Q: What is Nucleus Wealth’s performance & investment strategy/philosophy relative to traditional investment managers?

Nucleus Wealth’s investment philosophy is that high-quality assets at reasonable prices provide the best investment outcomes for investors. Not only do studies show that these assets provide higher returns over time, but essentially, that they also provide a smoother ride there. This is because the lowest quality and most expensive assets will often rise the most during bull markets, and fall the most during bear markets. Protecting investors on the downside is a key focus for Nucleus Wealth’s actively managed portfolios. 

We seek to add value in our Tactical portfolios through tactical asset allocation (we change the percentage of the portfolio allocated to cash, bonds and equity depending on our expectations about markets) and stock selection (which stocks your portfolio holds).

This is like most superannuation funds: they typically manage multi-asset portfolios and make small changes to the asset allocation depending on their market expectations. One of the main differences between Nucleus Wealth’s Tactical portfolios and other superannuation fund portfolios is that we can and do make much larger changes to asset allocation when our market expectations warrant it, like pre-COVID-19.

Just like other superannuation funds, our Tactical portfolios have strategic asset allocations (link to definition) (long term asset allocation targets), and you can find out more about them on our Portfolios page. 

Stock selection is what single asset class managers do. For example, Magellan is an equity manager who specialises in international equity management, and they seek to add value through stock selection. We similarly seek to add value in our Core portfolios through only stock selection.

For example, for most of 2020, we saw a deteriorating economic situation and a lot of unknowns as a result of the spread of COVID-19. From January we positioned our client portfolios defensively, minimising exposure to the equity market (Australian and international), and increasing our exposure to bonds.  We hence sidestepped most of the market crash that happened in February/March 2020 (our client portfolios went down around 1% in value when the equity market went down around 35%).