How does All Seasons compare with a traditional share portfolio?
A traditional active share investment is where an investor or investment manager creates a portfolio of shares they believe will outperform the market. The problem is, even though they may have an exceptional share selection method that consistently beats the market, if the overall market falls by 50%, then the portfolio may still fall by 40% or more, and a 40% loss of capital is always bad, no matter what the context.
All Seasons takes a much more diverse approach and understands that all investments perform better or worse dependent on the prevailing economic conditions and as it is impossible to consistently predict when economic conditions will change, a portfolio is constructed that performs well through a wide range of economic conditions. The aim is to provide the best long-term performance with the least amount of risk, rather than trying to be the best performer in any one year.
If the All Seasons approach to investing is such a good idea, why doesn't everyone do it?
Whilst the basic concept of All Seasons is fairly easy to grasp, most investors simply don’t have the technological, financial, or human resources to implement and monitor such an undertaking, which involves extensive research into which investments perform best under the various economic seasons, selecting the investments that produce the best returns for the least amount of risk and then combining these investments in the optimal manner so as to produce the best possible return for the least amount of risk across the full range of economic seasons. Once created, the portfolio requires constant monitoring, rebalancing, as well as continual research and development. It takes considerable skill to develop and maintain an optimal investment portfolio through time.
Why don’t all of the large super funds follow an All Seasons approach?
Large super funds primarily compete with each other and therefore, they all follow a fairly similar approach to asset allocation. Most investors select the default option provided by their super fund, which typically invests some 60-90% in shares or investments very closely correlated to shares.
When the share market does well, they all do well and when it doesn’t, they all fall by similar amounts at the same time. As an example, most super funds had large losses in 2007 and 2008, with total superannuation assets falling by 18.2% between December 2007 and March 2009, according to APRA. According to the 2018 Russell Investments/ASX Long Term Investing Report, Australian shares only produced an average return of 4% per annum for the ten years to December 2017. And according to Industry Super Australia’s Long-term superannuation returns: 2016 update, over the nineteen financial years between 1996 and 2015, the average annual net return of retail super funds was only 4.61 per cent. The default options of large super funds have largely become a bet on the share market, producing good returns in good times and significant losses in bad times.
How is it possible that I can apply online without having to sign documents and/or provide certified copies of documents?
The Electronic Transactions Act 1999 allows for documents to be legally signed using an electronic process, which we comply with. Further, the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (AML/CTF Act) makes allowance for electronic identity verification of both individuals and entities. Our online application system has been designed to comply with current legislation, and it saves our investors considerable time. We strive for greater efficiency wherever possible.