Investment insights: Macquarie Professional Series Managers


Concerns over the economic effects of the spread of COVID-19 have led to a major dislocation in global asset prices. Through March the MSCI World Index in USD sank 21.1% in its third worst quarterly performance since 1970, with a peak-to-trough loss of 34.0% between February 12 and March 23. Commodity prices fell across the board, with oil dropping by two thirds in value over the three months, after a price war broke out between OPEC and Russia. Fixed income markets fared better in this environment, particularly interest rates and shorter-dated sovereign bonds, which gained as central banks around the world cut interest rates and announced new asset-purchasing programmes.

The Winton Global Alpha Fund has experienced initial losses from the recent moves in financial markets, albeit less extreme than that experienced by global equity markets. The primary explanation has been the Fund’s positive exposure to the world stock market. While this exposure reduced over the month, the Fund shared a proportion of the market’s decline.

During the crisis, the Fund has responded as expected and has moved to a more defensive position. Position sizes across the Fund were reduced and the Fund oriented itself to traditional risk off positions such as long Fixed Income, long USD, net short commodities and with reduced positions in Equity Index Futures. During March, Winton’s Emergency Management Committee has been meeting daily to manage the risk and operations of the firm. The investment committee has also been meeting daily to assess the evolving risks in the portfolios.

Investing is a risk taking business and we will continue to take risk in line with the Fund’s mandate, and with confidence that a well-researched and disciplined approach will be successful in the long term.

The views expressed are current as at 3 April 2020, and are subject to change at any time.

Walter Scott

The global spread of COVID-19 has brought disruption to almost all aspects of economic activity, as governments grapple with containing the outbreak. The ensuing equity market turbulence shows little sign of respite, as companies across the globe are buffeted in the wake of the demand, supply and financial headwinds that are blowing harder as each day proceeds. Amidst the volatility however, markets have recently been displaying greater discrimination, with ‘quality growth’ companies faring relatively better than over-leveraged enterprises with questionable long-term prospects.

Rather than trying to weigh up ‘what happens next’ on the macroeconomic front, at Walter Scott we have been sticking to our investment knitting. Despite the communication challenges presented by the outbreak, we have been engaging with companies as we assess the impact of the pandemic across the portfolios.

Balance sheet strength, market leadership, and a long-term growth runway that will endure long after the epidemic ebbs are amongst the defining characteristics of our companies.

As such, we are not planning any wholesale changes to the portfolios. However, we have acted resolutely where the investment rationale of a holding has been compromised, and also seized the opportunity to add to positions or acquire new ones on the condition that they satisfy our stringent investment criteria.

The views expressed are current as at 27 March 2020, and are subject to change at any time.


Equity markets have been extremely volatile over the last few weeks as the COVID-19 situation has escalated. At IFP we continue to believe that a portfolio of high-quality companies with attractive valuation characteristics should protect clients’ capital better than the wider equity market in an extended market correction.

Whilst it is impossible to have all portfolio companies unaffected by events like Coronavirus, the IFP Global Franchise Fund has fallen less than the broader equity market so far this month.

The recent market decline has been in two phases: the early phase that saw a broad-based sell-off with little discrimination between stocks and sectors and a second, more recent phase where the market appears to have become more aware of the impacts of falling energy prices and industries affected by COVID-19.

The former did not give the Fund much opportunity to protect capital but, as we are seeing a rotation out of industries that a Franchise portfolio tends to exclude, the Fund has been in a better position to offer capital protection.

If we continue to see a focus on quality, we expect that the Fund should continue to protect clients’ capital better than the market. Most importantly, our clients remain invested defensively in what we believe are quality companies at attractive prices.

The views expressed are current as at 27 March 2020, and are subject to change at any time.


As concerns escalate surrounding the spread of COVID-19, we continue to monitor the virus’s macro-economic impact as well as any downstream strains it may have on the Polaris Global Equity Fund. Given the current uncertainty and fluidity surrounding the virus, it is difficult to quantify the impact this virus will have and how long it will impact global markets.

In our view, there will be a clear short-term impact on the global economy (i.e. lower consumption, lower production) and there will be ripple effects as well (i.e. supply chain disruption and commodity consumption).

We have reviewed our portfolio holdings and analysed both direct and indirect exposure to China and other economies. As a result of the increasing uncertainty surrounding the short- and medium-term economic impacts, the team has taken precautionary measures by transitioning the portfolio to a more defensive posture.

So far we have reduced position sizes in portfolio holdings we feel are vulnerable to the impacts of coronavirus. Specifically, we have reduced a handful of our Asian and European holdings and exposure to more cyclical companies to half-model weight. We increased the portfolio’s cash position, as short-term market dislocations can lead to buying opportunities and have begun to take advantage of opportunities.

Maintaining a long-term investment perspective is critical and we encourage clients to remain patient during these turbulent market conditions. We are confident in our portfolio positioning and stand ready to take advantage of buying opportunities as they present themselves.

The views expressed are current as at 27 March 2020, and are subject to change at any time.


During the past few weeks, we have observed elevated levels of market volatility caused by an abundance of uncertainty relating not only to the spread of the virus itself but also to the economic effects associated with the containment measures put in place across countries and the political responses from central banks and governments throughout the world.

In connection with the ensuing financial market stress, we have also seen some market dislocations increase and others decreasing. For example, the stress has created a shortage of USD funding which has given rise to a sharp appreciation of the USD vis a vis most other G10 currencies. This has likely been exacerbated by the sharp drop in equity markets which in turn have prompted large non-US institutional equity holders, such as Australian pensions, to re-adjust their FX hedges, thereby resulting in even more selling pressure on local currencies and demand for the greenback.

Being a predominantly relative-value focused manager, we have not been hit as hard as many of the managers focusing on directional position-taking. That said, our relative-value positioning in currencies has been adversely affected by the above-mentioned currency market dislocations as we have been positioned for the USD to weaken against many of its developed market peers, e.g. the AUD and GBP.

Our view, however, is that many of these specific dislocations are transitory in nature rather than fundamental shifts. On the bond side of the IPM Global Macro Fund (the Fund), we have instead observed most of the market moves benefitting the Fund’s positioning, thereby giving rise to at least some offsetting gains. Fund changes have been mostly tied to risk management processes reducing exposure in the face of spiking volatility while the change in sentiment has led to some changes in parallel.

Over the years, we have seen similar episodes where market sentiment suddenly evaporates and the ensuing sell-off sends prices of a broad range of asset classes plunging.

As painful as these episodes can be short term, they often create numerous dislocations whereby market prices deviate significantly from fundamentally motivated levels. This can create opportunities for the strategy which aims to benefit from the return of market prices towards ‘fair value’ by positioning itself accordingly. Once the immediate crisis passes, some dislocations can converge very quickly while other fundamentals become gradually more important for markets again. We are optimistic the Fund can benefit from these convergences over a prolonged period of time.

The views expressed are current as at 27 March 2020, and are subject to change at any time.

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