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Is your manager complementary (Part II)?


Is your manager complementary (Part II)?

We have been asking the question whether or not our global offerings are likely complementary to existing client portfolios. We recently analysed the characteristics of the Montgomery Global Fund relative to major Australian peers and concluded the following:

“The Montgomery Global Fund has delivered attractive returns over its 15-month life to date – beating the market and most major Australian peers. But in addition, these returns have been delivered in a way that is likely highly-complementary to many existing portfolios. The Montgomery Global Fund brings with it lower correlation to the market and higher capital preservation than Australian peer group managers.”

Today, we examine the characteristics of Montaka. First on fund returns, after expenses, over the period since Montaka’s inception on July 1, 2015. As illustrated on the chart below, Montaka has delivered returns materially above the market; and above most major Australian peers as well.

Fund Performance, After Expenses (July 1, 2015 to September 30, 2016):


Source: Morningstar

Note: Peers include Antipodes, K2, Morphic, Platinum, PM Capital 

But similar to the Montgomery Global Fund, it is not just about the returns that make Montaka interesting. An examination of the return characteristics suggest Montaka is likely highly-complementary to other strategies that may already exist in your portfolio.

Of particular note is Montaka’s correlation to the global market as well as to major Australian peers. Spend some time examining the correlation matrix below. Each box reflects the correlation of the returns of the two numbered strategies that correspond to the matrix cell.

What becomes very clear are two observations:

  • Montaka’s correlation to the market is by-far the lowest of the peer group; and
  • Montaka has by-far the lowest correlation to peers. It truly stands out as being unique.


Source: Morningstar

A manager that can add value with a low correlation to one’s existing portfolio is extremely valuable. Blending high-quality strategies with low correlation to each other boosts the diversification benefits to the overall portfolio.

Finally, we examine the upside-downside capture of Montaka relative to the peer group. As a reminder, the way to read the chart below is as follows:

  • The further to the left you are, the lower the amount of downside you capture when the market turns down (a highly attractive feature – and a measure of capital preservation); and
  • The further to the top you are, the higher the amount of upside you capture when the market rises (also an attractive feature).

As shown, Montaka is a complete outlier on the chart with enormous downside protection. For us, this reiterates the message that Montaka exhibits a very different return profile to that of its major Australian peers. And this is valuable for owners of the strategy.

Screen Shot 2016-10-17 at 4.00.11 PM

Source: Morningstar 

On the basis described above, Montaka has delivered attractive returns over its 15-month life to date. But in addition, these returns have been delivered in a way that is likely highly-complementary to many existing portfolios. Montaka brings with it very low correlation to the market, extremely low correlation to peers and significantly higher capital preservation than Australian peer group managers.

Andrew Macken is a Portfolio Manager at Montgomery Global Investment Management. Andrew joined Montgomery in March 2014 after spending four years as a Research Analyst under Jim Chanos at Kynikos Associates in New York.


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This post was contributed by a representative of Montgomery Investment Management Pty Limited (AFSL No. 354564) and may contain general financial advice that is prepared without taking into account your personal objectives, financial circumstances or needs. Because of this, before acting on any of the information provided, you should always consider its appropriateness in light of your personal objectives, financial circumstances and needs and should consider seeking advice from a financial advisor if necessary.


  1. Andrew, doesn’t the last graph show comparatively poor performance for Montaka on the Upside (40%), although it performs well against peers (graph 1)? I am an inaugural investor in the Montaka GA fund.

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