Money Management | Vol. 34 No 13 | July 30, 2020 by FE Money Management

MAGAZINE OF CHOICE FOR AUSTRALIA’S WEALTH INDUSTRY

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Vol. 34 No 13 | July 30, 2020

LEGAL

Best interests duty

GLOBAL EQUITIES

Future of globalisation

Factor investing

APRA delivers super funds a tick on investment in tough times

FUND MANAGER

OF THE YEAR 2020

BY MIKE TAYLOR

AUSTRALIA’S FIRST INDEPENDENT AND WHOLE OF MARKET AWARDS

Bennelong wins Fund Manager of the Year 2020

MARK EAST

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BY JASSMYN GOH

LOOKING for differentiated and unique products that can grow independently outside of the economic cycle has given Bennelong its boost to be this year’s Money Management Fund Manager of the Year. Not only did the fund manager win the coveted title but it had four other funds nominated in three categories. Bennelong’s Australian Equities and Concentrated Australian Equities funds were nominated in the Australian Large Cap category, the Australian Equities Model Portfolio Core in the separately managed accounts category, and the Long Short Equity fund in the long/short category. Bennelong Australian Equity Partners chief investment officer, Mark East, attributed the big win to focusing on owning good portfolios with good earnings outlooks. “We focus on high-quality businesses with strong management teams, high return on equity, and strong earnings growth,” he said. “We run pretty concentrated portfolios – even our core portfolio is on the concentrated side. So, we

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are pretty discerning about what we put in the portfolio. “It has to be high quality, have strong earnings growth and have a potential upside to those earnings – whether that’s from good execution of the strategy or upside from acquisitions or expansion globally.” When looking for quality companies, East said the funds looked for businesses that had the ability to differentiate themselves by product offering, if they had pricing power and where they sat in the industry versus competition. “It’s the ability to grow earnings or withstand economic shocks we are looking for. We want companies that can grow independently of the economic cycle,” he said. “A lot of them have spent a lot of money on research and development to continually refine and develop products and stay ahead of competition.” East said Breville was a company that had managed to benefit from the COVID-19 pandemic. “Just being locked up at home, people spent money on cooking and so Breville appliances performed strongly over the last three to four months,” he said.

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With all funds facing difficulties arising from the virus over the last six months, East said the fund’s underweight to the banking sector had helped its relative performance. He noted that Bennelong had been overweight the healthcare sector for the entirety of the fund’s existence – 12 years – with stocks such as Fisher and Paykel and CSL. On the longer term, East said he was reasonable positive on equity markets and while economies were improving there were a few short-term risks to look out for such as stimulus packages that would drop off over the next few months. On winning the biggest award, East said it was a good reward for the team to be recognised. “The team is proud of our performance. It’s good to get some recognition of that but one thing I’ve learnt from being in equity market is that you can never rest on your laurels,” he said. “When equity markets levels are great and as soon as you might think you know what you’re doing it brings you back to earth and we always have that in mind.”

Full coverage on page 13

FACED with continuing criticism from some Government backbenchers, Australian superannuation funds have been delivered a major tick by the Australian Prudential Regulation Authority (APRA) for the way in which they have supported corporate capital raisings in the face of the COVID19 pandemic. The plaudits came from APRA chair, Wayne Byres, who also paid tribute to the manner in which the superannuation funds had handled the Government’s hardship early access superannuation regime. Byres used a speech to a business forum to point out that the “superannuation sector has demonstrated the financial and Continued on page 3

ASIC runs up white ﬂag on Westpac responsible lending THE Australian Securities and Investments Commission (ASIC) has run up the white flag on its responsible lending legal battle with Westpac. The regulator has announced it will not be seeking special leave to appeal to the High Court in the Westpac ‘responsible lending’ matter, following the full Federal Court’s 2-1 decision to reject its earlier appeal. Continued on page 3

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July 30, 2020 Money Management | 3

News

Kaplan Professional freezes enrolment fees until 2022 BY CHRIS DASTOOR

KAPLAN Professional has committed to not increasing its retail subject enrolment fees until at least 2022. The education provider said it had made a conscious decision to reduce subject enrolment fees, support corporate groups with negotiated pricing and allow advisers to lock in the price of their enrolment fees for the lifetime of their qualification. Brian Knight, Kaplan chief executive, said most advisers had provided feedback that they wanted to move forward with completing the Financial Advisers Standards and Ethics Authority (FASEA) requirements even in the current environment. “You only have to look at the significant number of advisers enrolled with Kaplan Professional and the fact 90% had already completed their 40 hours of continuing professional development (CPD) in Ontrack before the original 30 June deadline, to understand advisers are facing up to the challenge despite the circumstances,” Knight said.

“Although advisers appreciate the extensions, they are expressing a preference to not have these education commitments hanging over them for the next five to six years.” Knight said Kaplan was concentrating on individually supporting advisers who were anxious or concerned about the FASEA requirements. This included extra assistance for those studying from home, extended early access to subject materials and assessments, and online proctored exams. “We felt it was important to do more for these advisers, so we introduced personal consultations to support anyone who is apprehensive about sitting the FASEA exam or has failed and is struggling with selfdoubt,” Knight said. Over 2,000 advisers had been enrolled in every one of Kaplan Professional’s six annual intakes since the FASEA education requirements were confirmed, and enrolments further increased during the pandemic. Kaplan had also partnered with the Financial Planning Association of Australia (FPA) to combine a Master of Financial

APRA delivers super funds a tick on investment in tough times Continued from page 1 operational resilience to respond rapidly to the temporary early release scheme, taking just over three business days on average to process 3.6 million applications to a value of $25.3 billion and counting”. “It has done so while also supporting the extensive capital raising by the corporate sector over the past few months: a critical role that should not be underestimated,” the APRA chair said. His comments have come as the Government backbenchers continue to manoeuvre ahead of the release of the recommendations of the Government’s

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Retirement Income Review and as Industry Super Australia (ISA) has sought to reinforce the degree of investment industry superannuation funds are making in the economy now, and into the future. The primary objectives of the Government backbenchers appear to be further slowing the timetable for lifting the superannuation guarantee (SG), making superannuation voluntary and paving the way for SG balances to be capable of being accessed for home ownership. None of these issues were clearly raised in the brief delivered to the Retirement Income Review panel by the Treasurer, Josh Frydenberg, but the release of the panel’s report is expected to act as a catalyst for elevating debate of the issues to Parliamentary Committee level. APRA’s Byres used his business forum address to reinforce the challenges being faced by the prudential regulator not least avoiding the creation of a “capital cliff” that the banks and insurers would have to climb. In doing so the APRA chair made specific reference to the continuing challenge of disability insurance for insurers.

Planning with the Certified Financial Planning (CFP) Certification Program. “Advisers who want to go beyond the minimum education requirement can combine a FASEA-approved Master of Financial Planning with the CFP Certification Program,” Knight said.

ASIC runs up white flag on Westpac responsible lending Continued from page 1 A formal statement from ASIC said that while it would be open to the regulator to seek special leave to appeal to the high court, it was mindful of the impact of the additional time required to resolve the matter in “the current challenging economic circumstances”. Instead, ASIC said it would review its updated regulatory guidance RG 209 (Credit licensing: responsible lending conduct) and consider what implications the Federal Court decision had for that guidance. “Any reform of the National Consumer Credit Protection Act (National Credit Act) to clarify further the enforcement of those principles is ultimately a matter for the Federal Government and Parliament,” ASIC said. “Bearing in mind the economic circumstances, it is important to remember that under the National Credit Act, ‘responsible lending’ obligations do not apply, and never have applied, to loans made for business purposes.”

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4 | Money Management July 30, 2020

Editorial

mike.taylor@moneymanagement.com.au

FE Money Management Pty Ltd Level 10 4 Martin Place, Sydney, 2000

TIME FOR THE SUPER GRANDSTANDERS TO SIT DOWN

Managing Director: Mika-John Southworth Tel: 0455 553 775 mika-john.southworth@moneymanagement.com.au Managing Editor/Editorial Director: Mike Taylor Tel: 0438 789 214

As the Government seeks to pull the Australian economy out of recession it should silence those on its backbench who are undermining confidence in the superannuation regime. IN a recent online interview, the Assistant Minister for Superannuation, Financial Services and Financial Technology, Senator Jane Hume, gave the appearance of being somewhat equivocal about the future of the superannuation guarantee (SG) and whether it would ultimately rise to 12% as currently timetabled. The Assistant Minister made the point that the rise had been legislated but, in doing so, appeared to leave open the question of whether the Morrison Federal Government would ultimately deliver on the increases much beyond the next rise to 10%. The minister’s comments came at the same time as a number of Government backbenchers have continued to agitate for changes to the superannuation regime, not least the compulsory nature of the SG and the possibility that the Government’s hardship early release regime should be extended beyond the existence of the COVID-19 pandemic. Little wonder, then, that State Street’s 2020 Global Retirement Reality Report pointed, in part, to Australians feeling less confident about their retirement plans not only because of the undoubted negative impact of COVID-19 on account balances but because of the continued confusing messaging around superannuation generally. This is a far cry from the

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attitude of the Coalition Government when it came to power under Tony Abbott in 2013 when the messaging around superannuation was that there would be no tinkering and no unnecessary adverse changes. Now, barely days out from the Treasurer, Josh Frydenberg, receiving the report of the Retirement Income Review panel, he has a range of backbenchers sending strident messages about significant future changes to superannuation and a junior minister whose statements must be regarded as, at best, equivocal. Right now, the Government’s priority should be on dragging the Australian economy out of a deep recession while, at the same time, phasing out the much-needed support it directed towards business in the former of JobKeeper Mks I and II and other key measures. While this is going on, the last thing the economy needs is the injection of unnecessary doubt on the future of superannuation as a retirement incomes savings vehicle. What is needed in the midst of a recession is certainty. If the Government, for whatever reasons, believes the economy cannot sustain increases in the SG beyond the existing 9.5% it should say so, and amend the legislation such that the timetable for the increases is delayed.

The Government should also closely examine the recommendations of the Retirement Income Review panel and determine whether, in all the circumstances, a pandemicinduced recession is the right time to be pursuing radical changes to the nation’s retirement income regime. The Government should be conscious of the need to instil confidence, not undermine it. Thus, Frydenberg would do well to prevail upon his backbenchers to curb their rhetoric around the future of superannuation until the economy moves more clearly back into growth – something which will likely take right up until the next Federal Election. Notwithstanding the fact that superannuation fund returns finished the financial year in surprisingly positive territory, it will likely take at least a year before many pre-retirees see their balances returning to levels which give them sufficient confidence to retire. In the interim, those people should be allowed some policy certainty. There will be time enough for backbenchers to politically grandstand when they can show how their Government has succeeded in placing Australia back on the road to recovery.

mike.taylor@moneymanagement.com.au Associate Editor - Research: Oksana Patron Tel: 0439 137 814 oksana.patron@moneymanagement.com.au News Editor: Jassmyn Goh Tel: 0438 957 266 jassmyn.goh@moneymanagement.com.au Senior Journalist: Laura Dew Tel: 0438 836 560 laura.dew@moneymanagement.com.au Journalist: Chris Dastoor Tel: 0439 076 518 chris.dastoor@moneymanagement.com.au Events Executive: Candace Qi Tel: 0439 355 561 candace.qi@fefundinfo.com ADVERTISING Sales Director: Craig Pecar Tel: 0438 905 121 craig.pecar@moneymanagement.com.au Account Manager: Amy Barnett Tel: 0438 879 685 amy.barnett@moneymanagement.com.au Account Manager: Amelia King Tel: 0407 702 765 amelia.king@moneymanagement.com.au PRODUCTION Graphic Design: Henry Blazhevskyi

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Money Management is printed by Bluestar Print, Silverwater NSW. Published fortnightly. Subscription rates: 1 year A$244 plus GST. Overseas prices apply. All Money Management material is copyright. Reproduction in whole or in part is not allowed without written permission from the editor. © 2020. Supplied images © 2020 iStock by Getty Images. Opinions expressed in Money Management are not necessarily those of Money Management or FE Money Management Pty Ltd.

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Mike Taylor Managing Editor

22/07/2020 3:55:26 PM

July 30, 2020 Money Management | 5

News

Single regulator advocated for ﬁnancial planning BY MIKE TAYLOR

THE new single disciplinary body for the financial planning industry should encompass the role of the Financial Adviser Standards and Ethics Authority (FASEA) and elements of the Tax Practitioners Board (TPB) and the Australian Securities and Investments Commission (ASIC). Association of Financial Advisers (AFA) general manager, policy and professionalism, Phil Anderson said that in the interests of reducing complexity and cost for financial advisers, he believed that there should be a single body responsible for adviser registration, code monitoring, policy and discipline. He acknowledged that for such a single body to work, he anticipated that it would have to traverse roles currently covered by ASIC, the TPB and FASEA. The single disciplinary body was a recommendation of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry and saw the Government

abandon the creation of code monitoring bodies to oversee the FASEA code of conduct. Both the AFA and the Financial Planning Association (FPA) together with the SMSF Association were part of a consortium which had been in advanced planning to establish a code-monitoring body. The Treasury has already conducted preliminary consultations with industry representatives around the shape of the single disciplinary body ahead of the original December 2020 deadline for the establishment of such a body, however that time-line now has now been extended to July 2021 because of the impact of the COVID-19 pandemic. Anderson said that while it was comparatively early days in the debate, he believed that the best outcome for financial advisers would be a single body rather than simply building on the multitude of regulatory structures currently impacting on the advice sector. Those structures included ASIC, the TPB and FASEA as well as the Australian Financial Complaints Authority (AFCA).

