Volume 18 Number 18

www.financialstandard.com.au

14 September 2020 | Volume 18 Number 18

07

11

22

Fairlight Asset Management

Shannon Bernasconi WealthO2

Australian Student Asset Management

Publisher’s forum:

Feature:

Profile:

Product showcase:

09 AMP

Opinion:

14

Asian equities

Featurette:

32

Kirstin Hunter Future Super

Everything from alpha to beta

30 million investors around the globe have chosen Vanguard. A company that’s run for the sole benefit of its investors.

Whether your clients invest in our index, actively-managed factor funds or our new fundamental active series Vanguard Manager Select, one thing is crystal clear. Our client-first mission is not muddied by making a profit for outside interests.

This helps us keep costs low, so more of your clients’ money stays in their pocket—where it belongs.

vanguard.com.au/lowcostactive

Vanguard Investments Australia Ltd (ABN 72 072 881 086 / AFS Licence 227263) is the product issuer. You should consider your circumstances and our Product Disclosure Statements (“PDSs”) before making any investment decision. You can access our PDSs at vanguard.com.au. This publication was prepared in good faith and we accept no liability for any errors or omissions. © 2020 Vanguard Investments Australia Ltd. All rights reserved.

YOUR PARTNER IN STRATEGIC WEALTH CREATION.

For over 40 years, Zurich Investments has partnered with Australian advisers and leading fund managers to give astute investors access to outstanding wealthbuilding opportunities that have proudly stood the test of time.

Australian investors have individual needs, and providing them with tailored financial advice has never been more important – or more challenging. The unpredictability of 2020 is a powerful reminder of the need for strong partnerships that deliver longterm investments, capable of withstanding volatile market cycles.

Our long-standing partnerships with world-leading fund managers provide Australian advisers and investors access to a suite of local and global asset classes.

This serves as the foundation on which you can build rewarding strategic investment portfolios that put your clients’ needs first.

Speak with our highly experienced team today or go online to find out more.

CALL 1800 004 480 ZURICH.COM.AU/INVESTMENTS

This publication is intended for the general information of licensed financial advisers, is dated September 2020, is given in good faith and is derived from sources believed to be accurate as at this date, which may be subject to change. It should not be considered to be a comprehensive statement on any matter and should not be relied on as such. The general information does not take into account the personal investment objectives, financial situation or needs of any person. Investors should always consider these factors, the appropriateness of the information, and the relevant Zurich Investments Product Disclosure Statement available from their financial adviser or Zurich Investments before making any financial decisions about any Zurich Investments fund. Past performance is not a reliable indicator of future performance. Zurich Investment funds are issued by Zurich Investment Management Limited ABN 56 063 278 400, AFSL 232 511, GIIN XYY9MQ.00000.SP.03 5 Blue Street, North Sydney NSW 2060 DFOY-015859-2020

www.financialstandard.com.au

07

11

22

Fairlight Asset Management

Shannon Bernasconi WealthO2

Australian Student Asset Management

Publisher’s forum:

Feature:

Profile:

Product showcase:

09 AMP

Doubt cast over IOOF, MLC deal Annabelle Dickson

$1.44 billion acquisition of MLC Iof OOF’s Wealth is a pivotal moment in the reinvention the wealth manager. But not everyone in the industry is convinced.

The outcome of the acquisition will be a force to be reckoned with; IOOF will become Australia’s largest retail wealth manager with $510 billion of funds under management, the largest advice business by number of advisers at 1884 and a superannuation conglomerate with $173 billion in funds under administration.

But, for advisers, strength in numbers is not necessarily a selling point and some advice groups are wanting out.

HFM & Partners managing director Scott Haywood is one of them, saying the size was one of the main reasons he decided to change licensees to Sequoia Financial subsidiary InterPrac.

Still, IOOF’s chief advice officer Darren Whereat is confident that many will come across and be a part of its revised advice strategy - Advice 2.0.

The aim is to enhance the client and adviser experience through the recent acquisition of Wealth Central.

Not to be confused with robo-advice, the digital tool is aimed at reducing the cost of advice by digitising the data collection processes and simulating different scenarios for the client through an online portal.

“We’re betting on technology being able to reduce the cost of advice, and we believe if we can solve for that, then it will be accepted by more and more Australians,” he says.

“We’re quite comfortable and confident that our offer will resonate with many of those advisers and showing them how we can make that

STRENGTHEN YOUR CORE

experience not only more engaging but more efficient for them.”

The technology will be employed throughout IOOF’s salaried adviser and self-employed adviser network Meanwhile under the deal, the 174-year-old wealth manager will have combined funds under administration in superannuation of $173 billion from $70 billion, coming just behind AustralianSuper, and the merger of Sunsuper and QSuper, if it goes ahead.

This has raised the alarm for some. Super Consumers Australia director Xavier O’Halloran has concerns over how IOOF currently looks after its membership, prior to acquiring MLC’s members.

Most recently ASIC caught out IOOF among other funds for wrongfully assigning ‘smoker’ statuses to new members in the IOOF Portfolio Services Superannuation Fund and OnePath MasterFund between 2017 and 2020.

IOOF chose not to remediate its 350 affected members or the 146,000 members from its recently acquired subsidiary OnePath.

“It’s a bit of a warning sign for how they treat their membership,” O’Halloran says.

In addition, APRA’s MySuper heatmap puts IOOF in the red for three out of four administration fee metrics, with total fees for a $10,000 account balance at 2.20% and was marked yellow for total fees for a $50,000 balance at 1.26%.

“A member looking at those facts, outcomes from the Royal Commission as well as high fees, at least in their MySuper product, need to ask themselves about whether it’s the right fund,” he says.

“The merger is a good time to reassess all the fundamentals when it comes to superannuation.” fs

14 September 2020 | Volume 18 Number 18 www.financialstandard.com.au 20 January 2020 | Volume 18 Number 01

Opinion:

14

Asian equities

Featurette:

32

Kirstin Hunter Future Super

Advisers remain bearish: Research Jamie Williamson

Darren Whereat

chief advice officer IOOF

This year is the first time financial advisers have been less optimistic than retail investors, with advisers only anticipating capital gains of 1.3% over the next 12 months from local shares.

That’s according to the latest data from Investment Trends which shows advisers remain bearish, despite the All Ords having rebounded by over 30% since the March sell-off.

“At the start of the COVID-19 lockdown, financial planners’ capital gain expectations dipped below zero temporarily but had since recovered slightly.

2020 is the first time we observe planners being less optimistic than retail investors in their outlook for domestic stocks,” Investment Trends research Continued on page 4

Aussie super funds climb ranks Total assets held by Australia’s super funds rose almost 20% in 2019, with 16 now sitting within the top 300 pension funds worldwide, new analysis shows.

In stark contrast to this year, Aussie super funds enjoyed an extremely positive 2019, according to Willis Towers Watson’s study of the top 300 pension funds around the world.

While total assets globally grew by 8.1%, Australian funds in the survey grew 19.2% for the year and rose through the ranks by an average of 13 places compared to 2018.

“This performance has been aided by relatively high allocations to growth assets and net positive cash flow, as many funds remain in a growth phase,” WTW Australia director, investments Martin Goss said.

Continued on page 4

A critical decision for advisers is the choice of core exposures, which serve as the long-term foundation of client portfolios, independent of market cycles.

It’s more important than ever to ensure your clients’ portfolio core matches asset allocation objectives, demonstrates compelling value, and contributes to the portfolio’s overall stability.

Explore the range of BetaShares Core portfolio ETF solutions: cost-effective, liquid and transparent.

LEARN MORE AT WWW.BETASHARES.COM.AU/CORE-SOLUTIONS

*Past performance is not indicative of future performance.

BetaShares Capital Ltd (ABN 78 139 566 868 AFSL 341181). Investors should read the relevant PDS at www.betashares.com.au and consider whether the product is right for their circumstances. Investing involves risk.

Strengthen your core Fin Strip Ad_V9.indd 1

7/09/2020 4:38:52 PM

2

News

www.financialstandard.com.au 14 September 2020 | Volume 18 Number 18

Fees fall after super mergers: Research

Editorial

Jamie Williamson

Jamie Williamson

M

Editor

Well, wasn’t that a big fortnight for financial advice?!

It all kicked off with the announcement that IOOF will acquire MLC for $1.44 billion which, if approved, will cement IOOF as the biggest advice group by adviser numbers and the second largest superannuation provider behind AustralianSuper.

It also finally marks the last of the big banks’ exiting financial advice.

It’s an interesting move for IOOF; hoovering up a business that has proven financially unviable when the last lot of dealer groups you brought on board are facing scrutiny from the regulator, not to mention doing so while simultaneously feeling the need to “streamline” your existing advice offering.

Then you’ve got the superannuation business to consider, and this is where the red flags really start to flap in the wind.

Among other things, IOOF has faced Federal Court action over conflicts of interest and poor governance in its super trustee business.

Meanwhile, since the Royal Commission has wrapped up it would seem MLC’s trustee business NULIS Nominees has been in the news every other month, whether it’s a class action, APRA action or what have you.

And, as mentioned on our front page, if you look at APRA’s heatmaps, IOOF members aren’t exactly getting value for money when it comes to their retirement savings.

However, IOOF’s decision to snap up MLC does make one wonder whether Renato Mota and crew are also casting an eye over any other competitors.

Having already bought ANZ’s advice business and now buying MLC, IOOF is seemingly undeterred by what many others would consider deal breakers; poor compliance, poor advice and a big clean-up bill.

So maybe it’s Evans Dixon that IOOF will set its sights on next. After months of speculation, ASIC finally took action against the group on September 4 for 126 contraventions of the Corporations Act including best interest duty failures and potential conflicts of interest in investing clients in the troubled US Masters Residential Property Fund.

Things aren’t looking good and it would seem the surface has only just been scratched; you know there’s skeletons when former employees are named in new roles and they leave their previous employer out of the media release when recounting their career bio.

If ASIC prevails, Evans Dixon faces tens of millions in penalties – right after reporting a $30 million statutory loss. So then what? Fold or sell, most likely, and there’s fewer and fewer buyers around.

Since announcing the MLC acquisition, much of IOOF’s marketing spin has centred on the idea that the benefits of scale will ensure success. But size doesn’t always equal scale.

In fact, if the last few years in wealth management has demonstrated anything, it’s that bigger is rarely better, for consumers and the industry. fs

The quote

Fees don’t go down just because a super fund merges, they go down because the trustees redesign the product.

embers whose super funds have merged in the last three years have seen their fees decrease by 20%, according to new analysis.

Rainmaker looked at 13 mergers involving 22 super funds; 11 traditional mergers, the integration of Virgin Super and Mercer Super Trust, and the joint venture between Catholic Super and Equipsuper.

Rainmaker found that in all 11 of the traditional mergers, the more expensive fund’s fees were lowered, with members seeing an average fee drop of 21%. For the fund with lower fees going into the merger, seven of the 11 saw an average reduction of 5%.

Meanwhile, nine of the 11 funds saw fees drop or stay the same when comparing the average pre-merger fees against those postmerger, with the average fall coming in at 14%.

“Mergers have created efficiencies and economies of scale for the funds, which has led to members being better off,” Rainmaker executive director of research Alex Dunnin said.

“Regulators and political leaders continue to heap pressure on funds to merge, particularly if they lack scale or consistently under perform.”

However, fees actually went up for Virgin Super and Mercer Super Trust members and those in Catholic Super and Equipsuper.

“Fees don’t go down just because a super fund merges, they go down because the trustees redesign the product,” Dunnin said.

“Products are more likely to be redesigned in a merger but not when funds just combine their back offices.”

Merger activity in the superannuation sector has ramped up in recent years, particularly following the release of the Productivity Com-

mission’s report that determined there were too many super funds offering too little value to members.

Most recently, NGS Super and Australian Catholic Superannuation and Retirement Fund announced their intention to merge, Cbus and Media Super have commenced due diligence, while First State Super announced plans to merge with WA Super just days after merging with VicSuper.

Also merging, MTAA Super and Tasplan are making progress. The two funds have announced the post-merger leadership team, revealing an almost all-female executive lineup.

Earlier this year, APRA released an updated version of its heatmap, claiming the initiative had seen fees drop across the industry while also compelling funds to merge.

In the six months to June end, APRA said MySuper members saved $100 million in fees thanks to the introduction of the heatmap at the end of 2019.

Updating its MySuper heatmap to reflect changes in the fees charged, APRA said products with 6.1 million MySuper members - or 42% - have seen the total fees charged to them by their fund decrease by an average of $33 per annum since the release of the inaugural heatmap in December last year.

Now, the estimated weighted-average total fees and costs paid per member accounts across all balances is $518, down from $525 in December.

It represents an estimated net saving to members of $110 million, or 1.4% of estimated total MySuper fees and costs paid.

That said, 3.8 million members saw their funds increase fees over the period by an average of $24 per annum. fs

ASIC drags Evans Dixon to court Kanika Sood

The corporate regulator started Federal Court proceedings against an Evans Dixon subsidiary over advice it provided, pushing the share price down.

ASIC is alleging a Dixon Advisory representative failed to look after client’s best interest, individual circumstances and potential conflict of interest while putting their money in the troubled US Masters Residential Property Fund (URF) and related products over a period of about three and a half years (between 2 September 2015 and 31 May 2019).

It is further alleging 51 instances (which it thinks should be treated separately) of financial advice to the eight sample clients resulted in two or more contraventions each of the best interests duty under the Corps Act. The action may mean a big bill for Evans Dixon shareholders; ASIC said the maximum civil penalty for contraventions it alleges against Dixon Advisory is $1 million per contravention for instances before 13 March 2019, and $10.5 million for each contravention after that.

A draft of the proceedings, which was shared

by Evans Dixon on the ASX before the actual

filing, said the total number of contraventions is 126. It also said ASIC wasn’t, at the time of draft, seeking action against specific people.

“Civil penalty for contraventions alleged against Dixon Advisory is $1 million per contravention for contraventions prior to 13 March 2019, and $10.5 million per contravention after that date.

The action comes on the heels of a tough year for Evans Dixon, which included job cuts, leadership changes and troubles with its American real estate fund and a statutory loss of $30 million.

In its FY20 results, it said its funds management business will stop seeding new real assets funds from retail clients, reduce the URF portfolio and wind down Dixon Projects.

The company said it is strategically recruiting in EP to broaden and deepen its M&A and equity/ capital debt markets capability.

