Russell has tweaked its Australian Select Holdings Fund which combines fund managers’ ‘best ideas’ in a single concentrated portfolio, increasing the frequency with which it rebalances and enhancing the weighting algorithm that skews the portfolio to those stocks with the strongest signals.
Kathy Cave, portfolio manager at Russell Investments, said the portfolio was rebalanced on a periodic basis, which had changed from monthly to fortnightly.
The move would increase the efficiency of the portfolio, leading to lower spread costs and increased speed of execution, she said.
“We look very closely at the trading costs as well as part of our model, and we are being more careful than in the past,” Cave said.
In addition, the fund, which includes stocks that are most favoured by a group of underlying external funds managers at a given time, has introduced an enhanced weighting algorithm which skews the portfolio to those stocks with the strongest signals.
“When we first did this we took those best ideas in a much more simplistic way,” Cave said.
“If two managers were overweight they would come into our buylist. What we’ve said now is if four managers are overweight, that’s a much stronger signal than if just two managers are overweight.”
The Select Holdings strategy was developed for US institutional investors in 2003, and was established in
Australia in
October 2006.
Russell has also altered the process it
uses to capture and exploit the diversity of the underlying managers’
investment processes.
Symon Parish, Russell’s chief investment
officer for
Australasia, said the concept
supports the ‘wisdom of crowds’ notion, which asserts that thought diversity
allows the predictive power of groups to rise above that of its individual
members.
Cave said: “If you have people that think
of the world very differently – the obvious example is a growth and value
manager – if both like stock ‘x’ maybe there’s more information in that than if
you have two or three growth managers all liking the same stock. So we give
that an extra weighting or kicker.”
