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Retirees may need to dial up their defensive equity allocations to help protect capital

Financial advisers may need to consider allocating more to defensive equity strategies for retiree clients to defend their income, according to Vertium Asset Management, a Copia investment partner.

In its June quarter research paper, the equity income fund manager compared the past seven share market corrections during global slowdowns since 1990 to the most recent correction in December 2018. For each correction the average decline in the share market index was 19% and the recovery time (from low to high) was 1.4 years.

But the most recent December 2018 equity market dip has been different, recording only half of the historical decline (11%) and one third of the recovery duration (5 months). The question is then will the market continue its unusually quick recovery, or will it follow the more common scenario of protracted recovery with possibly even another downward correction.

Vertium Chief Investment Officer Jason Teh said “one effective way retirement portfolios can be better shielded from a correction is lowering the sensitivity to equity market movements. An efficient way to achieve this is to allocate more to funds with low correlation to the market, so if the market declines, that portfolio is not fully tethered to the decline in capital values.”

For example, the Vertium Equity Income Fund has one of the lowest sensitivities with the share market among equity income funds in its peer group. Vertium has calculated its volatility risk measure is half that of the S&P/ASX 300 Index, with a Beta measure of 0.5. When the share market dipped in the December 2018 quarter, the low sensitivity was put into practice and the Fund’s capital value was cushioned by about 50%.

John Clothier, General Manager of Distribution for Copia said “our financial adviser clients are increasingly expressing concerns about of a lack of attractive income options for retirees, as well as the likelihood of a pull-back in equity markets. We have had increased interest in the Vertium Equity Income Fund due to its very low equity market sensitivity that can help protect capital, without denting any of the income potential for investors.”

The Vertium Equity Income Fund is currently expected to deliver 6% income over the next twelve months. The Vertium Equity Income Fund is currently expected to deliver 6% income over the next twelve months. Lonsec also recently reaffirmed the Fund’s rating as “Recommended” in its July Fund Report.

About Copia Investment Partners

Copia Investment Partners is an independent multi-boutique investment management group.

Copia provides distribution and business support for four partner fund managers: OC Funds Management (Australian Small Caps), Ralton Asset Management (Managed Accounts), Vertium Asset Management (Equity Income) and Chester Asset Management (High Conviction Australian Equities).

Copia forms partnerships with select investment managers to establish, grow and support their boutique businesses. At the same time, partners have the opportunity to access and broaden their reach within Australia’s highly competitive investment market.

Further details on Copia Investment Partners and its strategies can be accessed via the website


Past performance is not a reliable indicator of future performance. Positive returns, which the Vertium Equity Income Fund (the Fund) is designed to provide, are different regarding risk and investment profile to index returns. This email is for general information purposes only and does not take into account the specific investment objectives, financial situation or particular needs of any specific individual. As such, before acting on any information contained in this email, individuals should consider whether the information is suitable for their needs. This may involve seeking advice from a qualified financial adviser.

Copia Investment Partners Ltd (AFSL 229316, ABN 22 092 872 056) (Copia) is the issuer of the Vertium Equity Income Fund. A current PDS is available from Copia located at Level 25, 360 Collins Street, Melbourne Vic 3000, by visiting or by calling 1800 442 129 (free call in Australia). A person should consider the PDS before deciding whether to acquire or continue to hold an interest in the Fund. Any opinions or recommendations contained in this email are subject to change without notice and Copia is under no obligation to update or keep any information contained in this email current.

The Lonsec Rating (assigned 10 July 2019) presented in this document is published by Lonsec Research Pty Ltd ABN 11 151 658 561 AFSL 421 445. The Rating is limited to “General Advice” (as defined in the Corporations Act 2001 (Cth)) and based solely on consideration of the investment merits of the financial product(s). Past performance information is for illustrative purposes only and is not indicative of future performance. It is not a recommendation to purchase, sell or hold Vertium product(s), and you should seek independent financial advice before investing in this product(s). The Rating is subject to change without notice and Lonsec assumes no obligation to update the relevant document(s) following publication. Lonsec receives a fee from the Fund Manager for researching the product(s) using comprehensive and objective criteria. For further information regarding Lonsec’s Ratings methodology, please refer to our website at:


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