Since the annual results, former chair Alan Dixon has stepped down from the role (he left executive roles last year but kept the board seat) and sold his 17.6% stake in Evans Dixon to ASX-listed funds management business 360 Capital. fs

THE PURSUIT OF OUTPERFORMANCE.

Top 10 Global Investment Manager # 7 Active U.S. equity* # 4 Emerging markets debt* # 2 Global real estate** # 1 Active U.S. bonds*

Around the world, more and more investors who seek consistent long-term returns are turning to PGIM for deep expertise across asset classes.

Join the pursuit of outperformance at PGIM.com For Professional Investors only. All investments involve risk, including the possible loss of capital.

FIXED INCOME / EQUITIES / REAL ESTATE / ALTERNATIVES / PRIVATE CREDIT / QUANT SOLUTIONS *Based on Prudential Financial, Inc. (PFI) rankings from the Pensions & Investments’ Top Money Managers List, published 1 June 2020. Based on Prudential Financial, Inc. (PFI) total worldwide AUM as of 31 March 2020. **Pensions & Investments’ annual real estate manager survey, October 2019. This ranking represents worldwide real estate assets under management as of 31 December 2018. © 2020 Prudential Financial, Inc. (PFI) and its related entities. PGIM, Inc. is the principal asset management business of PFI. PGIM is a trading name of PGIM, Inc. and its global subsidiaries and affiliates. In the United Kingdom and various other European jurisdictions information is issued by PGIM Limited, an indirect subsidiary of PGIM, Inc. PGIM Limited (registered office: Grand Buildings, 1-3 Strand, Trafalgar Square, London, WC2N 5HR) is authorised and regulated by the Financial Conduct Authority of the United Kingdom (registration number 193418) and duly passported in various jurisdictions in the EEA. These materials are issued to persons who are professional clients or eligible counterparties as defined in Directive 2014/65/EU (MIFIDII), investing for their own account, for funds of funds or discretionary clients. PGIM, Inc. is exempt from the requirement to hold an Australian Financial Services License under the Corporations Act 2001 in respect of financial services. PGIM, Inc. is exempt by virtue of its regulation by the Securities and Exchange Commission under the laws of the United States of America, including applicable state laws and the application of ASIC Class Order 03/1100. The laws of the United States of America differ from Australian laws. Prudential Financial, Inc. of the United States is not affiliated in any manner with Prudential plc, incorporated in the United Kingdom or with Prudential Assurance Company, a subsidiary of M&G plc, incorporated in the United Kingdom.

PGIM, Prudential, the PGIM logo and the Rock symbol are service marks of PFI and its related entities, registered in many jurisdictions worldwide.

4

News

www.financialstandard.com.au 14 September 2020 | Volume 18 Number 18

01: Alex Dunnin

Advisers more bearish than clients

executive director research Rainmaker Information

Continued from page 1 director Recep Peker said.

Investment Trends found 63% of advisers have most often told clients to maintain a longer term view, yet are more likely to advise clients to investment in cash and reduce market exposure.

“Despite their bearish sentiment, planners aim to achieve the best outcomes for their clients – both in the short and long term horizon. To meet their top priorities of diversification (66%), liquidity (38%) and capital growth (37%), planners most often intend to expand their product set and prioritise high quality asset managers,” Peker said.

It comes as advisers struggle to generate income for their retiree clients in the low interest rate environment, according to 66% of those surveyed. Increasingly, mitigating market risk and educating retirees on their finances are also becoming difficult.

Advisers are more likely to favour flexible products, especially with the ability to access funds when required (56%) and alter income levels (53%), Investment Trends said.

The twin headwinds of low yields and heightened market volatility have made retirement planning more challenging than ever, Peker said. fs

Aussie super funds climb ranks Continued from page 1 AustralianSuper ranks highest on the list, coming in at 23rd – up 10 places from 2018 following a 29% increase in assets under management.

Hostplus saw the biggest jump, rising 46 places to rank 140th on the back of a 40% rise in AUM. Other super funds to make the list were Future Fund (29), First State Super (61), QSuper (67), UniSuper (74), Sunsuper (94), Rest (108), Cbus (117), HESTA (118), Commonwealth Super Corporation (143), State Super (163), ESSSuper (221), SuperSA (226), GESB (227), and VicSuper (270).

Marking 17 years on top, the Government Pension Investment Fund of Japan ranked first with $2.2 trillion in AUM. It’s a whopping 46% larger than the second ranked Government Pension Fund of Norway at $1.5 trillion.

Elsewhere, WTW said defined contribution (DC) assets grew by 9.2% during 2019, while defined benefit (DB) assets increased by 7.1%.

The share of DB funds slightly decreased across all regions except for in Asia-Pacific, where the same level was maintained.

“DB plans dominate in North America and Asia-Pacific where they represent 74% and 65% respectively. To a smaller degree, DB plans also dominate in Europe (53%), whereas DC plans dominate elsewhere, particularly in Latin American countries, accounting for 71% of assets,” WTW said.

Thinking Ahead Institute co-founder Roger Urwin said the positive results following a tough 2018 do not detract from the pressures facing funds this year.

“Perhaps most notably of course, we are still witnessing ramifications from the COVID-19 crisis and, as we anticipate further economic uncertainty in the months ahead, these challenges make pension fund boards’ agendas more complex and stressed than at any previous time,” he said. fs

MySuper products show resilence, post-crash Karren Vergara

A The quote

It shows that most super funds are doing their jobs and maximising investment returns for their members.

ugust marked the fifth consecutive month of positive returns for MySuper products since the COVID-19 pandemic hit, recovering 70% of losses, new Rainmaker analysis shows.

Last month generated a positive performance of about 1.7% for superannuation fund members invested in the default option, according to the research firm’s MySuper single strategy index.

The index comprises 20 not-for-profit MySuper products, representing 70% of this market. The index has essentially reverted to where it was just 11 months ago.

Over a rolling three-year period, returns hit 5.6% per annum. Over a rolling 12-month period, the index registered gains of about 0.8% p.a., up from -1.6%p.a. at the end of July.

MySuper assets lost 13% of its value over

Feb and March. But between April to August, it earned 9%. It is currently down 4% from its January 2020 peak.

Rainmaker executive director of research Alex Dunnin 01 commented on how superannuation continues to be resilient despite the COVID-19 economic meltdown.

“While it may not be due to the super funds themselves, but rather what’s going on in financial markets, it shows that most super funds are doing their jobs and maximising investment returns for their members,” he said.

Equities were particularly upbeat in August. The ASX returned 2.8%, international equities was up 3.5%, while A-REITs jumped 7.9% at the end of the month.

Australian bonds (-0.9%) and international bonds (-0.7%) however, did not perform as well, while cash and direct property were flat for the month. fs

First State Super makes take-private bid for listed entity Ally Selby

First State Super, soon to be Aware Super, has made a bid to acquire 100% of the shares in a listed telco; in what comes as the super fund’s first direct bid for an ASX-listed company.

The $95 billion industry super fund has made a bid to acquire OptiComm, a fibre optic cable company that competes with NBN Co, servicing new residential housing, apartment and commercial building markets.

A First State Super spokesperson confirmed the bid, noting the super fund had provided the telco with an indicative proposal to acquire the company.

“We believe this is a compelling proposal and look forward to working with OptiComm and its management team on this transaction,” the spokesperson said.

“We are unable to provide any further comment at this time.”

OptiComm shareholders were set to vote on a takeover by rival bidder Uniti Group on September 10, after entering into a scheme implementation deed with Uniti on June 15.

As part of the deal, Uniti had offered shareholders $5.19 per share, as well as a fully franked dividend of 10 cents per share.

However, OptiComm announced it had received a competing offer from First State Super.

First State offered shareholders $5.85 per share, and also said it would be open to paying a

fully franked dividend of 10 cents per OptiComm share (which would be deducted from the $5.85 per share cash consideration).

This is a premium of 12.5% to the all-cash consideration offered under the Uniti scheme, as well as a 16.77% premium to the implied value of the all-scrip consideration offered by Uniti (on the basis that Uniti shares were trading at $1.43 at September 7).

“The OptiComm board considers that given the value premium of the competing proposal relative to the value of the consideration offered under the Uniti scheme it is appropriate for the OptiComm board to engage in further discussions with the competing bidder on the basis it may lead to a superior proposal,” OptiComm said in the ASX announcement.

The board has provided due diligence access to First State until September 18.

This is the super fund’s first take-private where it is providing 100% of the equity. It has previously been involved in take privates in the past, but as part of a consortium with an investment manager.

This includes a stake in another fibre optic network provider LBNCo, which it owned via a consortium headed by ROC Partners, a Sydneybased investment manager.

LBNCo was sold to rival OptiComm bidder Uniti last year. fs

News

www.financialstandard.com.au 14 September 2020 | Volume 18 Number 18

Advice disciplinary body delayed

01: Paul Barrett

chief executive AZ NGA

Karren Vergara

Financial advisers will have to wait until June 2021 for the long-awaited disciplinary body that is purported to professionalise the industry.

Assistant Minister for Superannuation, Financial Services and Financial Technology, Senator Jane Hume flagged the single disciplinary body will not see its slated January 2021 launch.

Instead, the disciplinary body as recommended by the financial services Royal Commission, is set to be up and running in mid-2021, Hume told the Stockbrokers and Financial Advisers Association Virtual Conference this morning.

The federal government is still working through the design features of the disciplinary body, which is a key element in professionalising the financial advice industry, she said.

Hume was aware of what the delay meant for the financial advice industry which has been operating without a disciplinary or codemonitoring body since it began.

In the meantime, Hume said it is the responsibility of the AFSL or licence holder to ensure its authorised representatives are abiding to internal standards and the industry’s code of ethics.

ASIC has stated that it has no role in monitoring or enforcing advisers’ compliance under the new disciplinary body, but stressed the importance of sticking to the industry’s Code of Ethics.

The postponement is in line with a number of other Royal Commission recommendations that are yet to be implemented and delayed for six months or so. About 24 have been implemented while another 35 are a work in progress, Hume said. fs

ESG funds criticised Research house Lonsec has criticised ESG fund managers for confusing ESG scores and a lack of transparency.

“The traditional ESG approach tends to be more about process and less about outcomes,” Lonsec head of sustainable investment research Tony Adams said.

“ESG fund managers tend to look at sustainability factors in terms of the risks they pose to a company’s business model. Academic research supports the assertion that companies that follow strong ESG standards are more likely to outperform those that don’t.”

ESG research can be an integral part of a manager’s investment approach and can create opportunities for investors to find a portfolio that matches their values. However, there is significant confusion in the market.

“In some cases, you can end up with a portfolio that looks very similar to the broader market when it comes to exposure to things like fossil fuels, gambling, tobacco, or deforestation. For many investors, ESG integration might sound good, but in practice it will often fail to meet their expectations,” Adams said.

Most investors might expect an ESG strategy to align with sustainability and invest in environmentally friendly companies. However, Lonsec analysis found this perception doesn’t necessarily align with reality. fs

5

AZ NGA makes acquisition Elizabeth McArthur

A

The quote

I’m excited to see our team continue to thrive as part of this strategic alliance and to empower them to live their potential.

Z NGA has acquired a wealth management firm in Melbourne as it signals plans to expand in Victoria.

AZ NGA made a strategic investment in Matthews Steer Accountants and Advisors, a firm established in 1990 with six partners and 50 staff.

“In Melbourne’s north west corridor of industry, Matthews Steer is the trusted adviser to leading businesses and families in the region. It has built a reputation as the region’s premier accounting and advisory firm by delivering excellent service and advice, and helping local businesses achieve strategic results,” AZ NGA chief executive Paul Barrett 01 said.

“Matthews Steer exemplifies the characteristics we look for in a partner firm. It has a clear strategy, it has successfully carved out a niche in specialist areas and it has a collaborative, clientcentric culture.”

He said the acquisition reinforces AZ NGA’s commitment to building a large, integrated, multi-disciplinary financial services business.

“There are also mutually-beneficial opportunities for Matthews Steer to leverage the scale, resources and capabilities of the broader AZ NGA network,” Barrett added.

Matthews Steer co-founder and managing director Ken Matthews said: “We see AZ NGA as a strong cultural fit with Matthews Steer, and their alignment with our purpose and values was of primary importance in entering into this strategic partnership.”

“Their investment in Matthews Steer will provide greater capacity to continue to support our clients and extend our services to other entrepreneurs & family businesses. I’m excited to see our team continue to thrive as part of this strategic alliance and to empower them to live their potential.”

Since 2015, AZ NGA has acquired over 65 small-to-medium enterprises, initially concentrating on New South Wales and Queensland but now the company has plans to expand in Victoria.

“We are constantly on the lookout for high quality SMEs that can expand the capability and capacity of AZ NGA, and we are keen to expand our footprint in Melbourne,” Barrett said.

“Our mission is to partner with entrepreneurs who are committed to growing their business, returning value to all stakeholders including clients and staff, and creating a legacy for the next generation.” fs

Count Financial faces class action Annabelle Dickson

Class action proceedings have been filed against Count Financial, a former subsidiary of Commonwealth Bank of Australia after contravening its obligations under the Corporations Act. The proceedings filed by Piper Alderman in the Federal Court of Australia relate to commissions paid to Count Financial and its financial advisers from 21 August 2014 to 21 August 2020.

The class action has come off the back of Count Financial’s misconduct revealed in the Royal Commission and alleges it contravened obligations owed to clients when taking commissions from product issuers or clients.

Piper Alderman alleges Count Financial did not ensure its financial advisers did not contravene their legal obligations to clients, failed to ensure adviser remuneration was free from conflict, act in the best interests of customers nor provide services when fees were charged.

Count Financial was a subsidiary of CBA until October 2019 when it was acquired by

CountPlus. CBA has provided an indemnity to CountPlus of $300 million for the conduct that occurred prior to and after the acquisition.

The class action proceedings did not come without warning, as Piper Alderman made a call out for customers from the financial advice arms of AMP, CBA and Westpac who had either acquired, renewed or continue to hold a financial product on recommendation of an adviser from those institutions in the last six years.

This is not the only class action CBA may face as the law firm also called on clients from Commonwealth Financial Planning and Financial Wisdom.

In addition, Piper Alderman is interested in clients from AMP Financial Planning, Charter Financial Planning and Hillross Financial Services and from Westpac, Westpac Bank, Securitor Financial Group and Magnitude Group.

