Garnaut Absolute Return Theme (GART)

Most investment strategies are measured against a benchmark. If the index falls twenty per cent and a portfolio falls eighteen, that is recorded as outperformance. For an institution with a perpetual time horizon, that framing makes sense. For a family drawing on its capital, it can be cold comfort.

The Garnaut Absolute Return Theme takes a different starting point: the objective is positive return over the long term, through market cycles rather than relative to them.

What GART means in practice

Absolute rather than relative

GART is constructed around the aim of producing returns in absolute terms. In practice this means a greater emphasis on capital preservation during periods of market stress, and a willingness to hold positions — including defensive positions — that a benchmark-relative strategy would not.

Specialist boutique managers

We access specialist boutique investment managers rather than defaulting to large institutional platforms. Boutique managers are often more nimble, more concentrated in their conviction, and more aligned with investors through their own capital. Because Garnaut is not owned by a bank, we can select them on merit rather than availability.

Value orientation

The value theme within GART reflects a preference for assets acquired at a discount to assessed intrinsic worth. This is a discipline about entry price as much as asset selection, and it has periods — sometimes extended periods — of being out of favour.

How GART is managed

Portfolio decisions are made through an investment committee drawing on in-house research and external research and economists. Positions are reviewed continuously rather than rebalanced to a calendar, and changes are made in response to changed circumstances rather than movement for its own sake.

Each adviser maintains a deliberately limited number of client relationships, which allows portfolio decisions to be discussed with clients rather than simply applied to them.

What investors should understand

An absolute return objective is an aim, not a guarantee. Strategies of this kind:

• may underperform a rising market, particularly during strong bull runs, because of their defensive positioning

• may hold cash or defensive assets for extended periods

• involve exposure to boutique managers whose concentrated positions can increase volatility

• are designed to be assessed over full market cycles rather than short periods

Investors whose objective is to track or beat an index over short horizons are generally not well suited to this approach.

Who we advise

GART is available to wholesale and sophisticated investors as defined in the Corporations Act 2001. It is most commonly appropriate for families, self-managed superannuation funds and charitable organisations with long time horizons and a preference for capital preservation over benchmark-relative performance.