Clawback relief sought from Government, ASIC THE Federal Government and the Australian Securities and Investments Commission (ASIC) are continuing to be pressed to allow life/risk advisers some accommodation around the clawback rules as clients continue to seek to cancel or defer premiums. Association of Financial Advisers (AFA) general manager, policy and pofessionalism, Phil Anderson confirmed that his organisation was continuing to press the Government and ASIC to allow some accommodations in recognition of the extraordinary circumstances being experienced by life/ risk advisers and their clients.

He noted that clients were seeking to cancel or reduce premiums in the face of financial hardship and through no fault of their financial advisers who were very often working hard to find them alternatives. Nonetheless if the policy was less than one year old, the adviser was faced with 100% clawback of their commission and 60% if it was cancelled in its second year. Anderson said that, while the Government’s changes to an extension of the JobKeeper program was a good thing, it was undeniable that economic

hardship would continue to be experienced. He said that while there was no hard data available on the level of lapses leading to clawbacks, anecdotal evidence being received by the AFA suggested it was a real and growing problem as the impact of the COVID-19 pandemic continued to be felt. “We’ve been notified a few hardship circumstances such as the woman whose partner was a self-employed travel agent and found themselves in a serious business decline and there have been others such as the man who had a perishables importa-

tion business,” Anderson said. He acknowledged that while there were a range of options open to people in difficult financial circumstances including insurers granting premium holidays, the reality was that clients lost their insurance cover for the duration of the holiday. At the same time, he said that where an adviser managed to secure a premium reduction, they were still exposed to the clawback. “That is why we are talking with the Government and ASIC about ways around the situation,” he said.

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6 | Money Management July 30, 2020

News

Advisers should not be abandoning defensive assets BY MIKE TAYLOR

ADVISERS and their clients should not be abandoning defensive assets just because of the likelihood of a prolonged low interest rate environment. That was the consensus of panellists participating in Money Management's Retirement Incomes webinar with Challenger head of technical services, Andrew Lowe, stating that low expectations of returns from defensive assets did not mean advisers and their clients should be abandoning defensive assets altogether. “Defensive assets continue to have a really important role to play in retirement portfolios for a lot of Australian retirees and I have not come across a whole lot of Australian advisers who have abandoned defensive altogether,” he said. “Whether it be a high rate or low rate environment, they serve a purpose.” Allianz Retire Plus research and relationships manager, Tim

Dowling agreed with Lowe that there was no single product or silver bullet that fitted the decumulation problem. He said that, for this reason, it was a case of advisers using building blocks to address the unique retirement needs of retirees. Dowling said advisers needed to understand that the risks that

retirees were facing were not just technical risks in circumstances where there were a wide range of behavioural risks that came into play such as loss aversion. He also claimed that cash was not a suitable vehicle to address retirement needs in circumstances where “cash is no longer king” and being invested

in a growth portfolio in retirement significantly increases the likelihood that your money will not run out. Like Lowe, he acknowledged the value of annuities within a broader retirement incomes strategy but also emphasised the value of stochastic modelling in developing an answer for clients.

Paperwork and communications the key to winning in front of Australian Financial Complaints Authority GOOD paperwork and client communications will likely sit at the heart of how well financial advisers navigate the Australian Financial Complaints Authority (AFCA) regime in the event of a dispute with clients over advice given in the context of uncertainty generated by the COVID-19 pandemic. That is the bottom line assessment of AFCA ombudsman, Shail Singh, who told Money Management's Retirement Incomes webinar that the dispute resolution authority was well aware of the manner in which events such as the pandemic or, indeed, the Global Financial Crisis (GFC) could drive disputes between clients and financial advisers. “The GFC is a great comparison and we did get lots of disputes. I think when the market turns south we see lots of complaints,” he said while emphasising that communicating clearly with clients was a

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key for advisers in the current environment. “We find that the ones that communicate with their clients rather than changing strategy or taking a knee-jerk reaction tend to do best,” Singh said. “Often disputes end up with AFCA due to a relationship breakdown which comes from not communicating and having the meeting in the first place.” However, Singh made clear that if clients were simply complaining purely about relative investment performance they were unlikely to get a significant hearing from AFCA. “If the dispute is about investment performance only we must exclude it under our rules,” he said. “But people will complain and if we’re convinced it is not purely about investment performance we’ll then look to determine whether the best interest duty was satisfied – whether they [advisers] adequately understood the client, the risk profiling was correct, the goals

were correct, and the advice was correct.” Singh said that AFCA ombudsmen such as himself understood the context of the environment within which financial advisers were currently trying to work “that it is a very, very difficult time for advisers at this time but we are also conscious that people will point to the adviser unfairly sometimes”. “The short answer is we’re conscious of the environment in which financial advisers are operating at the moment, we know that people will turn and point the finger at the advisers and sometimes unfairly in cases of poor investment performance,” he said. “What we’ll be doing is looking at the basics – seeing whether they knew the client, whether they had risk-profiled them correctly, whether the advice was in line with the goals and objectives of the particular person.”

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FUTURE

WEALTH MANAGEMENT

WEBINARS

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PART 1: MANAGED ACCOUNTS WEBINAR

PART 2: PANDEMIC, POLITICS AND ECONOMY (PPE)

11AM, 10TH JUNE 2020

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PART 4: PRACTICE MANAGEMENT WEBINAR

11AM, 15TH JULY 2020

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PART 5: ESG/RESPONSIBLE INVESTMENT WEBINAR

PART 6: WHAT DO YOUR CLIENTS THINK OF YOU? WEBINAR

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News

ME Bank chief executive officer resigns after 10 years BY MIKE TAYLOR

JUST months over the uproar over ME Bank’s handling of client’s redraw facilities, the bank chief executive has announced his departure. ME Bank chair, James Evans said the chief executive, James McPhee had resigned. McPhee did not mention the drawdown

issue but said he had decided to call time. “In deciding to call time, I know the bank is in a strong position financially and is well placed for the future, but that the industry challenges ahead and resulting need for change, will require a long-term commitment,” he said. “After 10 and a half years as CEO, I believe now is the best time to hand over the reins to give ownership of the

bank’s post-COVID strategy development and long-term execution to a new CEO.” Evans said McPhee had requested that his resignation be effective from the end of July, which the board respected and had agreed to. “The chief financial officer, Mr Adam Crane, has agreed to take on the role of acting CEO,” he said.

APRA confirms second tranche early release surge THE Australian Prudential Regulation Authority (APRA) has confirmed a second-tranche surge in hardship early release superannuation. The APRA data covering the period from 29 June to 5 July revealed a significant increase. The regulator said there had been 511,000 applications received by funds during the week from 29 June to 5 July which included a mix of applications received in both the 2019/20 and 2020/21 financial years. “It is a significant increase in applications compared to the week of 22 June to 28 June, where 127,000 applications were received by funds, reflecting the start of repeat applications in the 2020/21 financial year,” APRA said. “The 511,000 applications received during this reporting week (29 June to 5 July) is lower than the 665,000 applications received during the first week of the early release scheme (20 April to 27 April).” “Out of the 511,000 applications received, 165,000 were for members applying for early release for the first time (initial application) and 346,000 were for members applying for the second time (repeat application). The average amount applied for by those making a repeat application was $8,904,” APRA said. “The 165,000 initial applications brings the total number of initial applications to 2.7 million since the inception of the scheme. It is important to note that the number of initial applications reflects the number of member accounts that have been accessed across entities with more than four members and exceeds the number of individuals that have made an application due to some individuals seeking withdrawals from more than one superannuation fund. “Over the week to 5 July, superannuation funds made payments to 132,000 members, bringing the total number of payments paid by funds to their members to approximately 2.54 million since inception with some of the payments being repeat payments as a result of the commencement of the second period in which members can make an application. The total value of payments during the week was close to $1 billion, with $19.1 billion paid since inception. The average payment made over the period since inception is $7,511.”

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ASIC not looking into AMP buyer of last resort issue BY JASSMYN GOH

IT is not in the “jurisdiction” of the corporate regulator to look into AMP’s strategy that would significantly reduce payouts from its buyer of last resort (BOLR) arrangements, the Australian Securities and Investments Commission (ASIC) has said. Speaking at a Parliamentary Joint Committee, ASIC chair, James Shipton said the evidence surrounding the affected planners was a commercial dispute between the parties and it understood that the parties that were pursing this matter was to do with private rights or actions. “There is no evidence it is within our jurisdiction and that’s where we view the matter,” Shipton said. “…if there are further and better particulars on this matter than we would be very prepared to review that and amend our conclusion.” The arrangements would see an exit of around 250 financial planners and when asked by Senator Deborah O’Neill on whether the exits and financial burdens it would place on the planners would be sufficient enough for ASIC to investigate, Shipton said that was a broader issue that the regulatory was aware of. “We see the shifts commercially and environmentally in the industry and we are monitoring it because we are worried about unmet advice needs,” he said.

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July 30, 2020 Money Management | 9

News

Managed accounts could breach FASEA’s Standard 3 BY JASSMYN GOH

FINANCIAL advisers using managed accounts could be in conflict with the Financial Adviser Standards and Ethics Authority (FASEA) code’s Standard 3 on conflicts, according to The Fold. An analysis by the law firm said the majority of managed accounts were white-labelled by, or associated with, financial advice licensees which made them in-house products. When advisers recommended them to clients they would generally receive a direct or indirect benefit and this created a conflict of interest. The analysis noted that FASEA said Standard 3 only prohibited advisers acting in the fact of actual conflicts and did not apply to potential or perceived conflicts. Managing a potential conflict would ensure that it did not become an actual conflict. It said advisers needed to manage any potential conflicts by ensuring the advice provided was in the client’s best interests. The Fold said advisers thinking about recommending a managed account should consider: • How the managed account is likely to satisfy the client’s needs, objectives and preferences; and • Whether the client is likely to be in a better position if they follow the recommendation. “Many advisers have some form of ownership interest in the business that operates the

managed accounts they recommend,” the analysis said. “According to FASEA, sharing in profits generated by the provision of ancillary products and services (like managed accounts) doesn’t breach Standard 3 provided that the ancillary products and services are: • Merely incidental to the adviser’s dominant purpose in providing advice; and • In the best interests of clients. “An adviser will breach Standard 3 if the dominant purpose for providing advice is to derive profits from ancillary products and services.” The Fold said it expected that advisers who recommended related-party managed accounts would attract more regulatory scrutiny in future but that Standard 3 “isn’t a death knell for managed accounts”.

AMP defends itself after S&P ratings downgrade BY MIKE TAYLOR

AMP Limited has defended the strength of its balance sheet in the face of another ratings downgrade. The company filed its defence with the Australian Securities Exchange (ASX) after ratings agency, Standard & Poors lowered its rating on AMP Limited and AMP Group Holdings from BBB+ to BBB. It acknowledged that all AMP entities “remain on CreditWatch with negative implications”. However, it noted that S&P had left the rating for AMP Bank unchanged at BBB+. The ASX announcement said the ratings changes related to the finalisation of the sale of AMP Life Limited. “AMP continues to have a strong balance sheet and capital position, with level three eligible capital above minimum regulatory requirements of $2.5 billion at 31 December, 2019,” the ASX announcement said. It said all credit ratings assigned to AMP by other ratings agencies remained unchanged.

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Advisers, it said, could still recommend managed accounts by following a robust advice process that included: • Identifying the client’s needs and objectives. Ask questions to draw out the client’s preferences and priorities. Find out which product features and benefits (if any) are important to them; • Researching investment solutions that are capable of satisfying the client’s needs, objectives and preferences. Learn about the benefits, risks and costs of each option; • Investigating the client’s existing investment solution and conduct a detailed comparison of that solution compared to the managed account; • Benchmark the fees and costs of the managed account you’re considering against the broader market. This is to ensure that the fees and costs are reasonable and represent value for money for the client; • Tailoring advice to the client’s circumstances. Link each recommendation back to the client’s needs, objectives and preferences; • Explaining how the managed account satisfies the client’s needs and objectives and why it is likely to leave the client in a better position; and • Taking steps to ensure the client understands the benefits, costs and risks of your recommendation.

