Being good risk managers

A combination of a strong investment process, highly experienced portfolio managers and good risk management has helped the WaveStone Dynamic Australian Equity Fund win the Long Short Equities category at the 2023 Financial Newswire-SQM Research Fund Manager of the Year.

The WaveStone Dynamic Australian Equity Fund offers investors a benchmark unaware long/short Australian equities opportunity with the objective to add value over the long term through a high conviction portfolio.

Catherine Allfrey, principal and portfolio manager, when asked about the fund’s differentiating factor, said: “We are good risk managers in terms of our portfolio construction.”

She said that the fund had a quite low turnover versus other long short managers.

“So, we are not traders. We are investors, particularly on the long side, clearly on the short side you always need a catalyst and it’s a more short-term focus. But that turnover is around 50% which is pretty low.”

The fund usually holds around 35 stocks in the long side and 10 in the short side.

Allfrey attributed the fund’s success also to its diverse investment team and highly experienced portfolio managers with over 30 years of experience in the Australian equities.

“I would [also] say our investment process is very strong and our relationships with corporate Australia gives us a very good access to management and boards.”

Speaking on a portfolio manager’s key attributes, Allfrey said a good portfolio manager needed to be able to stay calm under pressure, be unemotional and “quite numerate” and remember not to “fall in love with the company” which might not be ‘a right thing for their fund’.

“Different portfolio managers have different ways of operating. For me I like the ability to engage with management and management teams and I like having that emotional intelligence as much as I like the IQ. I think you need both in this game,” she said.

“I like being a part of the team, but you have to be very competitive and obviously wanting to outperform and deliver for your clients. You have to put your clients first, I think.”