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Is your manager complementary?


Is your manager complementary?

It can be hard enough to identify a skilled fund manager who follows a logical investment process with the utmost discipline, integrity and transparency. But when you do find one, the next question, of course, is: how does this new manager complement my existing portfolio?

There are a number of aspects to being complementary. It is not just about generating outsized returns. If the incremental manager also brings with them, say: a more attractive upside/downside capture; or has a lower correlation to the market and/or peer group managers, then this is typically desirable.

We recently asked such questions of the Montgomery Global Fund for the 15-month period since its inception on July 1, 2015 to the end of the most recent month on September 30, 2016.

First on the fund’s returns delivered, after expenses, relative to peers: The Montgomery Global Fund has not only outperformed the market, it has outperformed most of its major peers.

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


Source: Morningstar Note: Peers include IFP, MFS, Magellan, Perpetual, Platinum, Walter Scott

But is this enough for investors who already own a selection of other high quality managers? Will the acquisition of the Montgomery Global Fund simply result in a doubling up of ideas?

To test this, we examined the correlation between the Montgomery Global Fund and the global market; and compared this to peer group correlations, as shown below. What is interesting is that the Montgomery Global Fund has the lowest correlation to the global market of the peer group.


Source: Morningstar

Finally, we examined the upside-downside capture of the Montgomery Global Fund and compared this to peers, as shown below. The way to read this chart 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 by the chart, the Montgomery Global Fund is furthest to the left of the peer group which suggests it exhibits the highest degree of capital preservation of the peer group, according to this measure. Meanwhile, the Fund’s upside capture is around 90%. Delivering the upside, while protecting the downside is a hugely valuable attribute.
Screen Shot 2016-10-10 at 4.08.05 PM

Source: Morningstar 

On the basis described above, the Montgomery Global Fund 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. The Montgomery Global Fund brings with it lower correlation to the market and 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. Anton du Toit

    If I’m reading the small font correctly, the Montgomery Global Fund’s correlation to the MCSI World Index over the time period was 0.89. The correlations of the other funds were 0.90, 0.93, 0.95, and 0.98. As Brent says above, it is a short period, but nevertheless, the difference in the correlations looks like statistical noise to me.

  2. Hi Andrew, as you guys are experts in online classified businesses, what do you think of Schibsted Media Group, listed in Norway? May be a good holding for the Global funds. Its a bit complicated, as its not a pure online classified business, but leading positions in cars, real estate and jobs in France, Spain, Norway and Sweden etc. but somehow the same market cap as REA. Seems to have great potential. See:

  3. Come on guys, 15 months is hardly in the rehelm of statistical significance? (at least in certainly won’t be if the fund ever has to explain an extended period of under performance). Also, if we are going to discuss how the global fund might work within a portfolio containing those peers then it’s correlation of excess returns, not absolute that should be measured. Otherwise, For a strategy like this the correlations are mostly capturing beta, hence why the spread in peer correlations is a mere 6 basis points.

    • Hi Brent, you are correct. The period is very short, which is what we point out BUT it IS all we have. We have to start somewhere and we’ll keep updating as we do with all of our funds. It is an encouraging start.

  4. Unfortunately still not available yet on Netwealth.
    Despite being talked about for months.
    Why is it taking so long?

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