Nervous MLC advisers contemplate alternatives NERVOUSNESS around the speculated private equity ownership of MLC Limited has seen a number of aligned financial planning businesses open up discussions with rival licensees. A number of dealer group heads have confirmed the receipt of overtures from planning businesses currently operating under the remaining MLC licenses, including Godfrey Pembroke. MLC earlier this year announced a consolidation of its financial planning licenses with the retirement of the Apogee, Garvan and Meritum brands and the launch of a new license under the TenFifty Financial Group. Godfrey Pembroke is currently claiming 140 “financial advice specialists” across the business.

Recent reports have suggested that private equity giants such as KKR are vying for ownership of MLC but there have been question marks over their level of interest in the financial planning elements of the business.

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10 | Money Management July 30, 2020

News

COVID-19 sees HNWI wealth decline BY CHRIS DASTOOR

THE value of high net worth individuals (HNWIs) has continued to increase in 2019 but is expected to have declined due to the impacts of COVID-19, according to a report. According to the 'World Wealth Report 2020 ‘ from Capgemini, the number of HNWIs for Australia – those with assets totally over US$1 million ($1.43 million) or more – increased 6.8% in 2019, while their collective financial wealth increased 4.2%. North America saw a 11% rise, followed by Europe (9%), surpassing Asia-Pacific (8%) for the first time since 2012. Capgemini projected a decline of between 6%-8% in global wealth at the end of April 2020, compared to December 2019. Anirban Bose, Capgemini financial services chief executive, said wealth managers and firms were finding themselves in uncharted waters.

“This unpredictable period may also present opportunities for firms to reassess and reinvent their business and operating models to be more agile and resilient,” Bose said. “Analytics and automation as well as emerging technologies like artificial intelligence, can enable firms to enhance revenues through better client

experiences while reducing costs by streamlining processes.” Its analysis also found investment priorities had shifted as sustainable investments that upheld environmental and social priorities, had gained significant prominence post-pandemic with 40 of HNWIs planning to put cash into sustainable investments.

Leeway urged on opt-in requirements for locked down clients and ﬁnancial advisers BY MIKE TAYLOR

THE further six-week lockdown in Melbourne and key areas of Victoria has seen renewed calls for the Government and regulators to allow financial advisers some relief around the opt-in rules. The Association of Financial Advisers (AFA) acknowledged that it had made such a request earlier this year when the first round of lockdowns occurred and that it would be renewing its calls with respect to advisers caught up the Melbourne lockdown. AFA director of policy and professionalism, Phil Anderson, said he believed an acknowledgement of the problem and the injection of some flexibility into the arrangements was justified, particularly for advisers dealing with older clients. “There are obviously older clients who like to

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meet face to face and who like to send things in the mail,” he said. “Given the current circumstances it is possible that their opt-in documentation will not be received on time and advisers will find their authorisations lapsing through no fault of their own or that of their client.” The opt-in requirement means that financial advisers who have an ongoing fee arrangement with a retail client must obtain their client’s agreement at least every two years to continue the ongoing fee arrangement. Anderson said that the AFA’s original request to Government had not been met with a positive response but it was possible there had been a belief that the situation was beginning to recovery. He said that had certainly changed with respect to financial advisers working in Victoria and that advisers needed to allowed at least some lee-way in the current circumstances.

The $54,000 cost of early super drawdown PEOPLE who access the full $20,000 available from the Federal Government’s hardship early release superannuation scheme will be over $54,000 worse off in terms of their retirement balance in 20 years’ time. That is the assessment of Wealth Within chief analyst, Dale Gillham who has added his voice to those questioning the long-run fallout from the early release scheme. His comments have come following superannuation fund executive confirmation of a spike in people seeking to access the 1 July second tranche of the scheme, which allows them to access a further $10,000. Some $19 billion has already been paid out in the first tranche. Gillham has questioned whether the early release scheme has achieved what it set out to do, noting that he had spoken to several people who had accessed the money but did not need to do so and “wanted it simply because they do not like superannuation”. “While others have used the money to pay bills or reduce debt to give themselves some breathing space during the lockdown, you have to ask is this robbing Peter to pay Paul,” Gillham said. “If you take $10,000 out of superannuation, then according to ASIC’s compound interest calculator, your superannuation would be worse off by around $27,000, assuming a compounded growth rate of 5% over 20 years. “If you take the full $20,000, then you will be over $54,000 worse off in 20 years based on the same compounded growth rate.” “So, did the scheme do what it was supposed to do?” Gillham asked. “We don’t really know the impact of that just yet, but what we know is that those who took the money will be worse off in retirement, which is not good.”

22/07/2020 1:21:35 PM

July 30, 2020 Money Management | 11

News

Frydenberg gave ASIC barely a day’s notice on litigation funding changes

Melbourne August exam sitting to be online only

BY MIKE TAYLOR

BY CHRIS DASTOOR

THE Australian Securities and Investments Commission (ASIC) has revealed that it received barely a day’s notice of the Government’s decision to pursue significant changes to Australia’s litigation funding and class actions regime. The Treasurer, Josh Frydenberg announced the Government’s intended changes on 22 May and answering questions on notice from Federal Opposition backbencher, Steve Georganas, ASIC revealed it had been advised of the move just the day earlier, on 21 May. What is more, ASIC said that notification of the Government’s decision had come by way of a phone call from Frydenberg to the ASIC chairman, James Shipton and without any written explanation. Georganas asked what written information ASIC had received to explain the Treasurer’s policies and whether a copy of the written information could be provided. In reply, ASIC said it “did not receive any written information to

THE Financial Adviser Standards and Ethics Authority (FASEA) will provide remote proctoring for Melbourne attendees of the August exam due to COVID-19 restrictions. Following the Stage 3 stay at home restrictions for metropolitan Melbourne and Mitchell Shire, and the closure of exam venues, physical location exams would not be offered for the August sitting. Physical exams in Geelong, Ballarat, Tralagon and Albury/ Wodonga would continue to be offered. Advisers who had registered for a physical exam in Melbourne would have the option for remote proctoring or to defer to a later sitting. Exam administrator, the Australia Council for Education Research (ACER), would contact candidates registered for the August exam in Melbourne to explain their options to sit the exam.

explain the Treasurer’s policies. Georganas also asked whether ASIC was asked to provide any advice in relation to the policy change in anticipation of the Government’s announcement and was told no. Frydenberg announced in a media release that mitigation funders were to be subject to greater regulatory oversight involving a requirement for them to hold an Australian Financial

Services License (AFSL) and comply with the managed investment scheme (MIS) regime. Up until now, litigation funders have been exempt from holding an AFSL or being categorised as a financial service under the Corporations Act. The Parliamentary Joint Committee on Corporations and Financial Services is currently inquiring into the Government’s changes.

State Street reduces fees on ﬂagship equity funds BY LAURA DEW

Chart 1: Performance of State Street Australian Equity and Global Equity funds versus Australian equity and global equity sector over one year to 30 June 2020

STATE Street has reduced the fees on its flagship Australian and global equity funds in order to best offer value to investors. The new management fee on the Australian Equity fund had reduced from 0.79% to 0.70% per annum while the Global Equity fund reduced from 0.98% to 0.85%. Both of these funds sought to deliver strong total returns while managing total risk which State Street said was “especially relevant” in the current market environment. According to FE Analytics, within the Australian Core Strategies universe, the Australian Equity fund lost 4.8% over one year to 30 June versus losses of 5.8% by the Australian equity sector average. The Global Equity fund lost 6.3% over the same period versus returns of 1.5% by the Source: FE Analytics global equity sector average.

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22/07/2020 12:24:23 PM

12 | Money Management July 30, 2020

InFocus

INDIA A POST-COVID JEWEL While there have been critics of India’s handling of COVID-19, Fiducian Group’s executive chair, Indy Singh maintains the fundamentals are in place to make it an attractive investment destination. AS IS SAID, use a crisis to bring in change and to your advantage. It appears that since the COVID-19 crisis, India as an investment case seems to have just got a whole lot better. Within the ‘lockdown period’, the Modi Government has promoted policies that aim to make India a manufacturing powerhouse for the world. What we know is India has a total population of 1.35 billion with an average age of just 29 years. Therefore, while it boasts the world’s largest workforce, it needs to convert its population burden into a demographic dividend. So creating employment for some 10 million people a year is paramount. Therefore, it is focusing on expanding its manufacturing base to become a cornerstone of the Indian economy, which could see India exceed growth expectations over the coming decade. China’s recently-imposed exorbitant tariffs on Australian agricultural exports, believed to be in response to Australia’s demands of an independent inquiry into

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COVID-19, have drawn comments from the Australian Prime Minister that Australia must now strengthen its cultural, business and trading relations with India as an alternative to its heavy reliance on China. Whichever direction this political posturing may eventually take is not a matter for consideration here, but clearly it has thrown up opportunities which India is planning to capture. India’s Prime Minister Modi recently released sweeping reforms specifically to land ownership, banking, liquidity and tax to attract more foreign investment in an effort to promote an ongoing global manufacturing shift from China to India. There is a view that the first wave of transfer of manufacturing took place after World War II, from the US to Japan. The second wave was a shift from Japan to South East Asia. The third wave was a shift from South East Asia to China and now there could be a fourth wave where manufacturing shifts from China to India and possibly Vietnam. Historically, India has been a difficult place for overseas

manufacturers to acquire land as typically it must be purchased from several small land owners which has been time-consuming and overly costly due to unwanted bureaucracy and interference from political parties. The federal Government is now working in conjunction with state governments on developing substantial land areas to attract foreign investment. Reports estimate that the area being set aside to entice new manufacturing away from China could be up to twice the size of Luxembourg. Tax reform has been imposed dropping the tax rate from the typical 25% to 15% for all new manufacturing ventures. A financial incentive is offered for large-scale electronics manufacture. Banks have been consolidated into four major banks with an injection of around US$55 billion ($78.3 billion) and permission to raise funds from capital markets has been granted. Around US$266 billion will be provided to stabilise the economy, of which US$60 billion are loan guarantees for small businesses, power companies and non-bank lenders. Some of the shift in manufacturing to India could occur to prevent supply chain disruption and also support Indian companies to manufacture in India. Examples include: • Apple has committed to shift approximately 20% of its production from China to India over the next five years and invest up to US$40 billion as an initial entrée; • German sport shoe maker Von Wellx has shifted manufacturing to India; • Teledyne and Amphenol from the US have begun discussions with local companies; and • Two South Korean steelmakers have renewed discussions with

INDY SINGH

the Government to set up integrated steel plants in India. Meanwhile discussions have been initiated with over 1,000 US companies offering incentives to manufacturers to move to India, with promises of changes to labour laws. How much of this will eventuate remains to be seen, but there is renewed commitment by India to try and become the third-largest economy in the world by gross domestic product (GDP) in 2025. The case for a transition continues to be compelling as manufacturing wages in China increase to US$3.50/hour compared to just $0.90/hour in India. Recently, the International Monetary Fund has forecast Indian GDP growth to remain positive at 1.9% in 2020, the highest of major economies. India is projected to be the world’s fastest-growing economy with an economic growth target of 6% to 9% per annum. It is a combination of recent yet significant macroeconomic stimulus and targeted micro economic reform for manufacturing that could help India exit a pandemic induced recession much stronger than their developed or developing nation counterparts. India plans to grow into the third largest economy globally within the next decade. Small to mid-sized companies must naturally drive this transition and for this reason we have a significant overweight to such companies in the Fiducian India fund. India is not without its own challenges, however it is for the best part a stable functioning democracy. Its challenges are not impossible to overcome and do not appear to deter corporate enterprise. Indy Singh is executive chair of Fiducian.