“Each of these institutions owed specific obligations to their customer designed to protect their customers’ interests, and our claims will allege consistent and ongoing breaches of these obligations,” Piper Alderman said. fs

For more news and events, like us on LinkedIn

6

News

www.financialstandard.com.au 14 September 2020 | Volume 18 Number 18

ASIC grants frozen fund relief

01: Debra Hazelton

chair AMP

Jamie Williamson

ASIC has granted new conditional relief to all responsible entities of registered managed investment scheme that are now frozen.

Previously, access could only be granted on the basis of financial hardship on a case-bycase basis.

Investors must meet at least one hardship criteria, such as severe financial hardship, unemployment for more than three months or permanent incapacity.

If eligible, they will then be able to withdraw up to $100,000 of their investment per calendar year and receive up to four withdrawals per calendar year.

REs will still need to ensure they are acting in the best interests of investors, with ASIC encouraging REs to consider whether relied is appropriate for their particular fund.

Before relying on the new legislative instrument, REs must notify ASIC and ensure there is adequate cash to cover other future withdrawals on the basis of hardship and continue operations for the ensuing six months.

They must also provide ASIC with quarterly data and comply with all other conditions of the relief.

A fund is frozen when the responsible entity has suspended or cancelled redemptions to prevent withdrawals from destabilising their fund, leaving investors without access to their money.

“ASIC recognises that it may be the right thing for responsible entities to freeze their funds in such circumstances, and in doing so protect the interests of all members. But this can be especially problematic for some individual members experiencing financial hardship,” ASIC deputy chair Karen Chester said.

“The hardship relief will make it easier for responsible entities of frozen funds to enable withdrawals by investors suffering hardship.” fs

AMP reviews business units Eliza Bavin

A The quote

The board believes that AMP has high-quality businesses with significant strategic value.

MP has announced its board is undertaking a portfolio review of the groups’ assets and businesses, in the first major move by newly appointed chair Debra Hazelton01.

The embattled wealth manager said its board remains committed to AMP’s transformation strategy and is confident that the review will deliver long-term value to shareholders.

“As updated at the 1H20 results, following the successful completion of the AMP Life sale, AMP is making significant progress in driving its strategy – reinventing wealth management in Australia, growing its asset management franchise (including a repivot to private markets and refocusing public markets), and creating a simpler, leaner business,” AMP said.

“However, AMP periodically receives unsolicited interest in its assets and businesses, and recently has experienced an increase in interest and enquiries.”

AMP said the increased interest has led the board to undertake a portfolio review to assess all opportunities in “a considered and holistic manner”.

It said it will be evaluating the relative merits as well as potential separation costs and dis-

HESTA active in class actions Eliza Bavin

CBA investigation dropped Ally Selby

Commonwealth Bank has announced the corporate watchdog will not be taking any action against the bank nor its directors over a money laundering and counter-terrorism scandal identified by AUSTRAC three years ago.

In an ASX announcement, CBA told investors that ASIC had concluded its investigation into the bank and would not be taking any enforcement action in relation to the group’s disclosure of the matters, while investigations into whether directors of the bank had complied with the Corporations Act had also been dropped.

In August 2017, AUSTRAC alleged the bank had contravened the Anti-Money Laundering and Counter Terrorism Financing Act 2006 more than 53,000 times, after it failed to report cash transactions worth $625 million to the financial intelligence agency.

AUSTRAC slapped the bank with an additional 100 allegations just three months later, with CBA denying the majority of the fresh allegations in a submission to the Federal Court. fs

synergies, with a focus on maximising shareholder value.

Additionally, AMP said the review may conclude that its’s current mix of assets and businesses delivers the best value for shareholders and may not result in a recommendation to pursue any specific transaction.

“Throughout the review, AMP business units will remain focused on implementing the company’s transformational strategy and delivering for clients,” AMP said.

AMP chair Debra Hazelton said: “The board believes that AMP has high-quality businesses with significant strategic value. The board and management firmly believe in our existing strategy, including a repivot to private markets in AMP Capital and are confident that this will deliver long-term value for shareholders.

“However, we have taken a decisive step to undertake a portfolio review to ensure we appropriately assess all options to maximise shareholder value in a considered and disciplined manner.”

AMP has faced increased criticism lately due to sexual assault allegations made against former AMP Capital chief executive Boe Pahari and former AMP Australia chief Alex Wade. fs

HESTA has told the parliament it sees participation in class actions as a form of active ownership.

The super fund said it participates in class actions to recover losses but also as a means of encouraging better standards of corporate governance and improved accountability by companies, directors and corporate advisors to their shareholders.

“We see legal action as a vital third arm of active ownership that compliments engagement and share voting to achieve long-term change for benefit of members,” HESTA said.

“Curtailing the ability of shareholders to seek legal redress will limit the ability of responsible owners like HESTA to legitimately exercise its shareholder rights to protect and enhance the long-term value of companies they invest in on behalf of members.”

HESTA said it recognises that the class action industry contains a number of specialist entities and warrants oversight.

“Regulation should ensure that the risk premium awarded to entities for the funding of actions is appropriate,” it said.

“Most importantly, regulation and oversight should ensure that the settlement of actions is in the interests of the broader class and system

improvement, all entities involved in the funding or pursuit of a claim should prioritise this.”

HESTA said concerns over a rising rate of class actions is unfounded and argues it has actually remained steady.

“The concern seems to be that Australia is becoming overly litigious, our view is that where management has been behaving in a manner that erodes value they are increasingly being held to account,” it said.

“Attempts to subdue these rights should be resisted, as they excuse poor corporate behaviour and a lack of due diligence on the part of management that ultimately impacts the proper functioning of markets and long-term, sustainable wealth creation.”

HESTA said any attempts to excuse poor corporate behaviour or provide excuses for a lack of due diligence on the part of management should also be resisted.

“We take an active ownership role as a part of our responsibility to protect and enhance longterm investment value for members by promoting sustainable value creation in the organisations we invest in,” it said.

“HESTA believes that our ownership practices can improve long-term risk-adjusted returns to our members. As such, active ownership is entirely consistent with HESTA’s fiduciary duty to act in the best interests of our members.” fs

Product showcase

www.financialstandard.com.au 14 September 2020 | Volume 18 Number 18

7

01: Nicholas Cregan

portfolio manager Fairlight Asset Management

The role of global small and mid caps in an Aussie portfolio There’s more to investing internationally than household names and, given the chance, small companies can spell big opportunity. acebook, Apple, Tesla and Alibaba, AmaF zon, Netflix and Alphabet. When you think of international equity stocks, it’s generally these companies that first spring to mind.

That’s because as Australians’ appetite for investing in international equities has grown substantially in recent years, much of their money is being funnelled into the big household names they know and love – much in the same way local investors demonstrate bias toward the companies they’ve tangibly experienced.

However, where Australian investors are also comfortable owning the lesser known or smaller companies on the ASX, they are significantly more averse when it comes to the much larger world of global small and mid cap stocks, and it could be costing them.

In the United States, from 1927 through to 2015, the return premium earned by investing in small cap companies relative to large cap companies was 3.3%. A similar analysis of European markets stretching from 1982 to 2014 shows an average return premium of 2.7% for small companies.

Fairlight Asset Management portfolio manager Nicholas Cregan 01 describes this return premium as intuitive, as smaller companies are capable of faster growth and have a longer runway to compound growth.

“Less sell-side coverage means that smaller companies exhibit greater mispricing, offering further opportunities to outperform,” Cregan explains.

The premium may also be compensative for lower liquidity and less diversified business models, he adds.

The probability of outperformance by smaller companies increases steadily with investment horizon. For long-term investors, the probability of small company outperformance has historically approached 100% [Figure 1].

Still, an idea that large companies are in some way safer is still common among many retail investors, and it’s true – small companies are more volatile than their larger counterparts. But Cregan points out that a blend of global large and global small companies does not necessarily have to be more volatile than a pure large cap portfolio.

As the saying goes, diversification is the one free lunch in finance, and the imperfect correlation of small and large caps can serve investors well.

“Both asset classes are driven by slightly different factors. There is a tendency for the large cap market to be driven by global factors, whereas for small and mid cap businesses, they can be driven by more local or idiosyncratic factors,” Cregan says.

Therefore, with a blended portfolio, investors can earn some of the historic return premium associated with smaller companies without necessarily taking on more risk; the addition of global small and mid caps moves the efficient frontier of the portfolio upward.

And if investors are concerned about risk, Cregan points them to the realised performance during the Global Financial Crisis where global small and mid caps demonstrated better risk control for unhedged Australian investors than both Aussie large and small cap equities.

“This relative defensiveness comes from the tendency of the Australian dollar to depreciate relative to other developed currencies in times of economic stress,” he explains.

Still, risk reduction is key and, in times of volatility, so too is capital preservation. So how does Fairlight’s Global Small and Mid Cap Fund protect investors?

Recognising that there has not been a single year in the past 20 years where both the small cap factor and quality factor have underperformed at the same time, the Fairlight team anchors the portfolio in a quality mindset, only seeking companies with a history of generating attractive returns through the cycle.

The fund also only invests in developed markets where there is transparency around accounting and governance, screening out those

The quote

The relative valu­ation opportunity for small and mid caps when compared to large caps remains stark.

Watch the video on www.fsitv.com

Figure 1. Percent of time US small-caps have outperformed 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0%

that are highly leveraged or that have deep cycles, single product or customer businesses. As a signatory to the UN Principles for Responsible Investment, Fairlight also screens out tobacco, armaments, gambling, uranium mining and old growth logging industries.

Once the analysis is complete, what is left is 200-300 companies which Fairlight whittles down to between 30 and 40 to ultimately invest in.

The bulk of the fund’s revenue exposure is in North America, followed by Europe. In terms of sectors, the portfolio comprises largely of software and consulting stocks, followed by miscellaneous retail and business services.

Cregan says the Fed pivot in late 2018 and the COVID-19 crisis gave Fairlight the opportunity to stress test this portfolio design, saying its low risk, low volatility approach fared well at the height of the sell-off.

“The portfolio itself performed more like a large cap strategy in its defensive profile, so during those periods of stress it was down the line with the large cap market, but it’s tended to outperform during good periods, so more akin to a small cap alpha generation profile,” Cregan says.

Going forward, with so much uncertainty still on the cards, Cregan believes the relative valuation opportunity for small and mid caps when compared to large caps remains stark, the small and mid cap market is currently the cheapest it has been versus large caps at any point in the last 10 years.

The reason for this is that while smaller companies tend to outperform larger companies over the long-term, there are sometimes setbacks, Cregan says, including from 2008 to 2010 and the one currently being experienced. “Over the past 14 months small and mid caps have underperformed large caps by about 14%. Interestingly, if you look at the last hundred years in the worst 25 monthly sell-offs during that period, once we go into recovery phase small and mid outperform large caps over one, three, five and 10 year periods,” he says.

“While historical returns are no guarantee of future earnings, this looks like a pretty good set up to us.” fs Brought to you by

1

5

10

15

20

25

30

35

Time Horizon (Years) Source: Percentage of time small has outperformed large in the U.S. 1926-1996 (Hanna & Chen, 1999)

40

8

News

www.financialstandard.com.au 14 September 2020 | Volume 18 Number 18

Admin expands offerings

01: William Johns

chief executive Health & Finance Integrated

Karren Vergara

Intertrust Group has secured an AFSL that will enable it to provide additional fund services to asset managers, institutional investors and financial institutions.

Andrew Cannane, Intertrust’s corporate trust executive director for Australia, is in charge of the new business unit. He was most recently the executive director of institutional funds at Evans Dixon until he left in early 2020 to take up this opportunity with Intertrust. Prior to that, he held senior positions at Perpetual, The Trust Company and Link.

“We expect continued significant investment into Australian real assets by both local and international fund managers, institutional investors and superannuation and pension funds in the years ahead,” Cannane said.

Intertrust’s existing offerings in Australia include accounting and reporting, corporate secretarial, payroll and KYC/AML services offered to private equity and real estate fund managers.

The boutique wants to expand in the Asia-Pacific region with particular interest in the alternative investments space, which has over $500 billion in assets under administration in Australia.

Daniel Jaffe, managing director of market offices, said expanding the Australian and New Zealand operations is a key priority. The group opened a New Zealand office in 2019.

“We see tremendous growth potential for the alternative funds segment across Asia Pacific, and remain well-placed to support this growth while continuing to invest in the region at a time where many other firms are pausing on expansionary activity,” he said. fs

Adviser demands answers from Media Super Elizabeth McArthur

A

The quote

They’re claiming that looking after a child next door is gainful employment. It’s utterly false.

ASIC relaxes IPO red tape Annabelle Dickson

Following a public consultation in February 2020, the corporate regulator has amended the legislation to grant relief for voluntary escrow arrangements requested by public companies and pre-prospectus communications to stakeholders.

ASIC commissioner Cathie Armour said: “Given the significant costs involved in undertaking an IPO, our new legislative relief will help reduce the regulatory costs for companies considering going public, while upholding an orderly and transparent market.”

The first amendment facilitates voluntary escrow arrangements under an IPO so the interests of an issuer, professional underwriters or lead manager arising from the escrow agreement is disregarded for the purposes of the takeover provisions but not the substantial holding provisions.

ASIC noted the rationale for this is that it provides relief for professional underwriters which leads to capital raising and reorganisation while protecting the underwriters from an early sell-down.

In addition, the second amendment allows companies to communicate factual information to employees and security holders about an IPO before lodging a disclosure document. fs

financial adviser has publicly called on the chief executive of Media Super to explain why a total and permanent disability claim for a very vulnerable client has been indefinitely delayed.

Health & Finance Integrated chief executive and Financial Planning Association of Australia board member William Johns 01 wrote to Media Super acting chief executive Tony Griffin recently in a private message on LinkedIn. His message to Griffin said one of Media Super’s members, a client of Johns’, was at risk of suicide after having a TPD claim through the fund (with group insurer Hannover Re) declined.

Following the declined TPD claim Johns sent a full appeal. That was in June and there has since been no correspondence from the insurer or the fund.

Johns received no reply to his private message to Griffin, so he decided to make a public post.

Financial Standard reached out to Griffin for comment. He said: “You can understand that the fund can’t comment on the details of individual insurance claims.”

“There are many factors that can determine the timeframe in which a claim is processed and subsequently paid. The fund is continuing to review the matter.”

