Downside protection critical for offshore investing

International fund manager sees increasing risk of further market falls in US and Europe Insync has 60% protection over international share portfolio.

Actively managing the downside risk is just as important for Insync Funds Management as identifying stocks that produce consistent returns while they ride the latest megatrend.

“That’s a point of difference,” said Chief Investment Officer, Monik Kotecha. “While we are trying to generate those consistent returns, we think managing the downside risk is critical.”

Insync manages the downside risk with index puts. The fund manager varies the amount protected over the market cycle depending on the cost of the puts and its assessments of the valuations. ”Today we are around 60 per cent protected and over the cycle we can protect between 25-100 per cent of the portfolio,” explained Mr Kotecha.

“The research actually shows that the markets are much more volatile on the downside, both in terms of its frequency – that is, the number of times it happens – and in terms of its magnitude as well.

“The research actually supports that one should be thinking about protecting a client’s portfolio on an ongoing basis, which is what we do.”

Exceptional companies in sustained growth sectors are the best investment in low-growth market.

Monik Kotecha, CIO at Insync, seeks ‘exceptional’ companies that have resilient business models and consistently provide:

  • High ROIC

  • Highly visible and low volatile earnings stream

  • Resilient and dominant market positioning

  • Growth potential through innovation or new markets

  • Strong free cash flow yield.

  • Strong shareholder yield and focus of consistent and growing dividends/buybacks

The favoured sectors for Insync include growth opportunities in:

  • Global healthcare

  • Information technology

  • Global consumer brands

  • Media – Pay TV and content

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The rating contained in this document is issued by SQM Research Pty Ltd ABN 93 122 592 036 AFSL 421913. SQM Research is an investment research firm that undertakes research on investment products exclusively for its wholesale clients, utilising a proprietary review and star rating system. The SQM Research star rating system is of a general nature and does not take into account the particular circumstances or needs of any specific person. The rating may be subject to change at any time. Only licensed financial advisers may use the SQM Research star rating system in determining whether an investment is appropriate to a person’s particular circumstances or needs. You should read the product disclosure statement and consult a licensed financial adviser before making an investment decision in relation to this investment product. SQM Research receives a fee from the Fund Manager for the research and rating of the managed investment scheme.

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