22/07/2020 3:55:56 PM

July 30, 2020 Money Management | 13

FUND MANAGER

OF THE YEAR 2020 AUSTRALIA’S FIRST INDEPENDENT AND WHOLE OF MARKET AWARDS

CONTENTS 1 FUND MANAGER OF THE YEAR 14 BEST-PERFORMING FUND

18 AUSTRALIAN PROPERTY SECURITIES

WITH A WOMAN IN A LEADERSHIP ROLE 15 AUSTRALIAN LARGE CAP EQUITIES AUSTRALIAN SMALL/MID CAP EQUITIES 16 GLOBAL EQUITIES GLOBAL EMERGING MARKET EQUITIES 17 LONG/SHORT EQUITIES INFRASTRUCTURE SECURITIES

19 AUSTRALIAN FIXED INCOME

GLOBAL PROPERTY SECURITIES GLOBAL FIXED INCOME 20 EMERGING MANAGER

SEPARATELY MANAGED ACCOUNTS 21 MULTI ASSET – BALANCED

RESPONSIBLE INVESTMENTS

GOLD SPONSOR

SILVER SPONSOR

DATA SPONSOR

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23/07/2020 10:42:29 AM

14 | Money Management July 30, 2020

Fund Manager of the Year 2020

HEALTHCARE IS ‘MORE THAN CSL’ BY LAURA DEW

THE RECENT FOCUS on healthcare and the COVID-19 pandemic has brought attention to the lessercovered sector of healthcare funds, a boost for Platinum fund manager, and winner of this year’s Money Management Best-performing Fund With a Woman in a Leadership Role award, Bianca Ogden. After a PhD in virology in London, Ogden worked in scientific research at US pharma giant Johnson & Johnson but heard about funds management at a conference and decided to explore that area. Starting out as an investment analyst in 2003, Ogden originally planned to stay in the industry for just one year and said she did not still to expect to be in the sector. The $354 million Platinum International Healthcare fund

BEST-PERFORMING FUND WITH A WOMAN IN A LEADERSHIP ROLE WINNER: BIANCA OGDEN, PLATINUM ASSET MANAGEMENT

was launched in 2007 and her scientific background made her ideal as lead manager. “I already regretted the career change after six months but it got better and I understood more, I didn’t expect to be still here but I like the variety of the job,” she said. “Platinum felt that healthcare would be important for the future and we have done well from themes like diagnostics and we hope they will continue to play out in the next decade. “People have knowledge about technology but not about healthcare, it is not inferior to technology, it is a different beast and the pandemic has helped people to realise that. It is about much more than CSL.” She said her scientific background and experience differentiated her from her colleagues and gave her an outside perspective.

FINALISTS: • KATE HOWITT, FIDELITY INTERNATIONAL • QIAO MA, COOPER INVESTORS • MARY MANNING, ELLERSTON CAPITAL • JULIA FORREST, PENDAL GROUP

“It helps as I have real-life experience, I haven’t only worked in fund management. As a scientist, most experiments fail so I am used to failures and analysing them for what went wrong. There is significant strength in being able to see things like that.” When it came to being a women in funds management, Ogden admitted that little had changed in her 17 years in the industry and that she had always worked in a male-dominated team. At Platinum, she is the only

BIANCA OGDEN

female fund manager out of nine and there were a further two female analysts. “I haven’t noticed any changes since I started, it is a very male-dominated industry but you have to stand your ground and I have learnt to deal with it. It is harder for new people coming in and we don’t get many female applicants. “After the first six weeks in the job, the men were surprised I was still there!”

A WHOLE OF MARKET APPROACH FOR THE 2020 FUND MANAGER OF THE YEAR THIS year’s Money Management Fund Manager of the Year awards has evolved to a whole of market approach by drawing individual expertise and knowledge of research and ratings houses involved and with the outcome moderated by an independent third party. Also, for the first time, all funds available for sale in Australia will be eligible for the awards. The judging methodology consists of three main stages and combines FE fundinfo’s quantitative fund data with the expertise of our research partners Lonsec, Mercer, SQM Research,

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and industry partner IOOF. The first stage is a quantitative screening for the top performing 15 funds for each category over the past three years, and then a one-year performance will be used to find the top seven shortlisted funds. The second stage is a qualitative evaluation in two parts: judging panel to rate the shortlisted funds with their in-house methodology, and a qualitative data collection by Money Management. The last stage has the judging panel sending in their results to be rated by Money Management through a scoring system

to determine the winner for each category. The overall Fund Manager of the Year award takes account of the results across all categories with the winner polling consistently well or winning multiple categories. Where any of the research and ratings houses or industry partners have their own investment products in market, they will be excluded from judging in the segment within which they are seen to be compromised.

RECENT FUND MANAGERS OF THE YEAR 2019:

ALLIANCE BERNSTEIN

2018:

LEGG MASON ASSET MANAGEMENT AUSTRALIA

2017:

LEGG MASON ASSET MANAGEMENT AUSTRALIA

2016:

MACQUARIE INVESTMENT MANAGEMENT

2015:

LEGG MASON ASSET MANAGEMENT AUSTRALIA

2014:

LAZARD ASSET MANAGEMENT PACIFIC CO

2013:

HYPERION ASSET MANAGEMENT LIMITED

2012:

SCHRODER INVESTMENT MANAGEMENT

2011:

SCHRODER INVESTMENT MANAGEMENT

2010:

SCHRODER INVESTMENT MANAGEMENT

23/07/2020 10:41:18 AM

July 30, 2020 Money Management | 15

Fund Manager of the Year 2020

LONG-TERM QUALITATIVE INVESTMENT KEY FOR AUSSIE EQUITY CHAMPS

AUSTRALIAN LARGE CAP EQUITIES WINNER: GREENCAPE HIGH CONVICTION FINALISTS:

BY CHRIS DASTOOR

WITH A FOCUS on a qualitative investment strategy which backed the long-term growth of companies with strong management, the Greencape High Conviction fund has won the Money Management Fund Manager of the Year award for Australian Large Cap Equities. The strategy was co-managed by David Pace and Jonathan Koh, and Pace said it ran long-only equity funds with a three-to-five-year horizon that had a “quality tint”. “We have a qualitative bias: we’re into backing better than average people in better than average businesses,” Pace said.

He attributed the success of the fund to applying that process in a very disciplined way. “I always make the point internally that we have 14 years of evidence to demonstrate that what we do works, it might not work every quarter or year but over time it does,” Pace said. Finding companies with solid managerial performance and talent was the key component to the equities they selected. “We’re big backers of quality management boards, the emphasis is on what they’ve done rather than what they’re going to do,” Pace said. “We spend a lot of time looking at past management track records and board performance, and

SINGLE PRODUCT STRATEGY FOR THE WIN BY OKSANA PATRON

THE FAIRVIEW EQUITY Partners Emerging Companies fund won this year’s Money Management Fund Manager of the Year award in the Australian Small/Mid Cap Equities category. The fund attributed its success to its single product strategy coupled with strongly-aligned

TIM HALL

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interests and an equal say for all portfolio managers. The small-cap fund, which has managed to deliver strong returns over several time periods, has been managed by a highly-experienced investment team who have been through all economic and stockmarket cycles, Fairview Equity Partners’ portfolio manager, Tim Hall, said. “We are experienced fund managers with a combined 64 years in the market. With equal say in the portfolio, we all own each investment so the portfolio is not separated by sector responsibility. Moreover, we are equal business owners and are all participants in the fund so we have a very strong alignment with our unitholders,” he added. “The fund has been running for 12 years, and it has solid consistent returns with top

• ALPHINITY SUSTAINABLE SHARE • BENNELONG AUSTRALIAN EQUITIES • BENNELONG CONCENTRATED AUSTRALIAN EQUITIES • PLATYPUS AUSTRALIAN EQUITIES TRUST WHOLESALE

analysing the extent to which that’s generated economic value. “When the COVID-19 penny started to drop, the questions we were asking management were: what are your crisis management qualifications, how long have you had your crisis management plan in place and what does that look like under various economic scenarios?” Pace said the fund’s qualitative tilt had come to the fore with this

DAVID PACE

fallout, as quality management teams that would get their crisis management plans in place early. “They were the ones that were very early talking about how they capitalise on a crisis,” Pace said. “Good jockeys end up riding good horses and the same is true of management teams, if they inherit business that aren’t great, they tend to bring them up.”

AUSTRALIAN SMALL/MID CAP EQUITIES quartile performance over several time periods. Since the inception the annualised outperformance is 6.7%. “We are very focused on a single strategy with very strongly-aligned interests and despite top quartile performance, we manage much less funds under management than many peers. We currently have capacity in the fund. “Finally, our disciplined approach to stock selection is underpinned by our rigorous and repeatable investment process.” Asked about the competitive advantage of his fund, Hall said it all came down to being a single product company and focusing on one fund only rather than having a number of separate funds such as microcap/mid-cap funds, global funds or a pre-IPO [initial public offering] fund. Looking back over the last

WINNER: FAIRVIEW EQUITY PARTNERS EMERGING COMPANIES FINALISTS: • FIDELITY FUTURE LEADERS • OC MICRO-CAP • AUSBIL MICROCAP • AUSTRALIAN ETHICAL EMERGING COMPANIES WHOLESALE

few months, Hall said that liquidity was crucial for the funds and successful funds should have been positioned in the way which allowed managers to react quickly to events such as this unprecedented period of market volatility. Following this, he said, the portfolio of the Fairview’s fund had been repositioned more defensively and the fund’s increased its exposure to agriculture, consumer staples and gold.

23/07/2020 10:01:45 AM

16 | Money Management July 30, 2020

Fund Manager of the Year 2020

TECH DEPENDENCE A BOOST FOR GLOBAL EQUITIES BY CHRIS DASTOOR

ZURICH INVESTMENTS CONCENTRATED Global Growth is the winner of the Money Management Fund Manager of the Year awards 2020 for Global Equities, as it capitalised on the move to remote work and technological dependence during the COVID-19 pandemic. Matthew Drennan, Zurich Financial Services head of investments, said the fund had a unique growth strategy where the team looked to observe inflection points in earnings growth. “What they’re trying to do there is they’re looking to get into companies at the early stage of acceleration and earnings growth,” Drennan said. “They’re less concerned about how big the earnings expansion is but whether it is in a positive and

sustainable direction. “If you look at the top 10 holdings, Amazon is number one and we know they had a huge cloud computing business that’s been a beneficiary of the move to technology, particularly with the COVID-19 situation. “Alibaba Group, which is online retailing, is another beneficiary of the environment we find ourselves in, as well as a longer-term trend where people are looking to do more online rather than in the bricks and mortar.” When it comes to analysing an equity, Drennan said it was a process of understanding the competitive advantage and identifying whether it had favourable or accelerating earnings growth. “If you believe earnings expectations for a company are above what the market is currently

WINNER: FIDELITY GLOBAL EMERGING MARKETS FINALISTS: • GMO EMERGING MARKETS TRUST • CFS FIRSTCHOICE WHOLESALE EMERGING MARKETS • MFS EMERGING MARKETS EQUITY TRUST • LEGG MASON MARTIN CURRIE EMERGING MARKETS

STOCK SELECTION HAS been the dominant factor contributing to performance for the Fidelity Global Emerging Markets fund, winner of this year’s Money Management Fund Manager of the Year award for Global Emerging Markets, with strong picks helping the fund weather the downturn. Manager Alex Duffy, who has worked at Fidelity since 2004 and is

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WINNER: ZURICH INVESTMENTS CONCENTRATED GLOBAL GROWTH FINALISTS: • CFS GENERATION WHOLESALE GLOBAL SHARE • HYPERION GLOBAL GROWTH COMPANIES B • LEGG MASON MARTIN CURRIE GLOBAL LONG-TERM UNCONSTRAINED A • LOFTUS PEAK GLOBAL DISRUPTION

pricing in, then that’s a trigger in terms of investments,” Drennan said. Loftus Peak Global Disruption’s nomination was notable as the fund specifically focused only on disruptive companies that “changed the way business operates”. Anshu Sharma, portfolio manager, said the thematics the fund invested in had not changed in the last five years.

MATTHEW DRENNAN

“Obviously due to COVID-19, there was more movement towards our thematics, where people started working from home and there was more remote work going on,” Sharma said. “There was more virtualisation happening and the pace and adoption of our thematics has increased. “We were expecting this kind of market to be there for our companies in 2023 or 2022, but it’s been brought forward.”

STOCK SELECTION CRUCIAL FOR EMS

GLOBAL EMERGING MARKETS

BY LAURA DEW

GLOBAL EQUITIES

ALEX DUFFY

based in Singapore, said stock selection had contributed 95% to performance thanks to specific picks in the consumer staples and discretionary space. This focus on stock selection was particularly important given the fund was highly concentrated with only 30-50 stocks, meaning each stock had to contribute to the portfolio’s absolute performance. It

was also benchmark agnostic which gave Duffy more flexibility to pick companies and build positions on an absolute basis without needing to reference an index. Recent positively-contributing stocks included Chinese sportswear firm Li Ning, auto dealer Zhongsheng, and soy producer Foshan Haitian. “An example of an exceptionally positive investment decision is embodied in the holding in the Chinese sportswear manufacturer Li Ning. The company had entered into a harvesting period following many years of struggle and was set to benefit from multiple operational and strategic drivers, enabling multi-year margin expansion,” he said. “The Chinese sportswear market was also enjoying secular growth, as penetration remained

remarkably low and the change in lifestyle and health continued driving consumer behaviour.” Stocks were selected on the basis of their strong corporate governance and ability to provide sustainable investment returns and prudently pursue reinvestment opportunities. These were also the type of stocks, he said, which would be best able to weather the market downturn and add value in the long term. Duffy also took the opportunity to “high grade” the portfolio during the downturn by picking up high quality businesses in Taiwan and Brazil that were trading at attractive valuations. The fund also increased its exposure to industrials and reduced it to financials where Duffy was “cautious” in light of globally low interest rates and lukewarm credit demand.