Johns, meanwhile, said he has still had no response from the fund and is only growing more concerned for his client.

The client has been diagnosed with posttraumatic stress disorder (PTSD) and lost her job with the justice system as a direct result of her PTSD. Media Super has already granted the woman

access to her roughly $80,000 in retirement savings, acknowledging her inability to work.

But, the TPD claim for $110,000 was declined on the basis that the client had demonstrated an ability to work by babysitting one of her neighbours’ children.

“They’re claiming that looking after a child next door is gainful employment. It’s utterly false. When you’re not on any income you do what you can to sustain yourself and neighbours and friends might help you out by paying you,” Johns said.

“Even Centrelink acknowledges there should be times when people can make $100 here and there. We expect as a society that the system doesn’t prohibit people from doing that.”

Johns said his client has been a victim of crime in the past and is at risk of homelessness.

Centrelink acknowledged the clients’ vulnerable situation and escalated its processes to push her payments ahead – something that is very rare in Centrelink claims, given the volume the agency deals with.

“I think it’s really hard to communicate what it really is like unless you have dealt with someone who is very vulnerable. You know it doesn’t take much to tip them over the edge,” Johns said.

“She is very vulnerable and Centrelink acknowledged that and approved her for the disability support pension. To get that pension is a much harder test than a TPD claim.”

He added that the fund has already essentially admitted that the client meets the threshold of total and permanent disability by opening up her superannuation account to her under the Superannuation Industry (Supervision) Act provisions for permanent incapacity. fs

Demand for advice rises Karren Vergara

The number of Australians seeking financial advice has doubled from five years ago, a new report finds.

According to Investment Trends, 2.6 million non-advised Australians want the services of a financial planner over the next two years. This demand has jumped twofold from five years ago.

The global pandemic has pushed many to seek professional advice and reassess their financial situation, the research firm’s 2020 Financial Advice Report found, with 44% of those surveyed claiming COVID-19 as a major catalyst.

“Potential clients overwhelmingly prefer receiving comprehensive advice over limited advice (76% cite this vs.

35%). But when cost is factored in, preference for limited advice markedly increases,” Investment Trends senior analyst King Loong Choi said.

The majority of potential clients (61%) said they are open to

upgrading to comprehensive advice over time, he added.

The non-advised expressed strong interest in intra-fund advice. Nationwide, one-in-six Australians said they currently use intra-fund advice services offered by their main super fund.

Among those who don’t, 37% intend to take up this service, particularly young superannuation fund members, Choi said.

About 77% of members under 35 years old, based on a population of 4501 survey participants, would like to receive intra-fund advice, compared to 70% outside of this group.

The key areas the younger generation wants help with include investments outside super, tax strategies and budgeting assistance.

“Further, advice via super funds can lead to planner referrals, with 55% of members open to being transferred to a planner.

Older members favour a super fund-based planner, while their younger counterparts are more inclined to seek out an independent planner,” Choi said. fs

Publisher’s forum

www.financialstandard.com.au 14 September 2020 | Volume 18 Number 18

01: Shaune Egan director, wrap product AMP

Meeting the changing needs of clients

Managed portfolios are among the few bright lights in wealth management in the last few years. Not only have they allowed financial advisers to finetune client portfolios with ease but they also work as an important time-saving measure when running an advice practice.

In this issue, AMP MyNorth explains how managed portfolios continue to help advisers respond to changing client needs. As a case study, the platform demonstrates that a cost-effective index and active offer, options for sustainability-focused investors and bespoke portfolios for large advice practices are just the beginning.

With two in five financial advisers already using managed portfolios (also called managed accounts), we expect more innovation in this sub-segment of the market.

Michelle Baltazar Director of Media & Publishing

More than a platform

Managed portfolios continue to surge in popularity, providing mutual benefits to clients and advisers. or advisers, managed portfolios help inF crease business efficiency by reducing the costly administration burden for advisers as there is no need to provide ROAs or obtain client approval for portfolio changes to be made.

Research by Investment Trends indicates that this can help to save advisers 13 hours a week1.

This is time advisers can spend on client engagement, explaining how their investments will be managed to align with their goals, how the portfolio is tracking against those goals and responding to changing market conditions.

We know clients value transparency and having their portfolios reviewed constantly, so managed portfolios help advisers meet this need. By reporting on all transactions and listing the portfolio constituents the client is informed and feels in control. Changes to managed portfolios are implemented quickly and uniformly, greatly reducing implementation delays and potentially delivering better investment outcomes for clients.

Making values-based investments Advisers are increasingly finding that clients want to invest in a socially responsible way – reflecting their own personal values. Far from a fringe issue, in general, consumers now expect their money to be invested responsibly.

Nine in 10 Australians feel it’s important that their financial institution invests responsibly and ethically, and three in four would consider moving their investments if they found out their fund was investing in companies not consistent with their values.2 As such, managed portfolios are being shaped to reflect both the investment objectives and social priorities of investors in Australian and international markets. Managed portfolios with an environmental, social and governance (ESG) framework allow clients to support companies that are making positive contributions to our environment and society while screening out those that are not.

For example, the MyNorth Sustainable Managed Portfolio is designed for investors seeking sustainable investment and financial returns while contributing to a positive sustainable change. An actively managed portfolio that invests in all asset classes, it includes managed funds that integrate environmental, social and governance factors into their investment decisions.

AMP collaborated with Regnan to devise the sustainable principles that underpin the portfolio. And Pendal’s multi asset team designed the portfolio using the universe of investment options hand-picked by AMP’s research team.

The MyNorth Sustainable Managed Portfolio is guided by three principles that looks to: • transition to a low carbon economy • avoid material investments in thermal coal, tobacco, gambling, pornography and controversial weapons, and • encourage positive sustainable social and environmental outcomes for the community.

The quote

Along with expanding the managed portfolios on its buy menu, MyNorth can partner with large advice practices to offer their own series of portfolios in consultation with a suitable investment manager.

MyNorth recently upgraded its investment switch function. This addressed adviser pain points by providing more information before a switch is submitted, so that advisers have the confidence and control they need.

The Retirement Modelling Tool also helps advisers design or validate a strategy to support their clients’ retirement income needs.

The educationHUB, launched earlier this year, is an online resource where advisers can access educational material and webinars.

Along with expanding the managed portfolios on the buy menu, MyNorth can partner with large advice practices to offer their own series of portfolios in consultation with a suitable investment manager.

The MyNorth Managed Portfolio offering has reached a significant milestone of $1 billion in assets under management as at last month. fs To find out more about AMP’s managed portfolios visit amp.com.au/mynorth 1 Investment Trends February 2020 Managed Accounts Report, pg 12.

2 Responsible Investment Association Australia, From Values to Riches 2020: Charting consumer expectations and demand for responsible investing in Australia, pg 5.

Any advice in this article is provided by NMMT Limited ABN 42 058 835 573, AFSL 234653 (NMMT) and is general in nature only. It is for adviser use only and must not be distributed to or made available to retail clients. Any advice in this article does not take into account any person’s personal circumstances and a person should consider the relevant MyNorth Managed Portfolios PDS, available from northonline.com.au or by contacting the North Service Centre on 1800 667 841, before deciding what’s right for them. The issuer of MyNorth Managed Portfolios and MyNorth Investment IDPS is NMMT. NMMT issues the interests in and is the responsible entity for MyNorth Managed Portfolios through which MyNorth Sustainable Managed Portfolio and MyNorth Index Plus series is offered.

NMMT is part of the AMP group and can be contacted on 1800 667 841 or north@amp.com.au. If a person decides to purchase or vary a financial product, companies within the AMP group will receive fees and other benefits, which will be a dollar amount or a percentage of either the premium they pay or the value of their investments. Contact AMP for more details. The information in this article is current as at August 2020 and is subject to change without notice. MyNorth is registered trademarks of NMMT Limited ABN 42 058 835 573 AFSL 234653.

Overcoming entry cost barriers For many clients, high fees can present a barrier to the world of investing. Some clients find themselves constraining their portfolio design in order to meet their fee budget. This challenge is particularly acute for clients seeking exposure to actively managed options which typically command a higher fee.

MyNorth IndexPlus was designed to appeal to these more cost-conscious clients seeking to reduce the overall variability around market returns.

The series offer has a blend of lower-cost passive investments that provide a diversified exposure to the major asset classes and a selection of active managed investments that offer the potential of higher return and/or superior risk/ return balance.

Placing the portfolios on the Select administration menu and discounting the unit classes is another way the MyNorth IndexPlus series can offer lower costs and allow more clients to start investing.

9

Brought to you by

Watch the video on www.fsitv.com

10

News

www.financialstandard.com.au 14 September 2020 | Volume 18 Number 18

Luck a big player in CEO perception

01: Renato Mota

chief executive IOOF

Kanika Sood

New academic research says chief executives gain more power for strokes of luck, especially if the boards watching them have weak governance.

University of North Carolina academic Turk Al-Sabah probed the question in recently published his research titled CEO Power and Luck: Impact of Stock Markets on Building Powerful CEOs. Al-Sabah said while economic theory predicts that boards filter out luck (defined by him as exogenous shocks to performance, such as market-wide conditions that are outside of the chief executive’s control) from performance, the reality is far from the theory.

The academic says, chief executives are rewarded for market luck but not penalised as heavily for bad luck.

“In the baseline specification, a one standard deviation increase in firm performance due to luck leads to a 3% increase in CEO-power relative to the median,” Al-Sabah said in a preliminary draft of the report published on August 22.

The findings are primarily driven by companies that have weaker governance and institutional ownership.

“We also find some evidence suggesting that CEOs who are managing those firms are rewarded power for luck, but are not punished equally for bad luck,” he writes.

The academic goes on to argue that the above may suggest that departing chief executives may try to time their entrenchments to a period where the markets as well as the firm have performed well. fs

IOOF names licensee chiefs, acquires platform Jamie Williamson

F

The quote

The AFSL landscape is changing.

Actuary of the Year named Elizabeth McArthur

The Actuaries Institute announced the winner of its prestigious Actuary of the Year award.

Jennifer Lang has taken home the honour for 2020, recognised for leading the Institute’s COVID19 response.

The Actuaries Institute COVID-19 working group brought together more than 80 actuaries, who volunteered to assess the potential impact of the pandemic on the profession, public policy, business and the community.

A Pandemic Resource Centre was established by the group to help actuaries support their companies in managing and mitigating the impacts of the pandemic.

“The work of the COVID-19 group, under Jennifer’s leadership, is making a significant contribution,” Actuaries Institute chief executive Elayne Grace said.

“The group has provided strong guidance to the profession in unprecedented times, across a very broad range of practice areas. It has resulted in 17 pandemic briefings and more than 70 articles.”

Actuaries Institute president Hoa Bui said Lang’s work highlights the relevance of actuarial skills in policymaking and real-time national events.

“Jennifer’s ability to bring rigor with her actuarial skill set to looking at issues around COVID-19 particularly stood out,” Bui said. fs

ollowing its acquisition of MLC and decision to restructure its licensees, IOOF has consolidated the leadership of its various dealer groups and announced another acquisition.

Revealing the next phase of its Advice 2.0 strategy, IOOF has restructured its advice licensees into two core businesses, appointing two new chief executives to lead them.

The first group brings together integrated advice businesses consisting of Lonsdale, Millennium3 and IOOF Alliances and will be led by Millennium3 chief executive Helen Blackford.

The second group will comprise RI Advice and Consultum Financial Advisers and will be led by RI Advice chief executive Peter Ornsby.

Ornsby will also lead Financial Services Partners until it is closed, as previously announced

by IOOF. Terry Dillon will remain as chief executive of Shadforth Financial Group, and Nathan Stanton retains leadership of Bridges.

A spokesperson for IOOF could not confirm whether current Consultum chief executive Joe Botte, FSP head Geoff Kellett or Lonsdale chief executive Mark Stephen will remain with the licensees or IOOF. Botte has led Consultum for the past eight years, having been promoted from head of operations in 2012. In total, he served 14 years at the licensee. Meanwhile, Kellett is coming up on two years leading FSP, having previously served in senior roles at IOOF for eight years. Stephen has just clocked 10 years leading Lonsdale.

The changes follow the news of IOOF’s acquisition of MLC and consolidation of licensees, closing FSP, Executive Wealth Management and

Actuate and transitioning the attached advisers to their choice of remaining IOOF licensees.

IOOF has also announced the acquisition of Wealth Central, a proprietary financial advice and client engagement platform.

IOOF chief executive Renato Mota01 said Wealth Central is an important piece in its transformation.

“This is differentiating technology that IOOF now owns exclusively, for the benefit of our adviser network,” he said.

“It will significantly improve and streamline the client experience, meaning less time is spent collecting data and more time is spent on creating a plan to help the client achieve their financial goals. It also reinforces our commitment to continue to innovate in the space and build new advice delivery methods.”

Also commenting, IOOF chief advice officer Darren Whereat said the changes mark the next chapter in the advice business, focused on enhancing client engagement, increasing efficiency and ensuring AFSL sustainability.

“The AFSL landscape is changing. We have continued to adapt and invest so that we are well positioned to deliver compelling propositions to advisers within the employed, self-employed and self-licensed segments, as we support them to create greater efficiencies and more sustainable business models,” Whereat said.

“The assurance and governance programs implemented across our advice network has provided us with the platform to develop the next evolution of client experience and advice efficiency…The acquisition of Wealth Central provides us the platform to support our client engagement model and to deliver goals-based advice, more efficiently, to more Australians.” fs

Heine family sells Netwealth shares Kanika Sood

The Heine family took advantage of Netwealth’s strong results and buoyant share price recently to sell down about $76 million worth of shares in the company – a tiny sliver of their expansive holding.

The sale of 5.5 million shares by two companies was across two private investment companies – Heine Brothers Pty Ltd, where Michael Heine and his two sons are the shareholders, and Leslie Heine Pty Ltd where Leslie Heine is the only shareholder.

The family still has over 135 million shares in Netwealth after the sale.

The sell down translates into payouts of about $24.3 million for Michael Heine and about $12 million for Matt Heine, who work as joint managing director. The share of Michael Heine’s other son, Nick Heine, who is not involved in the business will

also have been about $12 million, according to ASIC documents for Heine Brothers Pty Ltd. Leslie Heine, meanwhile, is the only shareholder in his private investment company and would have received about $27.8 million from the sale.

