Volatility needs active investment: Nikko AM

Volatility needs active investment: Nikko AM

Investors are more likely to navigate current market volatility and achieve returns if they adopt an active investment strategy, says Nikko Asset Management.


Speaking at the Nikko AM ForewordAustralia event on Tuesday, William Low, Nikko AM's head of global equity, said certain companies and countries will feel the effects after quantitative easing (QE) by the US Federal Reserve expires next month.

Because of this, investors should be more selective and seek out companies which will likely flourish despite the changes, he said.

"We're in a diverging world of winners and losers," Mr Low said. "That is exactly what we're focused on when we pick 40 to 50 stock portfolios. We're trying to find the winners in this world that are going to survive."

As a way to stay afloat, Mr Low recommends working with some of the many investment strategies today that tout discovering a formula for figuring out who the winners and losers are.

"It's all computer-driven, risk-driven, smart beta-driven – they're the solutions that will help you find your way through the markets in a world where great monetary experiment continues to evolve before our eyes," he said.

"No one really knows how this monetary experiment is going to evolve... So having an investment team with a lot of experience and [one that] could potentially join the dots to work out who the winners and losers are, we think that's more likely to be a powerful strategy rather than an index strategy."

Mr Low added that the chance of there being QE in the future is slim.

Investors should not be surprised when they consider markets and economies are still being dictated by unprecedented levels of monetary stimulus, he said.

"Therefore, assuming that equity exposure is best achieved through a wide breadth of exposure (index investing) or based on assumptions that certain styles of investing will slavishly follow patterns that prevailed prior to QE, is debateable in our view," Mr Low said.

"Instead, building a portfolio of companies that are more likely to flourish in the growth environment beyond 2015 is, we believe, a more worthy strategy."

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