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Deutsche Asset Management (DeAM) has re-emerged with an active Australian fixed income mandate, just two years after selling its local businesses in bonds and domestic equities to Aberdeen Asset Management. The $120 million mandate is the first for the three-man team poached from Invesco’s Melbourne office a year ago – Chris Siniakov, Andrew Canobi and Steve Sutcliffe – and reflects a renewed interest in the asset class as governments and semi-governments bolster their debt issuance and increase opportunities for active management, according to DeAM’s Australian chief executive, Stephen O’Brien.
Siniakov, whose team manage the Australian component of DeAM’s global bond funds, was recently awarded a seat on the manager’s global process management group for the asset class – joining a group of seven out of 150 fixed income executives worldwide. After finalising a deal to exit retail distribution in Australia – outsourcing responsible entity duties for its funds to Wilson HTM and distribution rights to former CEO Chris Larsen’s new Ironbark venture – DeAM has stepped up marketing of its mandate-based offering to the wholesale market.
Property and alternatives are currently the biggest Australian-sourced wholesale asset classes for DeAM (it manages infrastructure portfolios for State Super NSW, for instance) however a local institution has just awarded it a $500 million mandate for an ‘index plus’ global equities process known as ‘Diversification Based Investing’. “It was designed for the Ford Pension Plan in the US, with the goal to diversify returns away from typical active managers and consistently outperform, with less downside risk.
For the last eight years the strategy has outperformed in every single year and has added an average 250 basis points to the global benchmark,” O’Brien said. “It takes sector and regional tilts to diversify away from momentum, but it’s priced like an indexing strategy. Investors are closely monitoring their fee budgets and they’re looking at different forms of enhanced beta, and this is definitely in that space.”
O’Brien has embraced the theory that institutional investors are beginning to seek larger relationships with fewer service providers. “Funds want to use every source of research and ideas that are available, and that includes their funds managers,” he said. As for DeAM making a return to Australian equities, that other asset class in which it sold its local business to Aberdeen two years ago, O’Brien said only “watch this space”.