“There is nothing untoward in the sale. The stock has done incredibly well since the IPO, they are still big believers in the business, they still have a very significant shareholding, and they sold it post results where they are allowed a window to sell some stock,” IFM Investors investment director, active equities said Reuben de Barros.

Netwealth last week posted underlying NPAT of $43.8 million for FY20 and gave guidance for $8 billion (or about 25% higher) funds under administration for FY21. The stock rallied strongly, rising over 8% after the results. fs

Opinion

www.financialstandard.com.au 14 September 2020 | Volume 18 Number 18

11

01: Shannon Bernasconi

managing director WealthO2

Naked pricing and the next generation: Managed accounts here are no doubts about the significant T benefits managed accounts provide advisers. These benefits range from delivery of better business productivity by reducing administration time allowing for more time with more clients, to reducing risks and increasing profitability of the practice. The adoption of managed accounts has grown as more platforms provide the tools and services to support them.

One of the potential or perceived issues with managed accounts is that they are enablers of simplistic “cookie cutter” advice, and not tailored to the client or the market conditions.

The implication is that all clients are treated in the same way for the ease of the adviser, rather than in the best interest of the client. The intellectual capital that is captured in the construction of the models/managed accounts is never done based on a specific person or their circumstances. Most align to risk profiles, income or growth goals, ethical or social responsible investments or low tax entities.

However, adviser led solutions, like WealthO2 are tackling this issue and responding to the adviser need for higher levels of customisation while still enjoying the benefits of scale and efficiency.

A positive aspect of those managed accounts that are delivered appropriately, is that there is a segregation between the intellectual focus and the personal advice given to a client. The segregation can be achieved with an internal investment committee with specialised research or asset consultants, or by outsourced investment management.

Customising portfolios There is no doubt that it is the managed account solution provider’s role to enable the adviser to have the ability to customise the client’s portfolio to accommodate personal circumstances.

The cookie cutter approach may start with a 100% allocation to an investment manager’s managed account model, but at minimum the adviser should be able to blend this with other assets or models so as to align the investments to the goals of the advice provided. Alternatively, the adviser can override specific stocks or funds in a managed account due to a client’s ethical or company limitations on investing.

The other dimension of adviser control centres around investing the managed accounts and taking clients from cash or current holdings to a new asset allocations. Here some, but not all, managed account solutions provide both the control in timing of the investments

and minimum trade size as well as the ability to control if all asset classes, or all managed accounts, are implemented into the market that day.

Interestingly this is one of the more debated topics in the practical nature of managed accounts. Why? There are some advisers that prefer not to be involved post selecting an SMA on a platform. They expect that the client will be continuously invested in the portfolio with no personal overrides, market timing, trade parcel selections or tailoring needed.

While there may be some clients for whom no changes are required, it is nevertheless a best interest obligation for advisers to know they can apply specifics for a client, when required.

Model performance Debate also comes from those who manage the investment of the portfolios. I have heard from portfolio managers whose preference is that each client complies 100% with their models and is invested immediately as the model changes.

Their perspective is that this is the only way for clients to receive the same performance as the model. Of course, I can see that perspective. However performance is at the behest of the methodology used, for instance, whether fees and brokerage and actual market prices are used, and one person’s performance expectations are different to another’s. Advisers providing personal advice to clients need to be able to make the right choices for their clients. If that means not buying a specific asset or holding off from investment due to an expected large contribution, then that is part of the advisers value and service. And there should not be a debate around whether this is possible.

Fee impacts As the technology solutions and range of managed accounts have evolved, the costs of accessing product based managed accounts like SMAs, have, in the most part, remained the same or in some cases increased. The fees associated with accessing SMAs can be categorized into three types: • the headline administration, account, cash account, expense recovery and transaction fees paid to the product platform by the client, • the fees paid by the client for the managed account (direct and indirect) and • the fees paid to the platform provider by the investment manager of the portfolio.

The quote

It’s on the basis of transparency and the fee for service model, that the naked pricing model delivers client benefits.

While many have dropped the headline administration fees, they have increased the per account and cash account fees. In fact, some platforms have recently increased the managed account fee payable by the investment manager to levels of $15,000 per annum and others are at levels of 12bps. What the client pays in direct costs of the SMA are increased by these fees. So the clients of those advisers who are able to access adviser-led managed account solutions, that don’t charge these additional “shelf” fees, gain access to the same managed account for 12bps cheaper. A significant saving in the current low-return environment facing investors.

WealthO2 has seen this differential in managed account managers fees. We also observed “vertical integration” of managed accounts where the platform provides its own managed accounts and within which they negotiate MER discounts with fund managers which they keep. Essentially, they charge the client but keep the differential.

This is a key issue with the layered product managed account pricing model - it is not clear to a client who is taking what in the value chain. This results in conflicts of interest and ultimately the client paying too much for the service being afforded.

Naked pricing The concept of naked pricing strips out fees exchanged between third parties in the value chain of advice and discloses only those fees payable to a client on a clean basis, void of revenue bias or conflict. An increasing prevalence of naked pricing will shift the margin from product – and hidden fees – to the adviser and lower the cost of the advice including the cost of the managed account.

It’s on the basis of transparency and the fee for service model, that the naked pricing model delivers client benefits as well as a shift of margin away from products and product-led platforms to the adviser.

Naked pricing is the way forward for next generation adviser practices. This next generation practice is fee for service, gains efficiency and scale through the effective use of managed accounts, provides clients with the benefits of reduced implementation drag, tailored portfolios, and efficient portfolio management during volatile times. The growth in profit is made decently while the cost to their clients are lowered. fs

12

News

www.financialstandard.com.au 14 September 2020 | Volume 18 Number 18

Products 01: Cory Bannister

La Trobe launches new loan suite Diversified wealth manager La Trobe Financial has launched a suite of a new loan products, which it says will help better meet shifting client needs in the wake of the COVID-19 pandemic.

La Trobe has launched three new products: an Everyday Heroes Loan, a Bridging Loan and a several International Borrower Loans.

It believes the product initiatives cater to both present and future borrower needs that have emerged as trends over the past six months.

The wealth manager’s chief lending officer Cory Bannister 01 said La Trobe is committed to expanding its range of products.

“We will continue to innovate to meet borrower demand created by these macro trends, giving brokers access to products that meet their clients’ needs,” he said.

The Everyday Heroes loan comes off a $1 million donation by the wealth manager to Epworth Hospital, to help frontline workers fight COVID-19, as well as an earlier $1 million donation towards bushfire relief efforts.

“We believe it is important to recognise the contributions made by our first responders and frontline workers,” Bannister said.

“We are now offering discounted loan pricing to people who provide emergency services to our community, including police, fire and emergency services, Australian Defence Force and emergency medical service workers.”

The second product is a Bridging Loan, set to provide La Trobe customers with a short-term “bridge” to purchase or build a new property prior to the sale of their existing property.

Instead of having to cover two repayments, La Trobe will combine the loans with an interest budget, meaning no repayments will be required while debt levels are high during the bridging period.

La Trobe says the three key macro trends driving demand for this product include an ageing population downsizing later in life, upgraders looking to capitalise on buying opportunities and borrowers looking to build.

Vanguard fund drops “cash plus” name Vanguard has joined the growing line of fund managers snipping the “cash plus” tag from their short-term fixed income funds, as ASIC sharpens focus on managed funds advertising.

Effective October 1, the Vanguard Cash Plus Fund will be renamed the Vanguard Short Term Fixed Interest Fund as the manager shifts to a more true-to-label name for the fund.

“While there is certainly ASIC guidance on the naming convention of funds, the name change of the Vanguard Cash Plus Fund aims to more closely align the fund name with its underlying assets, increasing transparency for investors,” a spokesperson for the company said.

It also dropped the fees of the fund from 0.29% p.a. to 0.19% p.a. for the wholesale fund and says the investment strategy remains unchanged.

LIC seeks conversion to ETF In a rare move, a listed investment company is looking to convert to an ETF in an attempt to close discount for investors.

The Monash Absolute Investment Company (MA1) is looking to restructure to an exchange traded managed fund (ETFMF) to re-set the market price and close the discount to investors. The conversion is outside of ASX’s aqua rules and will use an open-ended trust structure, subject to shareholder approval.

The last time a LIC converted to an ETF was nearly seven years ago, with the Aurora Global Income Trust.

Over the years, LICs and LITs have tried many measures to solve the problem of them trading at a discount or premium to the value of underlying assets, including buying back units, changing managers or strategy, merging with an existing LIC or merging with an existing LIC. “This is not the first time we are seeing restructure…I think it’s a case of investors perhaps not thinking as critically around the structure of the vehicles as they might have about the manger or the strategy,” Zenith head of listed strategies and real assets Dugald Higgins said.

Vanguard’s name change follows similar moves

by Legg Mason’s Western Asset who switched from cash plus to “conservative income” and UBS Asset Management which renamed to “short term fixed income”. [Legg Mason has since been acquired by Franklin Templeton, effective August 3] Such funds started their lives in the 90s, investing conservatively and closer to cash than they do now. As the debt markets expanded, so did their investment universe – meaning the “cash plus” name became outdated.

The recent shedding of the tag comes against a backdrop of ASIC’s sharpened focus on marketing of managed funds.

ASIC’s action stemmed from APRA’s scrutiny of “cash plus” options in superannuation funds in a June, 2018 review. APRA at the time clarified asset-backed and mortgage-backed securities, commercial bonds, credit default swaps and hybrid debt instruments couldn’t be passed off as cash.

In managed funds land, ratings house Zenith last May stopped classifying “cash plus funds” as a subset of “cash” to putting them in the “shortterm credit” category.

OnePath hikes premiums OnePath has announced that it is raising its premiums in response to an increase in the number of claims being made by its customers.

The life insurer is set to increase base premiums by 25% for existing customers with Income Secure Cover and Business Expense Cover.

A 12.5% increase will also apply to premiums for new and existing customers with total and permanent disability from November 3.

In a note to advisers, OnePath said it adjusted to the price in response to the “sustained, upward trend of claims being experienced in the Australian market.”

“The changes are designed to ensure that OnePath can continue to pay claims in a viable and sustainable way, insuring the lives and protecting the incomes of Australians now and into the future.”

In light of the changes, the insurer is emphasising more affordable options to keep customers covered including alternative product options such as OneCare Income Secure Essentials, flexible cover options and some temporary hold or reduction offers in light of the pandemic environment.

OnePath said it would be communicating the changes to customers from September.

Cbus pledges net zero emissions The $54 billion construction industry fund is planning to cut 45% of absolute portfolio emissions by 2030 and is aiming for net zero emissions by 2050 by removing high-risk climate holdings.

Under Cbus’ new Climate Change Roadmap, the fund will develop a stranded assets framework to reduce the risk for its members and ensuring a secure retirement.

02: Kristian Fok

It comes as Cbus has become the first Australian financial institution to join the United Nations Convened Net Zero Asset Owners Alliance.

The fund said by identifying the carbon emissions of companies and assets it holds, it will be able to reduce emissions in the real economy and avoid assets that will inevitably become stranded.

Cbus chief investment officer Kristian Fok 02 said the economies of 2030 and 2050 will look very different to what we have experienced over the last few decades and high-risk climate holdings will not see out their traditional economic life.

“The average Cbus member is 39 years old. It’s our responsibility to safeguard their investments as the financial impacts and physical effects of climate change intensify,” he said.

“This science has made clear the targets and timeframes. The course that we have charted will see Cbus reduce our portfolio emissions while investing further in renewable energy and climate solutions, as well as avoiding ‘stranded assets’ as the economy transitions.”

The fund has already undertaken work to understand companies that are at risk of being stranded and consistently ranks highly in the international Global Real Estate Sustainability Benchmark.

The roadmap will develop pathways to achieve portfolio targets for each asset class including equities.

“Portfolio-wide targets give us more flexibility as to how we allocate our members’ money. This next two-year road map will see climate pathways developed across sectors and asset classes, acknowledging the economy will decarbonise at different rates. This approach also provides.

MSCI Australia introduces new indices MSCI has now introduced the MSCI Australia Domestic Index Series, which aims to represent the performance of a broad suite of indexes covering the Australian equity markets.

The suite includes the MSCI ESG, MSCI Real Estate, MSCI Thematic, MSCI Factor and MSCI Market Cap Indexes.

With daily constituent and index-level coverage of the Australia opportunity set, the series encompasses market-cap segments and sectors and accommodates factor, ESG and real estate investment strategies.

The MSCI Australia Domestic Indexes are based on the MSCI Global Investable Market Indexes methodology and use the Domestic Inclusion Factor (DIF) as the free-float adjustment factor for the construction and weighting of the securities.

“MSCI’s modern framework and bottom-up construction methodology enables investors to evaluate domestic equities more efficiently,” MSCI said.

“From constructing and optimising portfolios to understanding and managing investment risk and performance, these building blocks afford asset owners and managers greater control over the investment process.” fs

September Journals now available Financial Standard's suite of journals have been published for September, bringing you the latest news, cover stories and CPD-accredited whitepapers for Australian wealth management professionals.

The 20-year impact of COVID-19 on super, the search for scale with Scott Cameron, plus moving to more flexible and agile technology models.

Featuring extensive adviser landscape research, Hugh Robertson’s long-term business philosophies and tips on moving to electronic signing in a pandemic.

From Paddock to Pitt Street with Robert Millner of Washington H. Soul Pattinson, and how to choose the right social enterprise structure.

Using managed accounts for ethical investing with Karen McLeod, and assessing platform offerings in a post-COVID world.

Subscribe to Financial Standard and your selection of journals, plus gain access to even more from Financial Standard.

Visit www.financialstandard.com.au and click ‘subscribe’

14

Feature | Asian equities

www.financialstandard.com.au 14 September 2020 | Volume 18 Number 18

RE-EMERGING MARKETS

While investing in Asian markets has for years been considered “risky”, experts say the region’s potential for growth is far too good to ignore. Ally Selby writes.

Asian equities | Feature

www.financialstandard.com.au 14 September 2020 | Volume 18 Number 18

T

here have been clear winners and losers of the COVID-19 crisis, however it seems that Asian markets, thus far, have emerged from the wreckage relatively unscathed.

The MSCI EM Asia Index has returned 6.18% YTD. That's in comparison to the MSCI EM ex-Asia Index, which is down -26.58% since the beginning of the year.

The region’s recent recovery - albeit driven by the stellar performance of China, Taiwan and Korea - calls to mind the Asian Financial Crisis, which spread throughout the region like a contagion in the late 1990s.

