The hunt for yield and the challenge of managing overall risk in rethinking defensive allocations
Global Investment Insights
with Will Hamilton, Managing Partner, Hamilton Wealth Partners
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Will is a Managing Partner at Hamilton Wealth Partners with more than 30 years spent in the financial industry, advising many families and individuals through many investment cycles endured, both in Australia and overseas, giving him a thorough understanding of the complexity and unpredictability of markets. Yet, Will remains excited by the challenge that no cycle is ever the same and that each cycle provides a unique learning opportunity. “Yes, the past can provide experience, but you can never rely on it as markets are dynamic, they change and the rate of change we are witnessing at the moment amazes me”, Will highlighted.
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No cycle is ever the same and each cycle provides a unique learning opportunity.
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Will’s role currently sees him focused on three main areas.
2021 has seen strong new client flows, and he is committed to ensuring clients have a great onboarding experience in bringing this business on.
Secondly, ensuring staff are coping with the protracted period of lockdown endured, particularly in Melbourne, Victoria. “I call every staff member daily and literally check in. I found at the start of the lockdown that the younger members of our team were doing it tough and Monday mornings were difficult after a weekend where they couldn’t do what young people should be doing”, Will remarked.
The other key area of focus for Will is ensuring that the business is maximising the value from the heavy investment made in technology, the catalyst for which have been the changes to business operations brought about by COVID-19.
“We have spent the last eighteen months introducing software at both, the back-end, to make our staff life easier and, at the front end, to increase the experience for clients. We have also introduced hardware in all our meeting rooms to provide a live digital experience for our clients. However, implementing the software is the easy part, ensuring as a business that we are optimising usage and benefits is the harder part and it is my focus to ensure a better experience for our staff and our clients”, Will highlighted.
More broadly, from an industry perspective, the advice side is going through enormous change in its desire to be recognised as a profession, according to Will.
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Although I believe regulation is important, I am also of the opinion that there should be a process to look at the regulatory framework and, where possible, simplify it.
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“Structural barriers have come from within the industry itself. The industry failed to self-regulate and the industry bodies, I don’t believe, have been good representatives for the industry, as self-interest dictated a lack of willingness to change.
The industry is changing and had to change with the introduction of Professional Standards and minimum educational requirements (in the interest of disclosure I am a Director of Financial Adviser Standards and Ethics Authority, FASEA).
This has created a lot of disruption and, in many instances, pain, but it is difficult to introduce something without drawing a line in the sand. That said, the result will be a stronger industry, providing better results for our clients, but in the short term there will be pain in achieving this.
Increased regulation is also an area of concern. Although I believe regulation is important to protect clients, I am also of the opinion that there should be a process to look at the regulatory framework and, where possible, simplify it to increase the client experience and outcomes”, Will explained.
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The challenge for everyone is the ‘hunt for yield’, whilst managing overall risk. We are very conscious of risk and that is the key driver in how we build client portfolios.
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From an investment perspective the last three years have seen the business’ asset allocation mix change drastically. “We introduced dedicated SAA and TAA allocations in Alternatives broken down into Private Equity, Diversified Credit, Direct Property and Infrastructure”, Will revealed.
He continued, “the challenge for everyone is the ‘hunt for yield’, whilst managing overall risk. The defensive allocation has become very difficult to manage with bond markets where they are, in the low interest rate settings. If I was to foresee change, it could be in this area, but again, this is very dependent on markets, where they are positioned and the macro headwinds they may face at any point in time.
We are very conscious of risk and that is the key driver in how we build client portfolios. What keeps me up at night is the amount of product in the Alternative asset classes and I do believe there is a large disparity in quality between many solutions and whilst illiquid allocations can dampen volatility it is important to keep the overall allocation in balance.”
This said, the key focus and concern for Will remains the performance of the portfolio.
Zenith monitor Hamilton Wealth’s model portfolio against average weighted benchmarks and competitors. Whilst performance has been strong, with lower volatility across the board, Will highlighted that this is a metric which measures past performance and that his focus remains on positioning and delivering for the future.
“We use Heuristic for asset allocation and could not be more pleased with the results they have delivered for us, but it is the ‘unknowns’ that we need to consider.
We are in a very fortunate position that our clients have entrusted their assets with us to manage and we take that responsibility very seriously. This is a constant top of mind concern, but we are paid to worry about this, and it is part of the job”, Will concluded.
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