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Have the wheels fallen off BT’s wagon?

ONE of the most asked questions in recent days has been whether the glowing performances of the BT Funds Management team over the last few years has come to a grinding halt.

When their BT Balanced Returns Superannuation fund delivers a meagre 2.9 per cent, a full 4 per cent under the industry average for the year 2000, does this spell a danger signal that investors need to heed?

Even on a three year basis the fund has returned 8.3 per cent per annum.

At the same time as the performance of some of their funds have deteriorated, the team from BT Funds Management has undergone a change of CIO and then suffered the ignominy of a downgrade by Assirt Research House of their Australian Equities Portfolios. One of the new faces at BT Funds Management is Gary Symons, who has replaced Andre Morony as their Chief Investment Officer (CIO). I took the opportunity to raise these questions with Mr Symons.

What are the reasons for the poor performance of the funds, particularly the Australian Equities component of your funds?

I think the first thing to remember is that BT does manage with the aim of outperforming over the medium term to long term.

And over these time frames, we have, more often than not, delivered strong returns for our investors. In volatile times, I’d caution investors not to pay too much emphasis to short-term returns in one asset class

2000 was a disappointing year for Australian equities, and part of my mandate as the new CIO is to try and turn this around.

However, our major balanced funds - like the BT Future Goals and the BT Balanced Returns – remain among the best performing funds in the market place over five years, and our the BT International Fund is towards the top of the table over 3, 5 and 10 years.

One year Australian equities performance suffered due to an underweight exposure to banks, and the poor relative performance of a few stocks such as Hutchison, One-Tel and Pacific Dunlop.

The technology tilt – was this too much, too soon?

In Australian equities, we didn’t really have a technology tilt.

We did have exposure to a few junior telecommunications stocks, which were impacted by a number of factors, but, in our view, these remain good investments over the medium to long term.

In the US, volatility was at its highest level since the 1940s.

The fallout in Australia was that large amounts of money moved very quickly between different sectors.

So you saw money move away from many telco stocks for instance, and towards what are traditionally safe-haven stocks, like the banks.

We had an underweight to banks, and so didn’t perform that well accordingly.

It is our opinion that these capital flows could quite easily reverse.

Is the BT Funds Management style of managing Aussie equities appropriate for the current market conditions?

I think it is. BT is an active manager, and in any given short-term period is likely to outperform or under-perform.

Going forward, I’d like to try and give investors a less giddy ride, but essentially what we’ve said to our investors is that we aim to deliver you long-term value.

And over the 10 years to the end of 2000, something like 4 out of the top 10 performing managed funds in the Australian market are BT Funds.

What do you anticipate to be the turnaround time in performance terms?

Well, it is difficult to talk over the short-term, but I would hope that over the medium term we would be among the top performers in most asset classes.

In terms of Australia right now, I think we are relatively well positioned.

I mean if the interest rate cuts continue, and the central banks remain committed to re-invigorating the global economy (as we expect), it should be a positive for many of our holdings.

The downgrades by research houses – has this hurt your funds flows?

A few research groups are disappointed with the performance of funds with Australian equities exposure, and this may see new flows from some groups fall off a little over the short-term.

Morningstar still rate us a “good” manager, while Van Eyk has said they think we will outperform 75 per cent of our competitors over the medium term.

Given our international funds have performed well, and given they are all highly rated by the research houses, I think flows should continue to be fairly good

Any other messages that you would like investors to take away from this interview about BT Funds Management and its funds?

Just that we have an enormously talented team that is very committed to delivering our investors solid medium term and long-term performance.

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