The currency crisis then saw foreign investors, just as they did at the outset of the current cataclysm, scurry back to the safety of their local markets in a bid to safeguard their wealth.

But the recent success of a handful of Asian tech darlings, as well as the region’s potential for exponential growth, have slowly drawn investors back begging for more.

Australians, as luck would have it, have indirectly benefited from the growth in the Asian region since the early 2000s, with our resource, energy and mining companies - both overweight in our index and often in our portfolios - reaping the rewards of Asia’s industrial and urban boom.

But now the world is in the midst of a changing of the guard; a shift from the ‘old world’ export-driven economy to one dominated by domestic consumption and technology.

Asian economies are rapidly evolving, while a burgeoning middle and upper class are driving a greater reliance on consumption as a share of GDP. Meantime, Australia’s narrow economy, and even narrower sharemarket, is far from being poised to benefit indirectly - as we once did - nor directly, from these key drivers of future growth.

This has been highlighted over the past two years, but particularly so in the wake of the COVID-19 crash in March, which has seen the ASX lag its global peers considerably.

And while investors have traditionally chosen to get their global equities exposure by investing in our western peer, the United States, it seems few are fully cognisant of the risks in the current environment.

The US has nearly a quarter of the world’s coronavirus cases, while its government’s fiscal deficit has exploded from US$779.1 billion just two years ago to $2.8 trillion as of July.

And yet, Wall Street has been repaved in gold, with the country’s tech darlings; the FAANGs, lifting US bourses to all time highs.

For Mary Manning 01, Asia funds portfolio manager at Ellerston Capital, this divergence speaks to the “extremely dated” risk framework that investors apply to markets.

“People need to get over some of the biases they have about investing in emerging markets,” she says.

01: Mary Manning

02: Anthony Doyle

03: Sudarshan Murthy

portfolio manager Ellerston Capital

cross-asset specialist Fidelity

deputy portfolio manager GQG Partners

The US, she believes, is rapidly transforming into an emerging market-like economy itself.

“You have an election where the outcome is potentially contentious, you have civil unrest in the streets, you have an epidemic with a high death toll, you have fiscal debt and deficit which are at emerging market levels, and you have monetary policy at the lower bound,” Manning says.

“If these sorts of things had been happening in an emerging market, it would have been absolutely smacked. And yet, US markets are at an all-time high.”

Nevertheless, SMSF specialist adviser Liam Shorte of Verante Financial Planning still believes that investments in the Asian region are riskier than those in developed markets.

“Unless a client specifically asked for more exposure, we would restrict [Asian and emerging markets investments] to no more than 5-10% of the portfolio allocation to equities,” he says.

A handful of his clients, however, have started to look to Asian markets with a US presidential election looming.

“Some clients, especially those who have lived and worked in Asia have asked for specific exposure and some younger clients are very keen to invest in Chinese companies like Tencent and Alibaba,” Shorte says.

“However, they do limit their exposure as they understandably prefer to invest in names and brands they know and use.”

But Manning believes this risk premium that investors apply to Asian markets is no longer relevant.

“Once all the COVID dust settles, I think it’s going to become very apparent to the world that developed markets don’t have any structural growth,” she says.

She dubs it the “Japanification of developed markets”, pointing to the US and Europe using quantitative easing and other expansionary fiscal policies in a bid to stimulate growth.

“If Europe, Japan and the US are all in that bucket, people are going to be forced to invest in emerging markets to get growth in their portfolios,” Manning says.

BetaShares co-founder and head of strategy Ilan Israelstam believes this has already begun.

“Not only do investors gain access to other geographic regions, they are also able to gain exposure to industries that are under-represented in the Australian sharemarket, increasing the potential for growth,” Isrealstam says.

“We find that, given its increasing importance globally, most financial advisers are allocating parts of their equities portfolio to Asia, either via specific country or sector, or more broadly as part of an emerging markets allocation.”

A shifting of the guard The International Monetary Fund predicted in June that global growth would contract by 4.9% during 2020, with various developed economies, including the United States (-8%), the United

Once all the COVID dust settles, I think it’s going to become very apparent to the world that developed markets don’t have any structural growth.

Mary Manning

15

Kingdom (-10.2%), Germany (-7.8%) and Italy and Spain (-12.8%) especially hard hit.

Similarly, the Australia Bureau of Statistics recently released figures showing the nation’s GDP fell by 7% over the June quarter - signalling the country has officially entered its first recession in nearly three decades.

So far, the US has seen its economic output decrease by 5% in the first quarter, before plunging a further 32.9% in the second. China, on the other hand, saw a 10% contraction in GDP in the first quarter, which rebounded and grew by 11.5% in the second.

Fidelity International cross-asset specialist Anthony Doyle 02 believes this economic rebound will see Chinese companies emerge the soonest - and with the least damage - from the COVID-19 pandemic.

“Activity is resuming, the Chinese authorities have implemented very supportive fiscal measures...And lower oil prices will both assist in companies manufacturing products but also consumers paying for petrol, acting essentially as a tax cut,” he says.

China, he believes, is already one of the strongest performing economies in the world, and will drive global economic growth going forward.

“You are talking about a population of 1.3 billion. GDP growth isn’t magic, it’s just population and productivity growth,” Doyle says.

And as the region eventually becomes the world’s dominant consumer market, growth will increasingly be compelled by internal drivers like consumption and services rather than exports, he believes.

Meantime, the other dominant economy in the region, India, has veered down a very different path.

“The Indian response hasn’t been as effective in containing the spread of COVID-19 and importantly the monetary and fiscal response has been limited in its scope, while corporate earnings revisions have been slow to rebound,” Doyle says.

This divergence has split the region’s developed and emerging economies, with several governments unable to stimulate growth.

“An aggravating factor is that countries such as Indonesia and India don’t really have the fiscal space to have a big spending program to counteract the adverse impact of COVID on the real economy,” GQG Partners deputy portfolio manager of emerging markets equity Sudarshan Murthy 03 says.

But Maple-Brown Abbott director and head of Asia Pacific equities Geoff Bazzan04 disagrees, arguing there is immense potential for long-term growth throughout the region, not just in China.

“Whilst both India and Indonesia have endured a more protracted and problematic experience during COVID, both retain immense long-term potential by virtue of their favourable demographic profile and burgeoning economic potential,” he says.

Morningstar Awards 2020 Š Morningstar, Inc. All Rights Reserved. Awarded to Fidelity International for 2020 Morningstar Australia Fund Manager of the Year. This document has been prepared without taking into account your objectives, financial situation or needs. You should consider these matters and seek independent financial advice before acting on the information. You should also consider the Product Disclosure Statement for the Fidelity Asia Fund before making any decision about whether to acquire the product. This can be obtained by contacting Fidelity on 1800 119 270 or online at www.fidelity.com.au.

Fidelity Asia Fund

Sericulture, the ancient Chinese process of turning silk cocoons into thread exquisite enough for embroidery, takes years of dedication and care to master.

When investing in Asia, we also believe a meticulous approach produces the best results. From 1,500 Asian companies, we carefully research and select 20-35 of the best stocks for the Fidelity Asia Fund, so we can focus more time on each company and make every investment count.

Only our finest ideas make the cut.

With a strong 14-year track record, backed by 50 years of doing business in the region, we have the experience to understand factors driving returns for local companies.

Invest in Asian equities with an award-winning active manager, with global strength and local expertise.

Learn more at fidelity.com.au/fidelity-asia-fund

Investments in small and emerging markets can be more volatile than investments in developed markets. Investments in overseas markets can be affected by currency exchange and this may aff ect the value of your investment. The issuer of Fidelity’s managed investment schemes is FIL Responsible Entity (Australia) Limited ABN 33 148 059 009, AFSL No. 409340 (‘Fidelity Australia’). Fidelity Australia is a member of the FIL Limited group of companies commonly known as Fidelity International. ©2020 FIL Responsible Entity (Australia) Limited. Fidelity, Fidelity International, the Fidelity International logo and F symbol are trademarks of FIL Limited.

18

Feature | Asian equities

Something else to consider but which is not reflected within Western pools of capital is the fact that China’s global leadership is arguably on par with the US. “[China] is overlooked relative to its potential, vibrancy and dynamism due to the quirks of the indices, mistrust and perhaps less of an understanding from Western investors,” Platinum Investment Management investment specialist Douglas Isles 05 says.

He believes the country boasts exciting domestic champions on lower multiples than Western leaders, and with longer runways for growth...you just have to find them.

Similarly, Bazzan says his firm regularly encounters Chinese companies, often overlooked

by Western investors, with a market value of several billion dollars that are subject to minimal or no sell side coverage in the region.

“A number of studies have shown that the mainland Chinese market often presents sustained pricing inefficiencies that long term investors can exploit,” he says.

This is thanks to “extreme bifurcation” evident in the pricing of a number of high growth sectors in Asia, Bazzan says, with the dispersion between growth and value far more extended than it has been previously.

“The real opportunity is afforded in those parts of the market currently being overlooked by virtue of them facing near term cyclical headwinds or macro uncertainty,” he says.

“With just 32% of stocks outperforming the benchmark in the prior quarter, the extreme narrowness in the market means that we are able to buy a range of high quality companies that continue to trade at compelling valuations.”

He believes that virtually all metrics currently point to the Asia ex-Japan region as being at a significant discount to both global and US averages.

“Unlike the US, the earnings cycle does not appear extended versus history, and has not relied on financial engineering via increased leverage and buybacks to support earnings per share growth,” Bazzan says.

The great wall Despite investment professionals agreeing that opportunity abounds within Asian equity markets, various challenges still remain.

Prior to the pandemic, there was a general consensus among investors that it was necessary to have managers “on the ground”, and for this reason, the majority of Asian equity funds on offer to Australian investors are run offshore.

“If you are looking at sourcing liquidity within markets, if you are looking at getting the cheapest transaction costs per client, you generally do that by having a dealing desk based in the region working with market makers that are also in the region,” Doyle says.

Similarly, PineBridge Investments managing director, portfolio manager and head of Asia ex-Japan equities Elizabeth Soon06 also believes

www.financialstandard.com.au 14 September 2020 | Volume 18 Number 18

04: Geoff Bazzan

05: Douglas Isles

06: Elizabeth Soon

head of Asia Pacific equities Maple Brown Abbott

investment specialist Platinum Investment Management

managing director and portfolio manager PineBridge Investments

having a locally-based team is an advantage.

It allows her team to truly do “in-depth” analysis on companies within her fund’s opportunity set; to better understand the drivers of their returns, as well as the quality of their investment decisions.

“As a dynamic market, Asia demands a wider analytical lens, not only to see the material changes taking place today, but those yet to unfold, such as regulatory and geopolitical changes,” Soon says.

However, having a team “on the ground” has clearly become difficult - if not impossible - in today’s world.

International (and, in some cases, state) borders have been closed, while the majority of flights have been all but cancelled. While some have returned to the office, most remain working from home.

Yet, Magellan portfolio manager Chris Wheldon07 says his team hasn’t skipped a beat; transitioning to video conferencing calls to speak to company management.

“COVID-19 hasn’t really disrupted our ability to find ideas; a lot of the work that we do identifying new ideas is spent reading, thinking and gaining a deeper understanding of the ecosystem of our current holdings or of the businesses currently within our investable universe,” he says.

Manning agrees, noting that while her team would typically spend a third of the year working in Asia, they have since pivoted to work from home.

“Not being able to travel has not been an impediment at all, in fact, I think it's really levelled the playing field between people who are based on the ground and people who aren't,” she says.

“There are investors who say: ‘I’d rather a manager who is on the ground in Asia’, but those people are sitting at home looking at their computer screens also.”

Similarly, Isles believes a local foothold for those with expertise and experience in the region is no longer necessary.

“The Zoom world is what it is, but companies have ironically become more accessible in these times and it’s not just the companies we speak to, that is only part of the analytical process – indeed, it’s vital to triangulate what competitors, customers, and suppliers are saying,” he says.

“The best overseas analysts can get good outcomes by being detached from the danger of getting too caught up in local noise.”

Transparency of both sovereign and corporate data remains an issue in general across the region, Soon says, but she believes it is no longer a barrier.

Many funds, like her own, have recently been working with companies to improve governance.

“There is a growing appreciation among companies of the need to be more forthcoming and how this impacts company valuations or their ability to raise affordable capital,” she says.

As a dynamic market, Asia demands a wider analytical lens, not only to see the material changes taking place today, but those yet to unfold, such as regulatory and geopolitical changes.

Elizabeth Soon

Doyle agrees, noting that various countries within the region have adopted favourable shareholder actions of late to attract foreign capital.

Chinese companies, in particular, have embraced developed market business practices, such as a growing trend towards issuing dividends as well as a shift towards sustainable practices, he says.

And while Manning agrees that governance has improved immeasurably since the Asian Financial Crisis, she notes that many Australian companies are not so ESG-friendly themselves.

She points to some of the misconduct that was uncovered during the Hayne Royal Commission as a key example.

“I was travelling through Asia at the time, and all these bank managers said to me: ‘It's so weird because Australian investors ask us about our ESG and our compliance and now we're sitting here watching the Royal Commission on CNBC, and these banks are way worse than the banks in Asia’,” she recalls.

“So there is a bit of a double standard; if you want to point the finger at ESG in Asia, then you have to be pretty squeaky clean yourself, and I don't think that a lot of Australian corporates are at that level.”

Similarly, Bazzan argues - perhaps surprisingly - that balance sheets are actually a lot stronger in Asia than those of Australian companies, and even the rest of the world.

“By way of example, there has been nothing like the prevalence of emergency capital raisings that we have seen among Australian corporates in Asia,” he says.

However, Aberdeen Standard Investments Asia Pacific equities senior investment specialist Ben Sheehan maintains that investors should still be mindful of the risks of investing in the region.

“Renewed waves of infections in countries where curbs were lifted too early remains a key risk, while US-China relations also provide a potential source of market volatility, especially in the run-up to the US presidential election in November,” he says, noting that bilateral tensions have spilled over from trade into technology and have even impacted the status of Chinese listed companies in the US. “Although stimuli from governments and central banks will continue to support markets, investors must be mindful of the risks.”

Opportunity in a crisis Despite the aforementioned risks, Sheehan believes there is still opportunity within Asian markets, mostly thanks to three key long-term structural trends.

