Origin Asset Management (AM) partner Nigel Dutson says investors are currently overpaying for low volatility characteristics and high yields.
Origin AM is a bottom-up boutique equities manager headquartered in London.
According to Mr Dutson, equities markets are currently looking “benign” and there is a “tidal change” coming that will see investors taking on more risk.
“We think it could be a very fertile environment over the next three to five years for truly active fund managers,” said Mr Dutson.
He said the danger for investors was that staple companies could be left behind as the market broadens.
“[On a relative basis], I’d be nervous right now if I was high yield and low volatility. If the market goes up 30 per cent, you’ll do fine – you’ll go up 20 per cent. But you might get fired,” he said.
The argument for low volatility stocks is a combination of excess returns and low volatility – but if one piece of that drops away, the argument drops away, said Mr Dutson.
As at 31 March 2013, Origin AM had £1.63 billion (AU$2.47 billion) in assets under management (AUM) and 47 mandates around the world.
According to Mr Dutson, about half of the money Origin runs is UK-domiciled.
“Probably 15 to 20 per cent of our AUM is in North America. Five to six per cent is in Australia, and there is a little bit in Hong Kong,” he said.
Origin AM only has one client in Australia – Colonial First State – for whom the boutique runs an emerging market portfolio.
Mr Dutson is currently visiting Australia talking to other potential clients.
“Our clients all pretty much come through investment consultants. Wherever we are, it’s always consultant driven – 100 per cent of it,” said Mr Dutson.