23/07/2020 10:07:11 AM

July 30, 2020 Money Management | 17

Fund Manager of the Year 2020

A ‘SUPERIOR’ APPROACH TO COMPANY SELECTION BY LAURA DEW

THE ABILITY TO recognise industry headwinds early and a focus on “superior corporate DNA” has helped the WaveStone Dynamic Australian Equity fund to victory in this year’s Fund Manager of the Year awards. Recognised in the Long/Short Equities category, the fund was launched in 2009 and aims to provide long-term capital growth. It is high conviction, has the ability to short stocks and has a strict 15-factor process which it says it considers before examining the valuation of a potential inclusion. Catherine Allfrey, portfolio manager and principal at WaveStone Capital, said: “We have a 15-factor process which is a qualitative filter on a company looking at factors such as its track record, innovation, engagement, operating margin, expansion plans and we call this

superior corporate DNA. We will look at all that before we have even looked at company’s valuation, we are not looking for growth at any price or for companies which aren’t profitable”. Companies which had this ‘superior corporate DNA’ included biotech firm CSL, financial Macquarie and healthcare Resmed, all of which had done well for the fund recently, while a strict, disciplined process and ability to recognise industry headwinds early had also helped. This aversion to companies which were unprofitable, however, meant the fund had been hurt by the recent market dominance of technology companies such as Afterpay. In the first six months of 2020, shares in Afterpay rose by 109% compared to 10% losses by the ASX 200 over the same period.

PROFITABILITY AND LONGEVITY BY OKSANA PATRON

A STRONG FOCUS on companies which show revenue certainty, profitability and longevity, derived from monopoly-like regulated underlying assets has helped the Lazard Global Listed Infrastructure fund take out the Fund Manager of the Year award in the Infrastructure Securities category. The fund, which is an actively

WARRYN ROBERTSON

13MM300720_14-27.indd 17

managed portfolio and invests in equity infrastructure securities and will be celebrating its 15-year anniversary in October, has a strict valuation discipline which prevents it from overpaying for quality assets. “We think that experience is really crucial in this asset class. We have a long history of working with these infrastructure assets through many different cycles. Our fund is the longest-running listed infrastructure fund in the Australian market and has a long track record of meeting and exceeding its objectives,” Warryn Robertson, portfolio manager at Lazard Asset Management, said. The fund’s strategy is a longonly, valuation-driven investment strategy that targets long-term, lower risk, inflation-linked returns. “We are stockpickers, managing a concentrated portfolio of preferred

LONG/SHORT EQUITIES WINNER: WAVESTONE DYNAMIC AUSTRALIAN EQUITY FINALISTS: • ACADIAN WHOLESALE AUSTRALIAN EQUITY LONG SHORT • BENNELONG LONG SHORT EQUITY • REGAL LONG SHORT AUSTRALIAN EQUITY

“This year has hurt us as it has been led by technology companies such as Afterpay and NextDC. We were positioned for the economy to improve and instead, the opposite happened,” Allfrey said. Another sector it disliked was retail property trusts which Allfrey said she “would avoid for the foreseeable future” as rent paid by Australian tenants was far higher than overseas, indicating rents would be decreasing in the future. Despite this, the long/short approach of the fund meant it had

CATHERINE ALLFREY

resources at its disposal to avoid the worst of the downturn which occurred in mid-March. “This is a conservative fund, it can have 50% minimum exposure to the market and a maximum of 100% but the average is 80% and then we can gear up to 150% on the long side. We also have targeted shorts of certain stocks which provide a hedge against falling markets,” she said. “When markets are falling, we have options available to us such as increasing the short positions and pulling the gearing back to change the portfolio positioning. We became more defensive during the crisis.”

INFRASTRUCTURE SECURITIES infrastructure securities. The number of stocks held will generally range from 25 to 50, and we make active decisions to invest in companies that we believe to be undervalued,” Robertson added. Apart from a long history of successfully investing in infrastructure assets, the fund’s differentiating factors also include a unique risk/return profile as the strategy is 100% invested in listed, preferred infrastructure companies, characterised by factors such as ownership of real assets, stable demand, pricing power and manageable debt, with assets located predominantly in OECD countries. On top of this, the fund is underpinned by Lazard’s global network which offers the team access information, opinions and advice from Lazard’s investment professionals. It also had a stable management team with four of the six investment professionals

WINNER: LAZARD GLOBAL LISTED INFRASTRUCTURE FINALISTS: • 4D GLOBAL INFRASTRUCTURE A • AMP CAPITAL GLOBAL INFRASTRUCTURE SECURITIES UNHEDGED A • MAGELLAN INFRASTRUCTURE UNHEDGED • CFML FIRST SENTIER INVESTORS INFRASTRUCTURE

having been involved with the strategy since its inception and no single departures from the team since June 2007. Commenting on the award, Robertson said: “It is an honour to have our Global Listed Infrastructure fund acknowledged by our industry peers. This recognition of our performance highlights our long–track record of delivering strong risk-adjusted returns for our clients”.

23/07/2020 10:15:48 AM

18 | Money Management July 30, 2020

Fund Manager of the Year 2020

GLOBAL FAMILY MATTERS BY OKSANA PATRON

THE AMP CAPITAL Listed Property Trust, which has won the Money Management’s Fund Manager of the Year award in the Australian Property Securities category, has assigned its success to being a part of a larger, global team which offers the opportunity to leverage its global coverage and industry insights which can be subsequently translated into alpha-generating opportunities in the Australian real estate sector. The fund, which was launched in 1997 and is one of the longest-serving capabilities in this space, is managed by Mark Ferguson who has over 26 years of investment experience

in analysing and managing portfolios across the local listed real estate space. On top of that, Ferguson is supported by a team of analysts under the secondary analyst model which includes 14 global teams. “I think what differentiates us from other funds is the fact that we have a global listed real estate team and we have been able to use this intellectual capital we have globally and to apply it to our Australian funds. The examples included being underweight retail malls and making investments into data centres and into manufacturing houses, so we were able to apply what we do globally directly to our Australian funds,” Ferguson said.

WINNER: QUAY GLOBAL REAL ESTATE C FINALISTS: • RESOLUTION CAPITAL GLOBAL PROPERTY SECURITIES UNHEDGED II • DIMENSIONAL GLOBAL REAL ESTATE TRUST INC AUD • APN ASIAN REIT • IOOF SPECIALIST PROPERTY

A COMBINATION OF good risk management, being index unaware and avoiding overleverage has seen the Quay Global Real Estate fund come out on top and take out the Money Management’s Fund Manager of the Year award for the best fund in the Global Property securities space. The fund, which was launched in July 2014 and aims to provide investors with a total return of the

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WINNER: AMP CAPITAL LISTED PROPERTY TRUSTS A FINALISTS: • CHARTER HALL MAXIM PROPERTY SECURITIES • UBS PROPERTY SECURITIES FUND • CROMWELL PHOENIX PROPERTY SECURITIES • PENDAL PROPERTY SECURITIES

The fund’s investment process consists of a fundamental bottom-up, valuation-based stock selection methodology which is complemented by a top-down macroeconomic research which constitutes a critical component in building a listed real estate portfolio. It also takes into account factors such as demographics, economic longterm and short-term variables,

MARK FERGUSON

financials, valuation, sentiment, and volatility. “The fund has also a strong focus on risk control and we have our own in-house risk system. We think that this risk system that we have also sets us apart considerably from our competitors who we believe do not have such a strong focus on managing risks, so it is not just about picking total returns,” Ferguson said.

BEING INDEX UNAWARE

GLOBAL PROPERTY

BY OKSANA PATRON

AUSTRALIAN PROPERTY SECURITIES

CHRIS BEDINGFIELD AND JUSTIN BLAESS

Australian Consumer Price Index +5% per annum over five plus years, has been managed by two portfolio managers, Chris Bedingfield and Justin Blaess, who each have around 20 years of solid experience in real estate, underpinned by their background in investment banking. The fund’s investment process employs quantitative, qualitative and fundamental research and analysis methodologies, on top of secular themes that can provide tailwinds to a company’s earnings

story, the firm said. Its investment strategy is based on four pillars which included clear valuation of replacement costs and the importance of pay-out ratios, balance sheet quality and the level of plough-back returns, a focus on rent-based asset returns as well as avoiding developers and a relatively concentrated portfolio. The key points best describing the fund’s investment philosophy, according to the company, were a strong focus on delivering real total returns, and not index relative returns, and defining risk as a real permanent loss of purchasing power. “The other thing that differentiates us is that because we have an index-unaware approach so we are not obliged to hold any stocks just because the index construction says we should. For example, the index might say we should hold 20% in office towers while we do not need to

hold office towers at all,” Bedingfield said, who is principal and joint managing director of Quay Global Investors. “Such an approach also allows us to go into more interesting areas such as data centres. “The overarching themes here are an index unaware approach and risk management as well as avoiding overleverage. And in this environment we really need active investments.” This approach has not only provided outperformance of total returns, but a characteristic of returns that has added value in both rising and falling markets, with a notably strong record versus competitors of lower market capture in negative returning periods, the firm said. Asked why the fund had been nominated for the awards, Bedingfield pointed to the fund’s positive performance and a good risk profile.

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July 30, 2020 Money Management | 19

Fund Manager of the Year 2020

ACTIVE MANAGEMENT CRUCIAL FOR UNCERTAIN TIMES IN FI BY CHRIS DASTOOR

ACTIVE MANAGEMENT HELPED guide the Legg Mason Western Asset Australian Bond A fund during challenging market conditions, which has won the Money Management Fund Manager of the Year award for Australian Fixed Income. Anthony Kirkham, head of investment management/head of Australian operations for Western Asset Management, said although the fund underperformed the benchmark during March and April, primarily due to an overweight in corporate credit, the strategy recovered ground in May and June. “The strategy has recovered ground quickly in May and June with the portfolio positioned to take advantage of potential

spread contraction as well as tactically trading around what we see as a range bound markets for yields,” Kirkham said. Kirkham said the overweight to credit ahead of the COVID-19 pandemic was focused on shortdated credit. “This was initially impacted by the liquidity drain that impacted all markets but once the market normalised this was quick to revert in most cases,” Kirkham said. “At the same time, and during the dysfunction, we took the opportunity to lean into credit in names that we felt had been unduly impacted relative to its fundamentals, particularly in the infrastructure and utility sectors, and selectively within REITS [real estate investment trusts]. “This has also been a large

DIVERSIFYING ACTIVE RISK BY LAURA DEW

SEEKING ATTRACTIVE OPPORTUNITIES while minimising risk is the appeal for investors in the PIMCO Global Bond fund, this year’s Global Fixed Income fund winner at Money Management’s Fund Manager of the Year awards. The $6.8 billion fund was designed specifically as a way to offer Australian investors access to

SACHIN GUPTA

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the $100 trillion global bond market. It aims to achieve total returns by investing in global fixed interest including government, corporate and mortgage fixed interest securities as well as non-investment grade and emerging market securities. The firm said multiple factors had contributed to performance in the past few years; diversification of return drivers, focus on attractive yield opportunities and bottom-up ideas from regional and sectors. “The fund aims to diversify sources of active risk across a range of risk factors so as to not over-concentrate client assets into specific market risks. This has allowed the fund to successfully navigate periods of volatility and offer a truly diversified source of return for investors,” PIMCO said. “We have focused the portfolio in looking for yield opportunities that we think are achievable at

AUSTRALIAN FIXED INCOME WINNER: LEGG MASON WESTERN ASSET AUSTRALIAN BOND A FINALISTS: • BLACKROCK ENHANCED AUSTRALIAN BOND • MACQUARIE CORE AUSTRALIAN FIXED INTEREST • NIKKO AM AUSTRALIAN BOND • ONEPATH OPTIMIX WHOLESALE AUSTRALIAN FIXED INTEREST TRUST A

contributor to our outperformance in recent months.” David Ashton, senior portfolio manager on the Macquarie Core Australian Fixed Interest fund, said March was an unprecedented period for financial markets with liquidity challenges impacting even the highest-quality government bond markets. “Credit strategies were also

ANTHONY KIRKHAM

extremely challenged with a dramatic widening in spreads in very poor liquidity,” Ashton said. “As a result, many strategies that were over-reliant on duration calls or credit beta to generate excess returns suffered significant underperformance.”