The first of which, he believes, is a booming middle to upper class, helping stoke demand in sectors such as healthcare, insurance and wealth management, as well as companies well placed to meet the region’s urbanisation and infrastructure needs.

Asian equities | Feature

www.financialstandard.com.au 14 September 2020 | Volume 18 Number 18

07: Chris Wheldon

08: Will Hamilton

09: Scott Tully

portfolio manager Magellan

director Hamilton Wealth Partners

general manager, investments Colonial First State

The Asian tech sector is also poised for fur- domiciled ETF is a far more convenient, costther growth, Sheehan says, with cloud comput- effective approach then accessing Asian shares ing, data centres, 5G and digital interconnectiv- directly,” he says. ity companies likely to benefit - notwithstanding Investing directly, he says, comes with its the sensitivity of these sectors in the run up to challenges, such as opening an international the US election. share trading account, having to deal in the curHe also believes ESG and responsible invest- rency of the relevant market, as well as other ading is set to grow in the region in itself, creating ministrative obstacles. opportunities for investors.

Doyle disagrees.

Financial adviser Will Hamilton08 , who leads “There are parts of the investment world boutique wealth management firm Hamilton where we think passive investing makes a lot of Wealth Partners, is banking big on the region, sense, but other parts of the world, like small with approximately 40% of the firm’s global cap investing and Asian equity investing, where equities exposure allocated towards emerging I think it’s very important to take an active apmarket and Asian equities. proach,” he says.

“We believe that 70% of global growth over “There are winners at the continent level, at the next 20 years is going to come from Asia,” the country level, at the sector level, and even at he says. the company level within divisions.”

“That is one of the reasons we do have that Similarly, Colonial First State general manweighting is to ensure our clients are exposed to ager of investments Scott Tully09 argues that inthat growth.” vestors can not get the same conviction from a Similarly, Wheldon believes there to be enor- passive strategy in Asia. mous potential for growth within the region – “An active manager in Asia will look at the especially in China; with much of Magellan’s drivers of a company’s share price specific to the holdings having both direct and indirect expo- company’s operations, as well as the economy sure to the country. and the regulatory frameworks of the countries “Increasing spending power, wealth and in- in which they operate,” he says. come is really attractive in an otherwise pretty “Compare that to the S&P 500 in the US; if low growth, low interest rate world,” Wheldon you indexed that you probably would have done says. better than all but the top 10% of all active man“So if you can find these investment oppor- agers.” tunities where you have that runway of growth While Murthy agrees, he notes that investors that you can have high conviction in… you can should be cognisant that Asian economies may try to surf that wave for many years, if not dec- not follow the same path as Western nations as ades to come.” they develop.

As of June 30, Magellan’s second and third “For instance, some Chinese internet comlargest holdings in its High Conviction Fund panies have become dominant franchises and were in Alibaba and Tencent, with portfolio among other things provide a pervasive payweightings of 13.6% and 9.4% respectively. This ments experience that has enabled China to was only surpassed by Microsoft (13.7%)...just. leapfrog the traditional credit cards model,” “The conviction that we have today on the Murthy says. longer-term thesis for those businesses and Similarly, India has “leapfrogged” in its teltheir suite of services is even higher today, in ecommunications infrastructure. part thanks to how well they performed during “For example, Reliance Industries built out COVID,” Wheldon says. an optical backbone, and within four years of While Israelstam agrees that Chinese tech launch has amassed 388 million subscribers companies will continue to drive growth within while providing world-class network speeds,” Asian markets, he believes a passive investment Murthy says.

FID0018_FinStnStrip 2020-09-03T18:06:54+10:00 strategy will also benefit from this growth.

Meanwhile, Tully says CFS has benefited “Gaining exposure to Asia via an Australian greatly from its exposures to Asian equities and

Increasing spending power, wealth and income is really attractive in an otherwise pretty low growth, low interest rate world.

Chris Wheldon

19

emerging markets, employing three active managers within its Asian equities exposures, and four for its emerging markets exposures.

“Where we landed was we wanted to have a manager that was on the ground, so they understood the country and its dynamics,” Tully says.

“We wanted a manager that was skewed to companies with strong business models and balance sheets.

“And then thirdly, we wanted the investment manager to have strong governance processes themselves, essentially to make sure the investment team made decisions in our best interests, without local influence,” Tully added.

However, like many of its peers, CFS only has a small percentage of its funds under management invested in Asian markets (approximately 5%).

This is echoed by Frontier Advisors head of equities Fraser Murray, who says his super fund clients invest “quite heavily” in emerging markets, while only a few have direct Asian equities exposure.

“Our experience is that super funds prefer to invest offshore in mandates covering multiple countries (for example, global equities and emerging market equities) as these enable the managers to invest in their preferred markets and vary these over time,” Murray says.

Over the long term, he expects Australian super funds will progressively own more exposure to emerging market and Asian equities as their economies themselves grow.

“At present, around 50% of offshore investment goes into the US equities market and we expect this to decline slowly over time with emerging markets and Asian equities an area that increases,” Murray says.

As we stand today, most investors have less exposure to Asia relative to its importance in the world economy, both retail and institutional investors alike.

However, if investors do not increase exposures to Asian equities as their economies grow, this gap will widen further, Isles says.

“We hope that investors make this allocation while it remains attractively valued, but history shows it tends to get on investor’s radars at the end of long booms,” he adds. fs

Fidelity Asia Fund

Only our finest ideas in Asian equities make the cut This document has been prepared without taking into account your objectives, financial situation or needs. You should consider these matters and seek independent financial advice before acting on the information. You should also consider the Product Disclosure Statement for the Fidelity Asia Fund before making any decision about whether to acquire the product. This can be obtained by contacting Fidelity on 1800 119 270 or online at www.fidelity.com.au. Investments in small and emerging markets can be more volatile than investments in developed markets. Investments in overseas markets can be affected by currency exchange and this may affect the value of your investment. The issuer of Fidelity’s managed investment schemes is FIL Responsible Entity (Australia) Limited ABN 33 148 059 009, AFSL No. 409340 (‘Fidelity Australia’). Fidelity Australia is a member of the FIL Limited group of companies commonly known as Fidelity International. ©2020 FIL Responsible Entity (Australia) Limited.

Fidelity, Fidelity International, the Fidelity International logo and F symbol are trademarks of FIL Limited.

20

News

www.financialstandard.com.au 14 September 2020 | Volume 18 Number 18

QBE chief exits after complaint

01: Scott Haywood

managing director HFM & Partners

Ally Selby

The group chief executive of QBE Insurance Group has left the business after almost three years in the role, following a complaint from a female employee.

A spokesperson for QBE confirmed with Financial Standard that the complaint against the now departed Pat Regan had come from a female employee, with the insurance giant’s board launching an external investigation just a day after the complaint was made.

The spokesperson would not reveal the nature of the conduct, in a bid to protect the identity of the female employee.

Following the investigation, the board concluded Regan’s “poor judgement” concerning workplace communications did not meet the standards set out in the group code of ethics and conduct.

QBE group chair Mike Wilkins said all employees at QBE “must be held to the same standards”.

“We are committed to having a respectful and inclusive environment for everyone at QBE,” he said in an ASX statement.

“The board concluded that he had exercised poor judgement in this regard.

“While these are challenging circumstances the board recognises and thanks Mr Regan for his hard work and contribution to strengthening QBE.” In the release, QBE said the board would put in place several additional initiatives over the coming weeks to build on the insurer’s “vibrant and inclusive culture”.

Regan had worked with QBE since June 2014, joining the insurer initially as its group chief financial officer before moving into the chief executive role. He has previously worked with Aviva, as well as Willis Towers Watson, RSA, and AXA – all based in London. He has also worked with GE Capital in the United States. fs

Advice group exits MLC after IOOF takeover Annabelle Dickson

H

The quote

We did not want to be going to another large institutional licensee that is aligned with prod­ucts or insurance.

New advice boutique launched

FM & Partners has made the decision to change its Australian financial services licence from MLC-owned GWM Adviser Services in light of the acquisition by IOOF. The announcement by IOOF to acquire MLC’s advice business will see the creation of Australia’s biggest advice business by number of advisers at 1884.

HFM & Partners managing director Scott Haywood 01 said being part of the biggest group of advisers was one of the main reasons he decided to change licensees to Sequoia Financial subsidiary InterPrac.

“We did not want to be going to another large institutional licensee that is aligned with products or insurance. Clients don’t want to be a number so why should advisers,” he told Financial Standard.

It was not just being part of a large group that sparked the shift but also the uncertainty of financial advisers after the Royal Commission and as a small business owner HFM & Partners needs certainty with their clients’ portfolios.

“We need to do what is in the best interests of our clients and soon we will see APRA make a decision as to whether IOOF will take over all advisers under the MLC banner and that could create more uncertainty for clients,” Haywood said.

“We decided to be proactive some months ago and make sure we were ready in the event the licence may not fit.”

Despite this, MLC chief executive Geoff Lloyd held briefings to reassure advisers of the changes and said that NAB chose the IOOF exit path for MLC as it was the best outcome for both NAB and MLC. In a note to advisers yesterday Lloyd said: “I know that today’s announcement will raise many questions, including what it means to be part of IOOF, your role, where you’ll be based, the immediate impacts on strategic initiatives and more.”

“While all the answers won’t be known at this point, there will be a constant flow of information to you, starting immediately with today and tomorrow’s briefings.”

HFM & Partners made the shift to MLC after the announcement that AMP was acquiring its previous licensee AXA in 2011.

Haywood said he saw what was going to happen at AMP and does not want to be a part of it at IOOF. MLC first alerted HFM & Partners among other licensees in 2018 about their decision to move its licence on. The move to InterPrac will be more expensive for HFM but it is more aligned with their business.

“We have given this decision extensive thought after NAB proposed the changes in 2018. We have in our opinion made ours in what we think will be best for our clients. We are not being remunerated to stay or move but from our clients point of view they want certainty of advice in these uncertain times,” he said. fs

Kanika Sood

Four former staff of ANZ’s financial planning business have started a new advice firm in Melbourne.

Park Lane Advice Group in Melbourne’s Cheltenham suburb is licensed via IOOF-owned Millennium3 Financial Services.

It was founded by Evguenia Rutkowski, Jonathan Scukovic, Jason Bell and Peter Feddersen – all of whom worked for ANZ’s financial advice business until recently.

The firm is currently working with about 89 new clients.

It is offering broad-ranging advice to clients of all profiles, including those in accumulation phase to retirement phase.

Rutkowski said the business sis looking to specialise in providing financial advice to clients who have been subject to a divorce or separation.

Evguenia Rutkowski worked at ANZ as a financial adviser for about five years and says she services over 150 clients.

She, Scukovic and Bell are directors and principles at the firm. Feddersen is a director and a lending specialist. fs

Super remains grossly inequitable: Per Capita Eliza Bavin

Australia’s superannuation system continues to produce grossly inequitable outcomes between the financial security of Australian men and women in retirement, according to research from Per Capita.

The research, titled The Herstory of Superannuation, said the system needs to be altered to create more equitable outcomes between the genders.

“Australia’s system of universal superannuation is among the world’s best retirement savings scheme, and the introduction of the Superannuation Guarantee in 1993 was by far the greatest policy intervention to improve retirement incomes for women,” it said.

Still, according to the findings, 24.2% more women than men receive the Age Pension, with 31.5% more women than men on the full rate and 13% more on a part pension. More than a half a million single women in Australia - about a third of all women aged 65 and over – rely on the Age Pension as their sole source of income.

Per Capita said it analysed the rate of real wage growth in the five years since the implementation of the SG freeze and quantified the amount of superannuation workers have lost as a result.

The analysis shows a worker on a full-time median wage has lost $4332.99 in super. Over the same period, the median wage grew from $1000 to $1066 per week, or from $52,000 to $55,432 per year.

When adjusted for inflation and looking at real, rather than nominal, wage growth, Per Capita found the median wage actually fell from $56,524 in today’s dollars to $55,432, resulting in the $4332.99 shortfall in super.

A woman earning $95,000 a year has lost almost $7000 in super since 2014, the research states.

“We found that, on any objective measure, workers have suffered a significant loss in net income, calculated as changes to real wages and forgone superannuation contributions combined, over the five-year life of the SG freeze,” it said. fs

News

www.financialstandard.com.au 14 September 2020 | Volume 18 Number

21

Executive appointments 01: Mostapha Tahiri

State Street nabs BNP executives State Street has announced two appointments to its Asia Pacific leadership team as a part of its expansion plan.

Mostapha Tahiri01 has been appointed as head of Asia Pacific and will report to both chief productivity officer and chief executive for State Street’s international business Andrew Erickson and chief executive of institutional services Francisco Aristeguieta.

Tahiri joins from BNP Paribas where he held a number of roles over the last 20 years including chief executive of Asia Pacific, head of institutional investors and digital transformation and chief executive of BNP Paribas Securities Services in Singapore.

Based in Singapore, he will be responsible for the strategic direction, management and growth of the business in Asia Pacific and will also serve on State Street’s management committee.

“Asia Pacific has been a growth engine for State Street since it established its presence in the region more than 40 years ago. I look forward to working with the teams across the region to further expand our franchise and to support our clients’ growth and transformation ambitions,” Tahiri said.

Commenting on Tahiri’s appointment, Aristeguieta said: “We are energised by Mostapha’s addition to our leadership team in Institutional Services. He will have extraordinary impact on our strategy and execution as we drive a focused growth agenda across Asia Pacific.”

In addition, Joanne Chen has been appointed as head of China. She will be based in Beijing and responsible for all business activity in China including driving strategy, pursuing growth opportunities and managing relationships with Chinese clients.

Chen joins from BNP Paribas where she was most recently head of China financial institutions coverage.

She was previously at Deutsche Bank as head of China management strategy and head of private wealth and commercial clients.

“As we position ourselves for growth in Asia, China stands out as a very important opportunity for our clients and the firm and thus we are delighted to count on Joanne’s proven leadership and experience in that market,” Aristeguieta said.

Prime Super adds to board Allison Harker joins the board of Prime Super as a director, bringing with her financial services, human resources and primary industries expertise.

Her early career began with Macquarie Investment Management, followed by Barclays Private Bank and Bank of America/Merrill Lynch.

She spent 10 years in Hong Kong before returning to Yass, New South Wales, where she is a partner in her family’s mixed farming business.

Harker also sits on the board of the NSW government’s Local Land Services, which provides services such as agricultural production advice, biosecurity and natural resource management to rural communities.

