In the latest edition of Meet the Manager, BDO's Private Wealth team sat down with Matt Sherwood to discuss the Perpetual Limited investment approach, his experience as Head of Investment Strategy in the Multi-Asset team, and his insights into the current inflationary environment.
Perpetual Investments has successfully managed the Perpetual Diversified Real Return Fund for nearly 12 years, taking a holistic approach to investment management. Matt has 26 years of industry experience, the last 17 of those with Perpetual.
Matt joined Perpetual in 2005 and his viewpoints and analysis of international developments are frequently sought by policymakers and opinion leaders. In his role, Matt is responsible for monitoring, analysing, and forecasting earnings growth, interest rates, currencies, economic growth, and policy implications across major regions.
Investment philosophy and approach
To Perpetual, investing is both an art and a science. By focusing on valuations and risk management, the fund seeks to achieve superior risk-adjusted returns. Their approach aims to be flexible and adaptive to market conditions, to providing the ideal outcome for clients.
A fundamental principle of their process is that no single position should jeopardise the overall investment objective. Perpetual takes a big-picture approach, ensuring that individual exposures - and their connections with other investments - do not amplify risks within the portfolio.
Although the fund seeks to invest in a broad range of assets that align with its investment objectives, hedge funds and private equity are excluded from its investment portfolio. By focusing on other assets, the fund aims to achieve its target of inflation plus 5% over five-year rolling periods.
Global impacts on inflation
Currently, there is a lack of suitable storage for renewable energy, comparable to the system for fossil fuels which historically offers spare capacity. Matt states that renewable energy “is [going to] remain one of the governing dynamics for the next ten years as the world economy goes through the fourth Industrial Revolution.”
This, combined with deep globalisation, will cause further inflationary pressures, which he states will make this “one of the most inflationary decades since the 1970s.”
Matt also emphasises the impact the US labour market has had, where low unemployment rates and high wage growth has impacted the consumer price index and, in turn, inflation. To combat this, Matt states that the Federal Reserve may need to continue raising interest rates to bring inflation back to the target rate of 2%.
As central banks respond to these dynamics by adjusting terminal and structural interest rates, portfolios may experience significant consequences. Investors will need to navigate the changing landscape by carefully considering asset allocation, valuations, and risk management strategies.
Should you wish to discuss how your portfolio is positioned in the context of your investment objectives and market risks, please speak to your local BDO Private Wealth adviser.
Perpetual Limited is licenced to provide general advice. The information contained is not advice, is general in nature and does not take into account your objectives, financial situation or needs. Before making a decision to invest in this fund please consider the relevant Product Disclosure Statement and Target Market Determination to determine if the product is right for you.
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