GLOBAL FIXED INCOME minimal to no extra risk for investors. This has been in the form of relative value opportunities we see in certain bond markets across the globe, as well as attractive credit opportunities that have allowed the fund to offer a favourable yield for investors.” As to how the fund dealt with the recent market downturn, the firm said credit spreads had “tightened meaningfully” and they were optimistic on markets despite trade tensions between the US and China, civil unrest and continued growth challenges. In terms of its positioning, the fund said it was cautiously positioned and was emphasising liquidity in order to better respond to a variety of possible shocks that could occur. “In our Global Bond fund, we are modestly overweight headline duration – although global yields are fairly low, we seek relative value opportunities that aim to

WINNER: PIMCO GLOBAL BOND FINALISTS: • COLCHESTER GLOBAL GOVERNMENT BOND N • LEGG MASON BRANDYWINE GLOBAL OPPORTUNISTIC FIXED INCOME A • RUSSELL GLOBAL BOND AUD • LEGG MASON BRANDYWINE GLOBAL FIXED INCOME TRUST A

benefit from an ongoing global grab for duration in the event the economic outlook worsens,” it said. “While the outlook for inflation is subdued, we continue to hold a moderate allocation to Treasury inflation-protected securities (TIPS) in the portfolio based on attractive valuations and as a hedge against a potential inflation overshoot. We also maintain modest exposure to a diversified basket of emerging market currencies, funded by developed market currencies.”

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20 | Money Management July 30, 2020

Fund Manager of the Year 2020

MEGATRENDS FOR A MEGA WIN BY JASSMYN GOH

FOCUSING ON MEGATRENDS gave Insync Funds Management the push it needed to take out Money Management’s Emerging Manager award this year. Insync’s chief investment officer, Monik Kotecha, said the Insync Global Quality Equity fund was able to produce strong absolute returns on a riskadjusted basis over the past year. Kotecha said the fund focused on high-quality growth companies that fell into one-of16 “unstoppable megatrend” categories. “The companies we invest in are on the right side of disruption, are intensely

profitable, have long-term durability, and we believe will have superior performance,” he said. Kotecha said two of these megatrends were the ‘food prepared away from home’ market, and ‘pet humanisation’. “We focus on finding two or three stocks per megatrend and this gives us a diversification so if one or two megatrends don’t work out the way we think it will then the other 14 should perform really well,” he said. “It’s a concerted effort within the investment team and whilst we have high conviction, we have 30 stocks so we want to ensure we get strong returns from as many megatrends and stocks as

WINNER: DNR CAPITAL AUSTRALIAN EQUITIES HIGH CONVICTION PORTFOLIO FINALISTS: • BENNELONG AUSTRALIAN EQUITIES MODEL PORTFOLIO CORE • BLACKMORE CAPITAL BLENDED AUSTRALIAN EQUITIES PORTFOLIO

BY CHRIS DASTOOR

A “QUALITY” FOCUS has helped DNR Capital Australian Equities High Conviction Portfolio win the Money Management Fund Manager of the Year award in the Separately Managed Accounts – Australian Equities category.

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WINNER: INSYNC GLOBAL QUALITY EQUITY FINALISTS: • FAIRLIGHT GLOBAL SMALL & MID CAP A • ELSTON AUSTRALIAN LARGE COMPANIES A • BOMBORA SPECIAL INVESTMENTS GROWTH A

possible. “In the last 12 months over 75% of our stocks outperformed the due to our systematic and risk discipline way of investing.” Kotecha said those stocks had a lot of cash, strong balance sheets, and were not sensitive to the economy which meant they fell a lot less during market downturns. For finalist Fairlight,

MONIK KOTECHA

portfolio manager Nick Cregan said its Global Small and Mid Cap A fund took a low-risk approach to a slightly higher volatile part of the market and had invested in quality companies that delivered alpha.

QUALITY LEADS THE WAY FOR SMAs

SMA - AUSTRALIAN EQUITIES

• ELSTON AUSTRALIAN LARGE COMPANIES MODEL PORTFOLIO

EMERGING MANAGER

ROBERT WHITE

Robert White, DNR Capital chief executive, said the fund was actively managed with a quality focus, which included key criteria such as balance sheet management, industry structure, and environmental, social and governance (ESG). He praised chief investment

officer and director Jamie Nicol and portfolio manager Scott Bender, with the broader investment team, for their work during the December quarter which “paid dividends” as the fund entered 2020. “It was a tough quarter in the market and that work was really about portfolio positioning and the hard work paid dividends through 2019 into 2020,” he said. White said SMAs were an alternative to the more traditional investment structures out there as they provided investors and advisers with high degrees of flexibility over portfolio construction. “The accessibility has grown dramatically, and platform representation has grown significantly as well,” White said.

Marcus Bogdan, Blackmore Capital chief investment officer, echoed the strengths of SMAs as an alternative. “I think it’s been a great area of change for investors from wealth management firms, financial planning groups and accounts,” Bogdan said. “The SMA space for retail and wholesale investors has the best of both worlds, in the sense the underlying investor owns the assets, they can see it, and they receive the underlying dividends and franking credits. “But they also have the benefit of having a professional sitting over the top of that, allocating capital to companies they have researched and doing it in an appropriate and risk adjusted way.”

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July 30, 2020 Money Management | 21

Fund Manager of the Year 2020

WINNING WITH A STRONG INVESTMENT COMMITTEE BY JASSMYN GOH

HAVING AN EXPERIENCED investment committee and a strong investment governance structure has given the IOOF Balanced Investor Trust fund the edge to win Money Management’s Multi Asset – Balanced award for 2020. IOOF’s chief investment officer, Dan Farmer, said his fund had been performing well prior to COVID-19 and had taken a more defensive position towards to end of 2019. “We reshaped our defensive assets to make them less dependent on interest rates and credit spreads. In our fixed interest portfolios we reduced our reliance on duration

and introduced relative value management,” he said. “This is designed to perform well in volatility and deliver good returns regardless of where credit spreads and duration are headed so that move towards relative value in fixed interest really helped us during the COVID-19 sell-off period. “So, it was a combination of asset allocation, a focus on active management and positioning the portfolio in a more defensive manner through 2019 that drove the performance over the last 12 months.” Farmer noted that the team had a strong performance culture as they focused on what mattered to clients.

TARGETING FUTURE SUSTAINABLE TECH GETS GOLD BY JASSMYN GOH

WHAT SETS THE Responsible Investments winner, Nanuk New World fund, apart from the rest is that it is the only global fund that invests specifically in industries and technologies that contribute to improving global environmental sustainability. Nanuk chief investment officer, Tom King, said he was

TOM KING

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happy the fund was getting recognition as the fund invested in parts of the economy that would continue to grow over the long term and which had interesting nuances and complexities that lent themselves to active management. “The prominent ones are renewable energy technologies like solar and wind. More recently in battery energy storage and things to do with smart grid. In the transport space, you’re talking about a paradigm shift towards electric vehicles which is an area of focus for us,” he said. “Then you’ve got areas of traditional environmental investment like waste

MULTI ASSET – BALANCED WINNER: IOOF BALANCED INVESTOR TRUST FINALISTS: • ADVANCE BALANCED MULTI BLEND WHOLESALE • BENDIGO BALANCED INDEX • AUSTRALIAN ETHICAL BALANCED • FIDUCIAN BALANCED

“All the teams spend time with advisers and understand client needs and are driven by outcomes – how we are performing not only in surveys but on how absolute returns look, and we make sure risk is appropriate for each client cohort,” he said. “The teams are also focused on having an empowered team so every member in the investment team can contribute to outcomes so they are all very experienced and that

DAN FARMER

experience is reflected in how we position portfolios.” Farmer said the fund’s investment philosophy was to be active and well diversified, and willing to look into a wide range of strategies, managers and asset class niches.

RESPONSIBLE INVESTMENTS

management, recycling, sustainable materials and we invest in technology areas like advance manufacturing, industrial automation and robotics.” King noted that the fund had outperformed global equity benchmarks during the beginning of the year when markets fells due to the COVID19 pandemic. He said the biggest challenge as investment managers right now was dealing with expectations of growth that was not certain. “That was a challenges for us in the second half of last year when a number of cyclical parts of the investment markets performed very strongly on expectations of growth this year that clearly hasn’t happened,” he said. “Similarly, in recent months the staggering recovery has

WINNER: NANUK NEW WORLD FINALISTS: • ALPHINITY SUSTAINABLE SHARE • AUSTRALIAN ETHICAL AUSTRALIAN SHARES • AUSBIL ACTIVE SUSTAINABLE EQUITY

seen large parts of the market perform in a way that challenges our assessment on how strong economic growth is going to be in those areas.” However, over the long term, King said his outlook was optimistic in relation to the areas the fund was focused on as they were likely to benefit very significantly from economic stimulus that had been disproportionately directed towards sustainable infrastructure and sustainable technology.

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22 | Money Management July 30, 2020

Legal

THE NEW SHAPE OF BEST INTERESTS DUTY Zoe Higgins examines the changes surrounding best interests duty and how it will affect mortgage brokers who will have to ensure they are lending responsibly. SINCE 2009, CREDIT licensees and their representatives have grappled with responsible lending obligations. Following the passage of legislation in response to recommendations of the Royal Commission, mortgage brokers will now also be required to comply with a statutory duty to act in the best interests of consumers. The Australian Securities and Investments Commission (ASIC) announced in May that it would defer the commencement date of these reforms until 1 January, 2021.

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However, considering the challenges that faced the financial advice industry as it came to grips with similar reforms, credit licensees and their representatives are likely to need time to prepare. Each mortgage broker (whether a credit licensee or a credit representative) will need to understand the new obligations that will apply when they provide credit assistance to consumers. Credit licensees must also separately take steps to ensure their representatives comply with this area of the credit legislation.

THE NEW, NEW BEST INTERESTS DUTY The concept of a best interests duty isn’t unfamiliar to the financial services industry. Financial advisers have been subject to a statutory best interests duty since the Future of Financial Advice reforms in 2013. Separate duties to act in the best interests of investors or consumers also apply in other areas of the financial services landscape. However, until recently, there has been no such statutory duty applicable to credit licensees.

The new obligations include not only a best interests duty, but also a duty for mortgage brokers to prioritise the interests of clients over their own. As already discussed, the new best interests obligations will apply to mortgage brokers. The national credit legislation defines the term ‘mortgage broker’ to mean a credit licensee or credit representative in the business of providing credit assistance in relation to credit contracts: • Offered by more than one credit provider; and

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July 30, 2020 Money Management | 23

Legal • That are secured by mortgages over residential property. The term ‘mortgage broker’ does not include a credit licensee or representative that performs the obligations or exercises the rights of a credit provider in relation to the majority of those credit contracts. In practical terms, this means the reforms will not apply to loans officers employed by banks or other lenders, and may not apply to other parties such as mortgage managers (where they step into the shoes of a lender).

RESPONSIBLE LENDING: CONSISTENT BUT NOT SUFFICIENT The national responsible lending regime was intended to encourage prudent lending and set standards of conduct for the industry. So, what are the differences between this new best interests duty and the existing responsible lending obligations? As summarised in ASIC’s new Regulatory Guide 273, responsible lending steps are complementary to, but distinct from, the obligation to act in a client’s best interests. As such, complying with the responsible lending laws will not be sufficient to comply with the new best interests obligations. Overall, the reforms impose a higher standard of obligation than the responsible lending obligations. Mortgage brokers had previously been required to demonstrate that a proposed loan contract was “not unsuitable” for a consumer, taking into account the consumer’s objectives and their financial situation. The new best interests duty goes further, by requiring a broker to demonstrate, in a positive sense, that applying for the credit contract would be in the client’s best interests. Borrowing from ASIC’s guidance on the best interests duty that applies to financial advisers, it is reasonable to ask whether this means that the consumer should be left in a “better off” position as a result of the mortgage broker’s recommendations. ASIC’s Regulatory Guide on the new obligations does not make any specific reference to the consumer being “better off”.

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ASIC instead states that in making an assessment as to what is in the consumer’s best interests, brokers should prioritise cost or affordability considerations, in addition to other loan features that have a realistic possibility of offering the consumer good value or a “net benefit” relative to other options. Not surprisingly, RG 273 states that a broker’s consideration of the individual circumstances of the consumer and their needs, goals and financial situation is particularly relevant to complying with the obligations. ASIC’s guidance highlights that the risk of non-compliance is substantially increased if a broker’s processes typically lead to a ‘one size fits all’ outcome for consumers. As such, it will be critical for brokers to understand what each consumer is trying to achieve, and what product features they value. The new best interests duty also goes further than the responsible lending regime taking into account ASIC’s expectation that mortgage brokers will research and compare a range of credit products. Again, looking at the parallel universe of financial advice, the need to conduct a reasonable investigation into relevant financial products has, in practice, been one of the stickier points of the safe harbour steps set out in section 961B of the Corporations Act. There is no such safe harbour for the best interests duty that now applies to mortgage brokers. As such, it will be up to credit licensees and their representatives to satisfy themselves that they have done everything necessary to comply. We suggest that this should include comparing the licensee’s panel of lending products against those in the broader market. ASIC’s guidance also discusses the need for brokers to prioritise the interests of a consumer in the case of a conflict (a new obligation in addition to the ongoing requirement that credit licensees have adequate arrangements in place to ensure clients are not disadvantaged by any conflict that may arise in relation to the credit activities of the licensee or its representatives).

