Colonial First State (CFS) has launched three hedged equities products that aim to smooth the ride for investors in the hope of keeping them invested during large market downturns.
The wealth management arm of CBA has teamed up with South African investment manager Sanlam Group to launch a suite of managed risk funds on the FirstChoice platform.
The new funds – the Sanlam Managed Risk Australian Share Fund, the Sanlam Managed Risk Global Share Fund and the Sanlam Managed Risk Multi-Index High Growth fund – are effectively three CFS index funds with Sanlam’s active risk management strategy overlayed on them.
The Sanlam strategy is managed by global financial services consulting firm Milliman and utilises short futures to hedge out risk.
According to Sanlam head of investments David Itzkovits, the managed risk funds aim to "smooth the journey" for investors by achieving lower returns in bull markets and losing less in bear markets.
CFS general manager for products and investments Peter Chun said a lot of thought had gone into the new Sanlam products.
"We’ve seen a lot of competitors come out with protected products [that are] expensive and inflexible [which] doesn’t fit with how advisers use them," Mr Chun said.
"It's no surprise most of them have not been that successful."
The partnership with Sanlam is a result of a "search around the world" for a solution that is cost-effective, flexible and "complementary to how advisers recommend strategies to their clients", Mr Chun said.
"There’s a lot of focus on maximising returns in this industry – that has been the game in the accumulation phase," he said.
"In the drawdown phase it’s not maximising returns – risk [management] is the new black. That’s why we’ve coined it 'managed risk' strategies. Risk is really critical for that retiree space."
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