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    Vector Insights

    Russel Chesler, Director, Investments & Portfolio Strategy

    Over the last decade factor-based investing has increased in popularity, especially in international equities where there is academic and practical evidence to support particular strategies. Understanding factors can help investors achieve their long term goals. For international investing over the long term, there is a clear winner.


    US Equity

    by Brett Liddell , CFA

    A comeback story for US Moats in November which recovered and outpaced stocks across the US.

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    International Equity

    by Brett Liddell , CFA

    Since its launch in October 2014 the VanEck Vectors MSCI World ex Australia Quality ETF (ASX: QUAL), the first smart beta international equity ETF on ASX, has outperformed the MSCI World ex Australia Index by 1.63% p.a. returning 15.96% p.a.

    QUAL’s Index has demonstrated outperformance over the long term through a variety of bull and bear markets. Whether you are a bull or a bear, with a single trade on ASX you can use QUAL to invest in 300 quality international companies.

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    Australian Equity

    28 November 2017

    The Smart Contrarian

    by Brett Liddell , CFA

    A contrarian investor buys when the herd sells and sells when the herd wants to buy. Some of the most famous contrarian investors include Marc Faber, George Soros and Jim Rogers. They all have one common trait. They buck conventional trends and focus on profits rather than popular opinion.

    An equally weighted portfolio is inherently contrarian as every three months, the ETF’s portfolio is adjusted back to being equally weighted.  It does this by selling the stocks which became a bigger portion and buying more of stocks which became a smaller portion of the portfolio.

    Contrarian trading is one of the reasons VanEck Vectors Australian Equal Weight ETF (ASX: MVW) has outperformed.

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    Vector Insights

    by Russel Chesler , Director, Investments & Portfolio Strategy

    Factor-based investing involves identifying the dynamics of an investment that drive its return. It has become more common in recent times, often involving the 'quant' factors that active fund managers have been using for decades to sort the wheat from the chaff.

    Factor-based investing has long been a part of institutional investors' portfolios and academics have backed its investment benefits through numerous studies.

    It's no surprise then that the ever-innovating ETF industry is now making factor-based investing more accessible than ever through a new subset of smart beta ETFs and retail investors are flocking in droves.

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    Australian Equity

    by Brett Liddell , CFA

    The correlation of Australian stocks, that is their tendency to move up and down together, is at its lowest level in four years.  Most active managers claim that when there is greater stock dispersion and less correlation it opens the window for achieving outperformance.  However, the recently released SPIVA Australia score card however indicates that this is easier said than done.

    One way an active manager will attempt to justify their fees is a measure called ‘active share’ which indicates how much a manager’s portfolio differs from the benchmark index.

    High fees can be justified if there is both high active share and outperformance.   There is a way to invest in a portfolio with low fees and as active share is comparable to active managers which has also demonstrated consistent outperformance relative to the S&P/ASX 200 since its inception, beating it by an average of 3.93% per annum since March 2014. 

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    International Equity

    by Brett Liddell , CFA

    Picking the right stocks when investing internationally is no simple feat because there are a number of additional risks including geo-political issues, currency and other idiosyncrasies not typically found in Australian equities.  Navigating these risks among many thousands of securities demands skill and discipline.

    The notion of quality investing is deeply embedded in Benjamin Graham’s ‘intelligent investment’ philosophy, one which his disciple Warren Buffett has made into a perpetual habit. Using the quality principles advocated by Graham and Buffett when investing internationally, can add significant outperformance over the long term via a single trade on ASX.

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