on what makes us tick - assessing stocks and markets to provide the best outcomes for our funds” concludes Andrew.


*According to Sorted Smart Investor and FMA KiwiSaver Tracker online tools.