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Australia Active Insights

Transforming pure insights into alpha

Overview

"Traditional" active fundamental equity portfolios which depend on style or factor mean reversion to drive alpha are often associated with high tracking error and longer time horizons. We recognise that these types of portfolios are increasingly becoming less aligned with the risk budget of asset owners facing strict performance benchmarks such as the Your Future, Your Super (YFYS) performance test. However, we still believe that true alpha is best derived from fundamental analyst insights.

The Martin Currie Australia (MCA) Active Insights strategy invests in a diversified portfolio of ASX-listed equities. We aim to provide investors with a ‘goldilocks’ efficient portfolio with consistently higher returns than the benchmark with a lower tracking error by focussing on our investment team’s ‘pure’ fundamental insights and minimising unnecessary style factor and sector risks relative to the S&P/ASX 200.

With the influence of style factor cyclicality and sector biases substantially reduced, and with deep fundamental insight and disciplined risk control, we believe the MCA Active Insights strategy offers benefits distinct from active fundamental portfolios, systematic smart beta or passive strategies.

Key Pillars of the Strategy

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Proprietary multi-lensed research by an experienced team

The MCA team has over 40 years of experience investing in Australian equities and listed Real Assets using a disciplined and repeatable multi-lensed investment approach.

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Combining fundamental research with risk control

Our stock ideas are grounded in our fundamental, bottom-up Valuation research. Risk is managed by incorporating our Quality, Direction Short-Term and Direction Long-Term lenses.

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Fully integrated fundamental Active Ownership approach

Responsibility for Active Ownership lies directly with the research analysts and portfolio managers responsible for making investment decisions.

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Unique portfolio stabilisers that minimise unnecessary style factor and sector risks

Our proprietary Mispricing process combines our fundamental research expertise with proprietary alpha & risk signals to identify attractive stocks that help to neutralises the influence of style or sector bias

We believe that our long-term track record in alpha generation through varied market cycles demonstrates our ability to deliver investors with a more persistent and efficient alpha stream at a lower cost, in a way that is difficult for passive, systematic or quantitative strategies to emulate.

Key Information

Portfolio characteristics Australia Active Insights
Objective Long-Term Growth
Asset Class Equities
Style Core
Investable Universe Australian listed securities
Benchmark S&P/ASX 200 Accumulation Index
Market capitalisation All cap
Country limit N/A
Sector limit Benchmark +/- 6%
Security limit Benchmark +/- 4%
Number of stocks Typically 60
Portfolio turnover Typically 40% p.a.
Forecast tracking error Typically 2% p.a. (ex-ante)
Inception 24 November 2021

Key Benefits of the Australia Active Insights strategy

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A smoother alpha stream with style control

Alpha generated with lower tracking error and factor influence, independent of mean reversion, can reduce the risk of extended periods of under-performance that exceed the time horizon and relative risk tolerance of most investors.

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Greater net of fee portfolio efficacy

With the potential for greater portfolio efficacy (such as information ratio and fee per unit of alpha), and alpha unbiased by the influence of factors whose use may be widespread elsewhere in a client’s portfolio, the strategy may be suitable for use within asset allocations that are subject to YFYS performance tests, and tighter tracking error targets/risk budgets

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Lower cost access to true fundamental insights

With lower fees than traditional active strategies, we offer the cost-effective fundamental insights and Active Ownership approach of a highly experienced investment team, alongside the disciplined risk control of a more systematic strategy.

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A key role to play within modern portfolios

Potential uses include:

  • a complementary exposure alongside existing passive or smart-beta factor portfolios, without additional factor & sector risk; and
  • a replacement for an Active Fundamental strategy, either stand-alone or within a multi-manager Australian equity roster.
  • Investment team

    The Active Insights strategy is co-managed by Matt Davison and Sam Li.

    The strategy is supported by the broader MCA investment team through detailed fundamental research analysis across MCA's four research lenses for each company within the investment universe.

    In addition, our quantitative research function is continually looking for new ways to improve the investment process and the efficacy of our stock decisions and portfolio risk/return outcomes.

    Our capabilities

    Please visit our contact page or speak to a member of our sales team, to discuss the most appropriate investment to meet your requirements.

    Ross Kent

    Ross Kent

    Ross Kent

    Ross Kent

    Client Portfolio Manager,
    Australian Equities

    T: +61 (0) 3 9017 8629
    E: rkent@martincurrie.com.au

    Felicity Walsh

    Felcity Walsh

    Felcity Walsh

    Felicity Walsh

    Managing Director,
    Australia and New Zealand

    T: (02) 9250 2200
    E: felicity.walsh@franklintempleton.com

    Center Heading

    Latest insights


    Important information

    This information is issued and approved by Martin Currie Investment Management Limited (‘MCIM’), authorised and regulated by the Financial Conduct Authority. It does not constitute investment advice. Market and currency movements may cause the capital value of shares, and the income from them, to fall as well as rise and you may get back less than you invested.

    The information contained in this document has been compiled with considerable care to ensure its accuracy. However, no representation or warranty, express or implied, is made to its accuracy or completeness. Martin Currie has procured any research or analysis contained in this document for its own use. It is provided to you only incidentally and any opinions expressed are subject to change without notice.

    The document does not form the basis of, nor should it be relied upon in connection with, any subsequent contract or agreement. It does not constitute, and may not be used for the purpose of, an offer or invitation to subscribe for or otherwise acquire shares in any of the products mentioned.

    Past performance is not a guide to future returns.

    The distribution of specific products is restricted in certain jurisdictions, investors should be aware of these restrictions before requesting further specific information.

    The views expressed are opinions of the portfolio managers as of the date of this document and are subject to change based on market and other conditions and may differ from other portfolio managers or of the firm as a whole. These opinions are not intended to be a forecast of future events, research, a guarantee of future results or investment advice.

    The analysis of Environmental, Social and Governance (ESG) factors forms an important part of the investment process and helps inform investment decisions. The strategy/ies do not necessarily target particular sustainability outcomes.

    Risk warnings – Investors should also be aware of the following risk factors which may be applicable to the strategy shown in this document.

    • Investing in foreign markets introduces a risk where adverse movements in currency exchange rates could result in a decrease in the value of your investment.
    • This strategy may hold a limited number of investments. If one of these investments falls in value this can have a greater impact on the strategy’s value than if it held a larger number of investments.
    • Smaller companies may be riskier and their shares may be less liquid than larger companies, meaning that their share price may be more volatile.
    • The strategy may invest in derivatives (index futures) to obtain, increase or reduce exposure to underlying assets. The use of derivatives may restrict potential gains and may result in greater fluctuations of returns for the portfolio. Certain types of derivatives may become difficult to purchase or sell in such market conditions.