“It will be critical for brokers to understand what each consumer is trying to achieve, and what product features they value.” ASIC points out that the conflicts priority rule means that a broker must not recommend a product or service that would entitle the broker (or other relevant parties) to receive higher remuneration unless doing so would also be in the client’s best interests. Similar to its approach in the world of financial advice, ASIC suggests a broker consider what another broker in the same position but without a conflict of interest would do. One could alternatively ask what Commissioner Hayne would do.

THREE THINGS YOU CAN DO NOW TO GET READY Here are just some of the steps we think licensees will need to take in readiness for the new obligations: 1) Reviewing the policies and guidance relied upon by the licensee, and provided to representatives, to ensure these adequately take account of the new obligations. Some of our tips on this: • We suggest mapping out each of the new obligations and building processes to ensure compliance with each of them, rather than trying to comply with the new obligations by tweaking your responsible lending policies. It may be that the two can be merged after you have done the initial ground work to identify the practical steps required to comply with the new obligations. • We also suggest including a simplified decision tree for brokers to follow in potentially tricky situations. For example, what should brokers do if they cannot act in the consumer’s best interests in providing them with credit assistance? (Answer: decline to provide the credit assistance.) In our

ZOE HIGGINS

experience, financial advisers have benefited from this type of resource in navigating comparable obligations under the Corporations Act. • Be clear about record keeping requirements. Financial advisers subject to the Corporations Act best interests duty have found out the hard way that if they can’t prove that they acted in a client’s best interests, ASIC will take the position that they did not. 2) Ensuring your monitoring and supervision framework includes relevant checklists for compliance with the new obligations. You may wish to refer to ASIC’s guidance, which sets out a list of factors that may need to be considered in an assessment as to whether a particular recommendation was in the client’s best interests. 3) Reviewing your panel of lenders to ensure the licensee or its representatives will be able to present consumers with loan options that are in their best interests. ASIC’s guidance suggests that it expects brokers to have an awareness of the products and features that are available in the broader market, and periodically compare them to their own panel. If you identify any need to make changes, this could take some time. Zoe Higgins is special counsel at Holley Nethercote.

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24 | Money Management July 30, 2020

Equities

COVID-19 AND THE FUTURE OF GLOBALISATION The aftermath of the Global Financial Crisis paved the way for increased globalisation, writes Govinda Finn, but the COVID-19 border and trade restrictions mean this is looking unlikely to be repeated. THE COVID-19 SHOCK has profoundly altered the outlook for globalisation in terms of trade, capital, information and people. Our analysis indicates that the post-Global Financial Crisis (GFC) compositional shift towards new engines of globalisation is likely to be disrupted (see Chart 1). Crossborder information flows will see explosive growth but this will be offset by a severe impairment in people movement combined with a further deceleration in the ‘old’ engines of globalisation of trade and capital integration. More importantly, we do not

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expect the aggregate pace of aggregate globalisation to return to its already disappointing pre-COVID trend path. Moreover, our updated scenarios analysis implies that the risks are tilted towards an even more damaging long-term reversal of globalisation.

TRADE – SHIFTING INCENTIVES LEAD TO REORIENTATION Prior to the COVID-19 shock, growth in the cross-border integration of goods markets had already weakened substantially. In the years immediately after the

crisis, multilateral policy impetus weakened. Then the US-China trade war dealt an additional blow with increases in bilateral tariff non-tariff barriers to trade reversing the multi-decade declining trend. Looking forward, global trade is expected to contract even more than gross domestic product (GDP) in 2020 due to the severity of the global downturn and disruption to supply chains. Indeed, the COVID-19 shock has highlighted the vulnerabilities that exist in a system where companies had lengthened and complicated their supply chains

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July 30, 2020 Money Management | 25

Equities

designed to optimise their labour, regulatory and tax costs. The COVID-19 shock is likely to profoundly impact these incentives. Supply chains are likely to be shortened and reoriented to focus more on resilience and diversification, amplified by government policies and regulations. This means a shift towards more strategic micro supply chains, which are decentralised, have flexible supplier contracts and manufacture closer to the final point of purchase. While some restructuring of supply chains is optimal, many of these changes will increase firm costs and be passed on to consumers. China’s pivotal role in the production of intermediate goods will be especially hard to replace as US-China trade relations continue to deteriorate. In this scenario, and under greater political pressures, there will be even more impetus for the global trading system to fragment into regional trading blocs. China and the US are the largest sources of demand in their regional blocs and thus will be crucial in determining how companies square off the demands of minimising cost and supply chain disruption while maintaining maximum market access. And this will all take place amidst an increasingly fractious strategic rivalry. Smaller countries may be forced into a more proactive choice to capitalise on these shifting value chains and reorient their labour and industrial policy to gain from the coming shift in the global trading order. They will also face difficult choices about which blocs to align with, decisions that will also influence global security arrangements. Meanwhile, exportled development models will be less viable, advantaging those economies with large domestic

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Chart 1: The trend pace of globalisation is set to slow further

Source: Aberdeen Standard Investments (as of May 2020)

markets and the ability to implement reforms to increase the efficiency of domestic industries.

CAPITAL – NATIONALIST SENTIMENT TO THE FORE Prior to the COVID-19 shock, we had expected capital market integration to continue, albeit more slowly than its long-term average, with de facto outpacing de jure integration. But capital integration is now likely to slow further, or even stall, as a result of COVID-19. Returns on foreign direct investment are likely to decline further, reflecting the likely shortening of supply-chains, as firms seek to re-shore or regionalise production, and as a by-product of companies insulating production processes from future disruption. Capital market integration may be especially affected in emerging markets. The COVID-19 shock puts emerging markets under extreme pressure, with capital flight (in effect) reducing policy-makers’ space to act. It seems likely that not all capital controls put in place to help navigate the shock will be fully rolled back afterwards. And even

if emerging markets escape with few balance of payments crises, the appetite for further capital account opening is likely to be reduced. Finally, with US-China relations so frayed, the politicisation of portfolio flows presents a new risk which could lead to a marked fall in both de jure and de facto capital integration in both developed markets and emerging ones.

PEOPLE – LAST TO RECOVER The ‘people’ component of globalisation – international tourism and migration flows – is where we expect to observe the largest longer-run reductions in the pace of integration compared with our baseline expectations before the COVID-19 pandemic. Beginning with tourism, international flows had grown at an average rate of 5.1% over the past decade, with the volume of arrivals reaching 1.5 billion in 2019. Prior to the current crisis, the World Tourism Organisation was projecting arrivals to increase at around a 4% annualised rate over the next five years, implying further moderate

Continued on page 26

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26 | Money Management July 30, 2020

Equities

Continued from page 25 increases in the ratio of tourism activity to global GDP. COVID-19 has radically changed this structural outlook. Around 70% of countries have completely closed their borders to international tourists, and total volumes are likely to fall between 60% and 80% this year. Moreover, the sector will be one of the last to exit restrictions making a return to its previous trend path unlikely, with the long-term growth rate to also be lower. That reality is already being acknowledged by airline companies, many of which are making permanent cuts to their workforces, aircraft orders and travel routes. The only scenario in which there is no damage done to the long-term outlook for tourism is if a highly-effective mass vaccine is found, vaccination rates are very high, and travellers do not remain concerned about potential exposure to new viruses. Migration flows, meanwhile, had been on a declining trend even before the current crisis. Setting aside the 2017 spike relating to the Syrian crisis, trend annual growth dropped by around a half between 2006 and 2018, though growth was still well above the average of the 1990s. This trend mainly reflected the more vexed politics of migration in the wake of the financial crisis in the developed countries. With real income growth weak by historical standards and income and wealth inequalities also elevated, the median voter became more responsive to messages implying that migration was suppressing wage growth and putting undue pressure on public services. As a result, policy also began to shift,

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either under the guidance of populists themselves or mainstream parties trying to preserve their influence. The potency of such messages will likely strengthen in the wake of the COVID-19 crisis. Unemployment will rise to multidecade highs in a number of countries. That in turn will put further downward pressure on wage growth. Meanwhile, governments are unlikely to prioritise the public spending that would be needed to accommodate sustained migration flows. Already, the Trump administration has suspended the issuance of some classes of US visas in the near-term and Australian and British governments have indicated the migration regime will be more restrictive, particularly for low-skilled workers.

INFORMATION â&#x20AC;&#x201C; COMPRESSED INNOVATION BODES FOR REBOUND Cross-border data flows have become the most powerful positive contributor to the growth of our globalisation index since the GFC. Estimates of global data flows indicate there was a 45-fold increase between 2005 and 2014, with forecasts for a further ninefold increase by 2021.

The rapid increase has been partly facilitated by a reduction in data transmission costs but a more powerful driver has been technology changes associated with the emergence of digital technologies such as big data, cloud computing, 5G, artificial intelligence (AI), Internet of Things and robotics. The unique nature of the COVID-19 shock augurs well for an acceleration of cross-border information flows. Firstly, efficient data collection and enhanced digital architecture are likely to be critical to tracking the COVID-19 pathogen and to planning disease prevention efforts. Secondly, in the absence of medical treatment or vaccine, social distancing is likely to remain the most effective viruscontainment strategy implying greater on-lining of communication and commercial services trade. The ongoing economic downturn may also reduce the opportunity costs for long-term investment and accelerate the innovation process related to digital technologies in the latter commercialisation and diffusion stages. However, our optimism for a rapid acceleration of crossborder information flows is

tempered by the lack of uniformity in standards and rules across international borders and jurisdictions. We have already witnessed a schism in regulatory approaches on data privacy while a fragmentation in areas such as 5G, AI, e-currencies and smart cities raises political red flags over the global welfare benefits of these technologies in the medium term. Moreover, the US trade policy action is increasingly focused on the Chinese tech sector, which has the potential to weaken cross-border information exchange. Another challenge is taxation. The OECD estimates large technology firms avoid $100$240 billion in taxes annually, corresponding to 4% to 10% of global corporate tax revenues. Countries have started to take unilateral measures due to a delay to an agreement of an international digital service tax. Although the COVID-19 shock has made the prospect of a global deal more remote, the EU recovery plan places digital taxation at the center of its revenue plans. Govinda Finn is Japan and developed Asia economist at Aberdeen Standard Investments.

22/07/2020 11:06:24 AM

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28 | Money Management July 30, 2020

Toolbox

BRINGING THE X FACTOR

With factor-based investing on the rise, writes Simon Lansdorp, how should investors determine the relevant factors and the most-effective way to combine these for higher returns? OVER THE PAST decade, prominent institutional investors have publicly embraced factor-based approaches to securities selection and portfolio allocation. Concepts such as value investing or low-volatility investing have gained popularity, with the number of retail investors introducing factorbased products into their portfolios also increasing substantially in recent times. Factor investing is an approach used by asset managers that involves targeting specific drivers of return across asset

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classes, and can help improve portfolio returns, reduce volatility and enhance diversification. Factor-based strategies can help to significantly improve the return-risk profile of a portfolio, for example, by reducing downside risk or enhancing longterm returns. Yet not all factor products are created equal. For instance, generic factor-based strategies can be prone to some common pitfalls. Applying an enhanced multi-factor approach can help mitigate many of these issues. Focusing on efficiently combining factor premiums and making sure premiums do not clash or compete

with each other will ensure a positive exposure to all the desired factor premiums over time. The rise of factor investing in recent years has largely resulted from large flows into exchange traded funds (ETFs) based on popular smart beta indices. While these relatively generic products offer exposure to factors in a transparent way and at relatively low management fees, they can incur significant hidden costs. Smart beta indices are also prone to overcrowding and arbitrage, and while strategies based on generic factor indices may be fully transparent, this

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July 30, 2020 Money Management | 29

Toolbox

transparency comes at a cost to investors. It means that other investors can identify in advance which trades are going to be executed, and can opportunistically take advantage of this.

