SMSF Awards 2017: International shares winner

02-Feb-2018

By Penny Pryor

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Magellan Financial Group distribution general manager Frank Casarotti has a simple definition for the firm’s approach to managing international equities.

“Ultimately we want to achieve a reasonable rate of return for a decent level of risk,” Casarotti says.

“What we’re saying is everything we ultimately do within the strategy must align with that.”

The strategy has recently cracked its 10-year anniversary and Casarotti, along with co-founder and chief executive Hamish Douglass, is obviously delighted the manager has been able to achieve consistently strong returns.

This involves investing in extremely high-quality companies, invariably multinationals, and companies that are able to exploit competitive advantages in order to earn returns on capital well in excess of their cost of capital.

In terms of change in the past 12 months, Casarotti says there has been a move towards a greater exposure to mature tech stocks in its funds.

“Some of the key holdings – Microsoft, Alphabet, Oracle, eBay, Facebook – there is a really solid exposure, they are all broadly categorised as technology, but they are very different businesses.”

These dominant players can have 30 per cent, 40 per cent or up to 50 per cent market share of their expertise and have moved well beyond the start-up definition.

When it comes to SMSFs, Magellan has a unique proposition for a trustee’s international equity component, which Casarotti says appeals to advisers working in this space.

“Our story around diversification is in the sense of genuinely trying to complement an SMSF’s portfolio, which is invariably overweight domestic equities, domestic property and so on. We’re trying to bring a relevant complement to that strategy,” he says.

“I also believe the rise of true passive suits us down to the ground because we suit that very, very well.”

The Magellan portfolios are highly concentrated with 25 to 35 stocks. This makes it a nice satellite complement to passive investing.

But this doesn’t mean they are opaque and Casarotti stresses the manager goes out of its way to tell investors what it is doing and why.

“We spend a lot of effort telling people what we’re up to with their money because at the end of their day, it’s their money,” he reveals.

This includes roadshows, videos and fund fact sheets.

Magellan is across the trend of SMSF trustees looking to increase their international equity exposure.

“If you wound the clock back seven or eight years, maybe 10, you would struggle to find an SMSF with any active global equity exposure.”

But, with the likes of Magellan, it’s become easier than ever to invest in global opportunities and fund managers with this expertise.

It’s a simple play, but it works.

“I think advisers like the fact we’ve stuck to our core expertise,” Casarotti says.

“We’re not trying to be all things to all people.

“We like being a specialist in global equities and let somebody else be the expert in small caps.”

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