After the Hayne Royal Commission many advisers decided to steer away from large dealer groups in favour of becoming self-licensed. In the last six months, however, that trend has taken an abrupt turn.
While known for being the flagbearer for financial product providers, the Financial Services Council is now making serious inroads into the financial advice sector.
Market snapback likely to be ‘short-lived’, short positions warranted: Sage
The current Australian reporting season is likely to go down as a positive one, according to Sean Fenton, chief investment officer at Sage Capital, a specialist long-short manager. After a strong year for the group’s landmark Absolute Return strategy, which overcome broad-based falls in nearly every sector to deliver a double-digit positive return, Fenton thinks “a lot of bad news has been priced-in,” setting individual companies up for a rally.
Fenton highlights the “significant valuation multiple compression” experienced by many companies in 2022 – with 60 per cent of the S&P/ASX 200 index now trading 20 per cent off their 12-month highs  – as a key reason for positive moves in the short-term.
“A lot of bad news has been priced-in and earnings or outlook statements that are not as bad as expected could drive material share price rebounds” he tells Inside Adviser. Â
After a financial year result that saw the ‘market-neutral’ long-short strategy post a positive return of 19.3 per cent when nearly every other major market in the world finished sharply lower, July was more challenging as a market rally caught several short positions off-guard, sending the strategy 4 per cent lower.Â
While the value of long-short and market neutral strategies is well-understood in investment markets, there has been massive divergence between the performance of the best and worst strategies, with Sage comparing well to the significant losses of other strategies where many under-appreciated style biases were evident amid the global selloff.
The premise remains to ensure that portfolio returns are influenced by “individual stock drivers” and that it also “hedges systematic market risks”, meaning that if the market collapses, these funds should always outperform, which is easier said than done.
The weak performance In July was driven by a number of short positions, with positive results seeing the share prices of Wisetech, Pinnacle and Zip all jump sharply, something that Fenton does not believe is sustainable.
On the return of risk appetite, “this a false signal driven by a sharp inventory cycle that is causing manufacturing to soften,” says Fenton, who retains a “cautious stance towards markets” with margins likely to come under pressure in the months ahead.
