While bound by an ethical and legal obligation, their actions can directly impact the individual members, participants and beneficiaries they represent.
Rather than trying to be the source of all wisdom, an investment committee exists to protect assets and enhance returns by providing a series of checks and balances.
I like to think of them like a thoughtful and considered oversight committee, where we check and test every decision.
With a core belief asset allocation is the most important determinant of portfolio returns, Alvia’s investment committee has established a rigorous set of investment principles to frame decision making, assess investment opportunities and monitor portfolio performance on a risk-adjusted basis.
These principles include a comprehensive approach to risk management with the aim of building portfolios which will remain resilient over the market cycle.
A three-year performance comparison shows Alvia, as an agile fund, is outperforming larger balanced funds due to a range of factors including asset class diversification, swift responsiveness and its investment committee that checks, questions and tests every decision.
Data comparing the median investment performance of large Australian institutional super funds with that of Alvia Asset Partners revealed a 7.17% per annum performance gap in favour of Alvia.
The results tracked investment performance from 31 May 2020 to 31 May 2023. In that time, Alvia delivered a three-year per annum return of 15.3%, while the seven larger funds delivered a median three-year per annum return of 8.13%.
I worked in superannuation for a long time and if you could be something like half a percent to a percent above the average, over the long term, you’d be a top quartile performing fund.
And if you were 1.5% above the average, you’re probably top of the pops over that horizon. A 7% out-performance is enormous. It’s a stunning result for a family office investment management firm.
Alvia’s investment committee assesses each investment on its own merit and it’s important to emphasise this impressive result hasn’t just come about because we loaded up on risk, or from one or two lucky decisions, it’s come from a breadth of places where all asset classes have outperformed their benchmarks.
The key to outperforming as an agile fund is firstly the asset allocation – how the assets are spread around the various asset classes.
Secondly, it’s what you do within the asset classes. It’s about how you change the mix of the asset allocation over time, moving money from equities to cash, or bonds to equities, or to alternatives.
There’s clear evidence Alvia has been successful at actively managing the asset allocation and adding value over time.
Alvia excels by being open-minded. We do not pigeonhole ourselves by focusing on a particular sector, geography or size. For example, the ability to assess a small-cap business trading on a much more attractive multiple than a large-cap one in the same sector is not in the remit of many large institutional fund managers. Alvia’s focus lies in solid, financially sound companies with a value-oriented approach that will deliver strong cash flows through the cycle, without regard for arbitrary restrictions.
Agile funds invest in a different manner to large funds. They’re not constrained by size; they can be nimble and assertive during down markets and take opportunities when they arise.
Big funds have $200 billion or $300 billion invested. You can’t change that asset allocation quickly. And often those large organisations need prudent layers of risk controls, governance and approvals. That can stifle what creates the value, which is the ability to make good investment decisions in a timely manner.
By Jim Christensen, Investment Committee Chair
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