IDENTIFYING THE REQUIRED FACTORS Since the first factors were reported in the 1970s, hundreds of individual factors have been identified in the academic literature and implemented into investment portfolios, with varying degrees of success. Different asset managers will adopt different factors for a number of reasons, including the individual market and economic nuances at play. Most factors tend to be related to one another and ultimately measure the same phenomenon, whereas others only seem to work over short periods of time, or in a limited number of segments of the market. Research shows it is possible to bring the number of factors down to just a handful that consistently perform over multiple time periods and across markets. Investors should therefore be selective and focus on a small number of factors that are performing with superior riskadjusted returns, proven, and have an economic rationale with strong academic underpinnings. There are typically four main factors that meet these required criteria across equities, including: 1) Value: The value effect is the tendency of inexpensive stocks, measured for example by the price to-book ratio, to achieve above-market returns. This phenomenon has been extensively documented in the academic literature, where it has been identified over long periods of time and in a variety of regions, including the US,

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Japan, Europe and emerging markets. A concern with conventional value strategies is that these are typically exposed to elevated levels of distress risk and other value traps. However, empirical evidence shows distress risk is not driving the value premium and such value traps are therefore better to be avoided. 2) Momentum: Momentum is the tendency for stocks that have performed well in the recent past to continue to perform well; and for stocks that have performed poorly to continue to perform poorly. The momentum effect was first documented in the early 1990s, and has been confirmed in numerous subsequent studies. The momentum premium is one of the largest factor premiums, but its sensitivity to market reversals and high turnover are two well-known issues that can deter the implementation of this type of strategy among some asset managers. 3) Low volatility: Low-risk stocks generate higher riskadjusted returns than highrisk stocks, as demonstrated as far back as the 1970s by Robert Haugen and James Heins who showed that low-beta stocks earn higher risk-adjusted returns than high beta stocks in the US market. However, generic low volatility strategies are typically based on a single backward-looking historical risk measure, such as volatility or beta, and this construction may expose the strategy to some pitfalls, such as miscalculated downside risk. A more sophisticated approach can overcome these issues, by taking a multi-dimensional view of risk. This means using

several low-risk variables, that include both long- and short-term statistical data. 4) Quality: The quality effect is the tendency of high-quality stocks to outperform low-quality stocks and the market as a whole. Stocks of companies with high profitability, high earnings quality and conservative management are seen as high-quality stocks. The quality effect was first documented in the early 1990s where (low) accruals were used as an indicator for sound earnings quality. A key concern with generic quality strategies is that they use poor definitions. For example, quality is often measured by financial leverage or earnings stability, which are actually more related to the low volatility factor. Other quality definitions, such as growth in profitability or earnings growth, can have weak or no predictive power for future returns.

WHEN THE TIMEâ&#x20AC;&#x2122;S RIGHT One of the most hotly-debated topics in the field of quantitative finance is whether investors should try to tactically time their exposures to factors. Single-factor portfolios can experience periods of relative underperformance or outperformance that can last multiple years. As a result, timing may appear like an appealing option, in principle. However, there is little evidence that it is possible to predict accurately which factors are going to do well in the near future, especially if one takes the high transaction costs into account that are involved with timing factors. Instead of tactically trying to identify the best one, it is usually far more rewarding to strategically diversify across factors to be successful.

Continued on page 30

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30 | Money Management July 30, 2020

Toolbox

CPD QUIZ This activity has been pre-accredited by the Financial Planning Association for 0.25 CPD credit, which may be used by financial planners as supporting evidence of ongoing professional development.

Continued from page 29 By combining various individual factor strategies, it is possible to produce a multi-factor portfolio that offers high exposure to multiple factor premiums, minimises turnover and avoids the individual factors competing against each other. This methodology results in efficient and balanced exposure to all proven factors. This leads to a better expected risk-adjusted return in the long-run for the multifactor equity portfolio.

ADDING SUSTAINABILITY INTO THE FACTOR MIX As with many other investment philosophies, sustainability is increasingly front of mind for managers needing to cater to the demands of environmentally-conscious investors in both Australia and globally. Excluding stocks with poor environmental, social and governance (ESG) ratings is now regarded as a viable investment option, with performance now stacking up accordingly. Factor strategies and sustainable investing can make a good combination. The rules-based nature of quant models makes it relatively easy to integrate additional quantifiable variables into the security selection and portfolio construction process. From this perspective, integrating sustainability criteria into investment methodology can be similar to a standard factor-based approach, where securities are selected based on their factor characteristics. Through a factor approach, asset managers can create an investment portfolio that strikes a balance between sustainability objectives and risk and return expectations for each client. Empirical research increasingly points towards the ability to achieve improved sustainability profiles with proven return factors. One approach is for the manager to ensure that the weighted ESG score of every portfolio is at least as high as that of the reference index. If the portfolio generated by the stock selection model scores below average on sustainability, the portfolio construction tool will select stocks that improve the portfolioâ&#x20AC;&#x2122;s sustainability profile. Securities from companies with a higher ESG score are therefore more likely to be included in the portfolio. Subsequently, this approach positively screen stocks, in contrast to an exclusion policy that only allows negative screening. This enhanced form of ESG integration ensures the risk of being overexposed to less sustainable companies is avoided, while maintaining exposure to top-ranked stocks. Using more generic approaches to sustainability can present issues, including the simplicity of the approach to ESG scoring leading to undesired biases, and the level of sustainability integration these products offer often being too basic, making it impossible to adjust them to specific client needs. Factor investing is a unique to forming an investment portfolio, and gives more control to asset owners on how their portfolio behaves and what it looks like. The application of factors enhances diversification, generates strong returns and, importantly, assists in managing the risk profile of a portfolio. Simon Lansdorp is portfolio manager â&#x20AC;&#x201C; factor investing equities at Robeco.

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1. What are the main benefits of a factor investing approach? a) Improved portfolio outcomes b) Reduce volatility c) Enhance diversification d) All of the above 2. Which of the following is NOT widely considered to be a factor premium? a) Momentum b) Value c) Corporate governance d) Quality 3. What is the main concern with using quality as a factor premium? a) Poor definitions b) Market inconsistencies across jurisdictions c) Doesnâ&#x20AC;&#x2122;t adequately account for changes in monetary policy d) It can be a compensation for risk 4. Momentum is considered a strong factor premium for many asset managers due to which of the following? a) The tendency of high-quality stocks to outperform low-quality stocks b) The likelihood that stocks that have performed well in the past will continue to perform well in the future c) Low-risk stocks generate higher risk-adjusted returns than highrisk stocks d) The tendency of inexpensive stocks, measured for example by the price to-book ratio, to achieve above-market returns 5. Sustainability is increasingly being integrated into factor-based portfolios. Why? a) The asset manager feels a sense of obligation b) Media coverage of sustainable investing is driving awareness among investors c) To achieve a balance between financial imperatives and ethical values d) To improve diversification across asset classes

TO SUBMIT YOUR ANSWERS VISIT https://www.moneymanagement.com.au/ features/tools-guides/bringing-x-factor

For more information about the CPD Quiz, please email education@moneymanagement.com.au

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July 30, 2020 Money Management | 31

Send your appointments to chris.dastoor@moneymanagement.com.au

Appointments

Move of the WEEK David Bryant Chief executive Australia Mercer

Mercer has welcomed David Bryant as its Pacific zone leader and chief executive, Australia. In his new role, Bryant would work with the Pacific leadership team and would report to David Anderson, president of Mercer’s international region.

“With his proven leadership across financial services and his investment domain expertise, David is the right person to lead Mercer in the Pacific through our next phase of growth and transformation,” Anderson said. “The Pacific plays an important role in our global

The Financial Services Council (FSC) has appointed four new fund managers to its board and has established a new board committee, the fund management board committee (FMBC), to drive the strategic policy direction of the Australian funds management sector. The four new board appointments were: • Andrew Landman, BlackRock Asset Management Australia; • Bryce Doherty, UBS Asset Management; • Jen Driscoll, AllianceBernstein; and • Liz Hastilow, First Sentier Investors. The FMBC had also seen 18 chief executive and country head fund manager members appointed, which also included Landman, Doherty, Driscoll and Hastilow: • Brett Jollie, Aberdeen Standard Investments; • Chris Durack, Schroder Investment Management;

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portfolio and David will play an instrumental role in building brighter futures for our colleagues, our clients and our firm.” Bryant was most recently CEO for wealth and capital markets and chief investment officer at Australian Unity.

• Frank Kolimago, Vanguard Investments; • Garry Mulcahy, MLC Wealth Management; • James MacNevin, State Street Global Advisors; • Jodie Hampshire, Russell Investments; • John McMurdo, Australian Ethical Investment; • Justin Cowper, Ninety-One Australia; • Matthew Drennan, Zurich Financial Services; • Matthew Harrison, Franklin Templeton Investments Australia; • Nick Fels, Bell Asset Management; • Nick Hamilton, Challenger; • Rachel Farrel, J.P. Morgan Asset Management; and • Richard Brandweiner, Pendal Group Limited. Westpac has appointed former ANZ chief financial officer (CFO), wealth, Michael Rowland as CFO.

Rowland joined from KPMG, where he was a partner in management consulting, specialising in financial services, and had also previously worked for ING Australia. He worked at ANZ from 1999 to 2013 where he held various CFO roles including in the institutional banking and personal financial services departments. Gary Thursby, who had been acting CFO since December 2019, would continue in the role until Rowland joined later in the year. Peter King, Westpac chief executive, said Rowland brought deep experience across the financial services industry. Former chief executive of Colonial First State Global Asset Management (CFSGAM) Mark Lazberger has joined Yarra Capital as a nonexecutive director. Lazberger held the CEO role at CFSGAM (now First Sentier Investors) and First State

Investments for 10 years until December 2018 when it was acquired by Japanese bank MUFG. Prior to joining First State, he had a 15-year international career with State Street with roles including president of State Street Japan in Tokyo and president of State Street Global Advisors’ international business (ex-US) in London. Self-managed superannuation fund (SMSF) administration and audit firm Seamless SMSF has appointed Deloitte partner, and Engage Super Audits chief executive and founder, Jo Hurley as business development manager. Hurley would return to the SMSF industry after previously taking a career break from her role as SMSF assurance and advisory partner for Deloitte in February 2018. She had almost 25 years of experience in the SMSF sector and was the founder of Engage, which was acquired by Deloitte in 2015.

23/07/2020 10:43:52 AM

OUTSIDER OUT

ManagementJuly April30, 2, 2020 2015 32 | Money Management

A light-hearted look at the other side of making money

The PWC 11 – only a bargain if you need them THESE are challenging times for consultants. Outsider’s heart almost literally bleeds for the chaps at places like Deloitte, KPMG and elsewhere who he is given to understand have taken pay cuts of up to 20% to help their organisations through these difficult times. This is why Outsider was so puzzled when he read a report that 11 partners from consulting outfit PWC were looking to hawk their combined capacities to the highest bidder. In circumstances where all the contractors have gone and hundreds have been retrenched from some consultancies – who would that be? Now, Outsider admits that he has never been the greatest exponent of the art of selfpromotion, but he has been around enough discount supermarkets to know that bulk deals are not always a good idea when times are tough and budgets are tight. What is more, his old Scots granny always told him that “it’s only a bargain if you need it”. So Outsider’s message to the PWC 11 is that they should maybe consider a more scaled back approach or perhaps offer themselves up for some social cricket. Because as Granny O says, it’s only a bargain if you need it.

Postponing the inevitable without a prescription IT was with some regret but absolutely no surprise that Outsider learned that Dr Martin Fahy and his crew at the Association of Superannuation Funds of Australia had postponed the organisation’s November conference. Outsider was not surprised because, right now with COVID-19 etc, getting anyone to attend anything involving more than about a dozen people in a large room is about as easy as getting someone into an elevator in which someone has broken wind. But wait, there’s more. It seems that having postponed the November conference, Fahy believes that ASFA is going to be able to pull off the same event in February, 2021, which

suggests to Outsider that the ASFA CEO’s doctorate is actually in epidemiology or that he has shares in CSL and insider knowledge on vaccine development. Outsider does like a nice conference held in a warm climate and close to a good golf course, but his advice to Fahy and all those yearning for the scintillating sessions, the well-stocked buffets and the glamorous gala dinner is that they not get ahead of themselves and consider the safety of the internet instead. If Outsider’s polling of fellow conference veterans is anything to go by, it will be late next year or 2022 before anyone feels ready to pack the bags and venture out to conference land, and only if there is a vaccine.

Bad Egg and Rice, not as good as spotted dick A few weeks ago Outsider noted the Financial Services Council’s decision to have NSW Liberal Senate tyro, Andrew Bragg, discuss/debate his book “Bad Egg” with

OUT OF CONTEXT www.moneymanagement.com.au

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actuarial veteran and founder of actuarial ratings house, Rice Warner, Michael Rice. Outsider wondered what you would get when you combined Bragg’s hipster/ pugilistic attitude with Rice’s somewhat more subdued and very much actuarial approach – giving rise to Money Management's headline of a few weeks ago – What do you get when you combine Rice with a bad egg? As it turns out you get a blancmange. And what is a blancmange, you non-domesticated types ask? Well, in

"I've had a view it's worth nothing for a long time." – Rhett Kessler, principal at Pengana Australian Equities, on the value of Foxtel

Outsider’s opinion, it is a poor man’s panna cotta – it is “a sweet dessert commonly made with milk or cream and sugar thickened with rice flour, gelatin, corn starch or Irish moss, and often flavoured with almonds”. You see as an inveterate trencherman, Outsider likes a bit of substance in his pudding, a bit of the sticky date, a bit of the plum duff, a bit of the old spotted dick and he has concluded that mixing Rice with a Bad Egg might be OK for hipsters, pugilistic or otherwise, but it is not as good as the real thing.

"It is not about how I feel...I simply got up and acknowledged that today would be another hard-working day. That is pretty much the story of 2020." – Victorian Premier Dan Andrews on how he felt about seeing the record daily high number of 484 cases

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23/07/2020 11:47:37 AM