SMSF trustees and fund managers alike need to pay more attention to the investment outcomes they are trying to achieve and not be distracted by the underlying elements being used to achieve the result, a global investment executive has said.
“Unfortunately in the investment industry we are very, very focused on the underlying components. My job in my capacity is to effectively wax lyrical to you today about why we’re overweight in Rio Tinto and underweight in the CBA (Commonwealth Bank of Australia), so we’re very focused on the underlying stock decisions,” Schroders investment director Oliver Trusler told delegates at the recent selfmanagedsuper Trustee Empowerment Day 2017.
“But what we’ve been talking about over the last 10 years is we want to evolve the way that we’re thinking to get away from the underlying components and start thinking about the solutions and start thinking about the outcomes that we’re really trying to achieve.”
To this end, Trusler encouraged SMSF investors to break away from conventional performance benchmarks to use a measure that is more suited to themselves.
“The starting point for your portfolio should be zero and then you can build the portfolio that is appropriate to your outcomes and appropriate for your needs,” he said.
“Build the solution that works for you, not some arbitrary benchmark because it’s easy for a computer to generate.”
Along with a greater focus on outcomes, Trusler also advised SMSF trustees to pay more attention to risk as well as return.
“Lots of people, and unfortunately the whole world because of Bloomberg and newspapers, focus on return and that’s typically on page one of any product pitch,” he said.
“Everybody just wants return and nobody is really that focused on the risk side.
“We want to give you a better risk-adjusted return, so we want to consider both sides of the equation.”