ASIC adds senior leaders The corporate regulator has made two senior appointments to lead its operations and risk management units.

ASIC promoted longserving employee Warren Day to the newly-created role of chief operating officer after serving as the executive director of assessment and intelligence since January 2019.

Prior to his appointment as operations chief in August, Day has worked across several senior leadership roles at ASIC. Day’s nearly 17 years has covered departments that included legal, stakeholder services, and the offices of whistleblowers and small businesses.

Based in Melbourne, he also holds the role of the regional commissioner for Victoria, which helps ASIC gather information on developments and issues affecting the region.

Emily Hodgson, reports to Day as deputy chief operating officer and chief financial officer.

Meanwhile, Zack Gurdon was appointed to the newlyestablished role of chief risk officer in July, joining from NBN Australia where he held senior responsibilities in compliance and risk management. Prior to that, Gurdon spent 12 years at Telstra working in a senior capacity across risk and security.

She was part of the National Farmers’ Federation Diversity in Leadership program last year and awarded a scholarship to the Australian Rural Leadership Program in 2017.

Prime Super chair Nigel Alexander said: “With her strong financial background, primary industry experience and previous roles with community and government organisations.”

Harker said she looks forward to helping build the retirement savings of Prime Super members, which mostly work in agriculture, horticulture, health, education, aged care and recruitment.

Dealer group investment head departs The head of investment management for a dealer group has departed, establishing his own advisory.

Julian Pitt has left Centrepoint Alliance after more than 13 years with the dealer group.

Pitt was head of investment management and in the last year and a half also took on the head of transformation program delivery position.

His role there involved being the chief architect of Centrepoint’s data feed practice management platform.

Earlier in Pitt’s career he worked in product and strategy for VenturaFM and was a business development manager for IOOF and Perennial.

In Centrepoint Alliance’s annual results it reported revenue grew 11%.

Centrepoint said its plans for growth are to "aggressively pursue inorganic opportunities".

The dealer group said 79 new financial advisers had joined the licence in the last year along with 49 new firms.

With the advisers that left Centrepoint, the dealer group had net growth of 17 advisers.

With 317 licensed advisers, Centrepoint said it was up 6% against the overall advice market which has contracted 13% in the last year.

New CIO at Australian Unity The firm has hired a former Colonial First State Global Asset Management executive as its first standalone chief investment officer for its wealth and capital markets business.

Dr Joe Fernandes moved into the role on September 7.

He will have responsibility for over $8 billion in funds under management and advice across Australian Unity’s investments team and its joint venture and investment partners Platypus Asset Management, Altius Asset Management and Acorn Capital.

Fernandes has over 20 years of experience, including 17 years with Colonial First State, Colonial First State Global Asset Management and First State Investments.

More recently, he has worked in independent advisory roles in superannuation and wealth management.

He will report to Esther Kerr-Smith, who was appointed chief executive for wealth and capital management in July this year (as incumbent David Bryant left to take the chief executive role at

02: Rosemary Vilgan

Mercer) following three years as group executive finance and strategy.

Kerr-Smith decided to separate the chief investment and chief executive roles, as a part of which Fernandes was appointed to the standalone function, a spokesperson said.

Financial Standard recently reported Geraldine Barlow was departing as the executive general manager of investments, as the business looked to restructure the role and the responsibilities of the chief executive.

“Joe’s key priority will be the ongoing stewardship and development of Australian Unity’s investment activities,” Kerr-Smith said.

“This will include capturing investment opportunities that align with our strategic agenda as a provider of health, wealth and care products and services that both meet the wellbeing needs of our members and customers, and deliver community and social value.”

Former QSuper chief joins NZ Super Fund The former QSuper chief and the current chair of Commonwealth Bank’s staff superannuation fund has been appointed to the board of the $44 billion NZ Super Fund for a five-year term.

Rosemary Vilgan02 will join the board of guardians for NZ Superannuation Fund starting October 1.

She replaces Stephen Moir, who is rotating off the board, after serving since 2009. Moir’s past roles have included general manager of the Westpac Institutional Bank for three years.

Vilgan currently is the chair of CBA’s staff superannuation fund and chair of the federal government’s safety, rehabilitation and compensation commission (from which she will step down in October).

She is also a member of the investment committee at Fairfax Family’s Cambooya, member of the advisory board for the committee for Brisbane and a member of multiple committees at Queensland University of Technology.

“The NZ Super Fund is projected to reach NZD70 billion of assets under management within the next decade. Rosemary brings a wealth of international investment fund experience and will help the Guardians to scale up as the fund grows to that size,” NZ Super board of guardians chair Catherine Savage said.

“Guardians board members are chosen for their experience, training and expertise in the management of financial investments, as well as their mix of complementary skills. Rosemary’s deep experience in the Australasian investment sector brings a unique perspective to the Guardians board and we look forward to her joining the team.”

Vilgan was the chief executive of QSuper for 17 years, ending 2015.

“My background is in supporting large institutional investors as they go through periods of change and I will be drawing on that experience to ensure the Guardians is set up to take advantage of the opportunities in front of it,” Vilgan said of her appointment. fs

22

Roundtable| Funds management Featurette

www.financialstandard.com.au 14 September 2020 | Volume 18 Number 18

The fundies of tomorrow The next wave of fund managers is ready to leave their textbooks behind and start investing with real money.

And star stockpickers of today are offering their help to an interuniversity group. Annabelle Dickson writes.

Traditionally, students undertaking a commerce or business degree at university are taught quantitative methods along with formulas and theories which are to be applied to an exam question or a report.

But students wanting to gain industry experience in their first couple of years of study have limited choice as the highly competitive internships and summer clerkships generally go to those students closer to completion and vying for a graduate job.

One student from the University of New South Wales, armed with his desire for real funds management experience, saw a gap in tertiary education for financial markets and decided to do something about it.

As a result, some of Australia’s best and most experienced fund managers are paving the way to the future through a mentorship program, guiding students to run an operational fund where the proceeds improve the financial literacy of other Australians.

Doron Haifer was inspired by the studentrun university endowment funds in the USA when he established Australian Students Asset Management (ASAM) in 2018.

“Only two universities in Australia had student funds that were available to selected students to take as a subject but for the vast amount of students interested in financial markets there was not an opportunity available,” he says.

ASAM is a public ancillary fund run by a group of 30 student volunteers that gain practical

experience in funds management ahead of entering the industry.

The fund relies on donations from industry participants which are then pooled together and invested into eight to 12 long positions in the ASX 200 universe.

The strategy is to manage a diverse portfolio through a positive investment philosophy, only investing in assets that have expected unrealised value by selecting securities that trade at an inappropriate but meaningful discount to their intrinsic value.

As part of the strategy, students are able to develop a deep understanding of each investment, grounded in comprehensive quantitative and qualitative research, to create a high-conviction portfolio.

Each year the fund donates 4% of funds under management to Australian charities that aim to improve the financial literacy of underprivileged Australians.

This year the fund is donating to The Smith Family to assist in funding several financial literacy programs such as a 10-month financial education course, teaching families to save and giving young people financial education skills.

ASAM has industry heavyweights on its board including Michael Gallagher01, general manager of AIMA Australia, Aitken Investment Management chief operating officer Les Andrews, AMP Capital head of alpha strategies Alistair Rew, Regal Funds Management chief executive Brendan O’Connor along with Haifer.

It’s about getting students from textbooks to the real world and hit the ground running.

Michael Gallagher

AIMA’s Gallagher initially got involved to lend a helping hand and help the founding members make a few introductions within the industry. Three years later he is now chair of the board with the fund becoming a “labour of love”.

“It’s about getting students from textbooks to the real world and hit the ground running,” he says.

ASAM’s chief operating officer Finn Kingston 02 started as an analyst in 2018 before working his way up to portfolio manager and then onto to his current role.

He said the two main benefits from his time at ASAM is practical learning and industry exposure.

He tried to enrol in as many valuation-based courses at university but the learning opportunities for actual engagement with company valuations and portfolio creation was highly theoretical.

“As an analyst in the fund, every month involves a new valuation and a new investment pitch. This forced me to continually look to new and better ways of valuing companies, but also allowed me to learn unique valuation methodologies for specific industries and sectors,” he says.

“This level of detail and area-specific knowledge is just not available at university and really helped to expand my learning to practical investment decisions outside the classroom.”

Mentoring underpins the program and can come from anyone in the industry. The experience results in employers with graduates who have practical experience under their belt.

ASAM relies on industry donations which can be made in three ways – money which is invested

Funds management | Featurette

www.financialstandard.com.au 14 September 2020 | Volume 18 Number 18

in the fund; resources and services; and also time through mentorship.

Some of the industry’s biggest institutions have donated their services to ASAM to have it operating at full speed. Perpetual has offered its services as custodian, EY as auditor, Norton Rose Fulbright as legal team, Citco as administrator and BTIG as broker.

“The fund’s operations are as good as any funds management business would want to have,” Gallagher says.

Tribeca Investment Partners lead portfolio manager Jun Bei Liu 03 got involved as a mentor for a year after a couple of students approached her and explained the ethos of the fund, before moving onto the ASAM’s advisory committee.

“I thought it was a fantastic idea because when I went through university I never had real life experience in investing,” she says.

“What we need in the finance industry is innovation and the next generation to really fill it with better energy and continue to drive this industry forward.”

Liu runs up to four workshops annually at the Tribeca office for students in the fund to have the opportunity to ask questions and hear insights from other industry professionals.

“Generally the students are so well prepared and come with so many questions and real-life questions not just theoretical. It helps everyone around the table to think about what it looks like to run a fund and how to look at the market,” she says.

Kingston attributes the industry engagement to developing his understanding of what skills are required to work in asset management.

“Some of this came from discussions with mentors or more experienced students, but mostly it was just from actually playing a role within the industry. I recently started a job as an investment analyst for a financial services company and have been surprised by how much my learnings from ASAM applied in this new role,” he says.

The recruitment process begins in the lead up to each university semester and includes written applications and multiple interviews.

Throughout the semester the existing members put on training sessions for the new members to ensure they have an understanding of the skills required for the fund.

The members will research a stock over a 10-week period and ultimately put it forward as a pitch presentation.

Throughout the semester breaks and exam periods, the head of risk looks after the portfolio and is supported by the available analysts.

The first security Kingston pitched was the Folkestone Education Trust (now Charter Hall Social Infrastructure REIT).

“It’s strange looking back at my pitch and realising how different my pitch and valuation would be today. In the two and half years since then, I’ve pitched a broad range of securities across a few sectors including Westpac Bank, IMF Bentham (now Omni Bridgeway), Bingo Industries,

23

01: Michael Gallagher

02: Finn Kingston

03: Jun Bei Liu

chair Australian Students Asset Management

chief operating officer Australian Student Asset Management

lead portfolio manager Tribeca Investment Partners

Magellan Financial Group, Flexigroup and EML payments,” he says.

There are around 30 roles between front office (portfolio manager and analyst) to middle and back office which includes human resources, marketing, compliance team, portfolio analyst and external relations.

Rainmaker Information business development manager Rohan Brotherson is a member of the external relations team at ASAM. He explained the role of the external relations is two-fold – to get more mentors on board as well as more donations which are then invested.

“We have identified our target audience for both of these as primarily being investment managers” he says.

“Building awareness of ASAM and raising funds involves leveraging the networks and guidance of our board members and Rainmaker’s market connectivity, in addition to our own connections and initiatives to prospect and engage similar to how a real-world distribution team would operate in the market.”

Kingston explains the investment process begins with the analyst pitching to the portfolio managers. If the portfolio manager likes the pitch, it will go onto the investment committee who determines which investments are suitable.

The investment committee evaluates trade ideas and risk as well as portfolio construction therefore being somewhat accountable for portfolio performance.

The last step is to consult the advisory committee and who approves or denies the idea and discuss the construction and weighting of the positions.

Liu says: “By the time it gets to the advisory committee we are very confident. I think these presentations are phenomenal and I can’t tell the difference between a real life professional analyst and these students.”

Liu is joined by Jianfeng Shen associate professor of finance at the University of New South Wales, Jamil Barmania senior portfolio manager at K2 Advisors, Simon Winston Smith principal of Ascienta and Hugo Molina director at ID Know Yourself.

“I do see a few of the same students over the years and the great thing is that you can see their knowledge build. Some of them are so good,” she says.

Gallagher notes one of the hallmarks of the program is that nobody expects anyone to make the right decision.

“We just want to see that the student puts enough thought into a stock pitch and why the fund should buy it. If they make a mistake that’s good because hopefully by the time you get out into the real world they will have learned from those mistakes,” he says.

“The mentors aren’t there to grade the work or analysis, they are there to say ‘that’s really sound’ or help to correct a computational error rather than criticise them.”

Liu agrees and says it is important for students

What we need in the finance industry is innovation and the next generation to really fill it with better energy and continue to drive this industry forward.

Jun Bei Liu

to make mistakes as that is where the best lessons come from.

“Once you make a mistake you really learn from it and it’s not for me to tell them what is right of wrong. Our job is to guide them and let them make the decisions,” she says.

Liu offers some students the opportunity for work experience placements at Tribeca. She first took in a student two years ago in the middle of reporting season and he was able to see how the Tribeca analysts look at valuations.

“It was an incredible experience for him.

Subsequently that student now works for a private equity firm and I provided a very strong recommendation for him because he was such a fantastic student,” she says.

“I do what I can to help those students because I am familiar with them, I see how they think and how they present and I would love to help them get a good start in their career.”

Gallagher says there have been students that have been offered jobs as a result of the relationships they have had with their mentors.

Some of the students have gone onto to work or intern for firms including Antipodes, Goldman Sachs, Morgan Stanley, Credit Suisse, Nomura and Aberdeen Standard Investments.

In addition, just like the rest of the world, COVID19 has presented challenges to the fund. As such, the students are currently paper trading and aim to go live again on October 1.

Given the increased preference of ethical investments, ASAM has plans to look at implementing an ESG screen or a separate ESG fund.

“When everyone couldn’t meet in person and the market was going nuts we were concerned the mentor wouldn’t have time for the students. We put things on ice,” he says.

“The students have been working on paper trades and some of it has been incredible. There is some amazing work — you would think that some of these students were 20-year veterans of funds management.”

The effects of the pandemic have made it challenging for the fund to reach out for donations as corporations rein in their spending.

On the other hand, the pandemic has been somewhat opportunistic as ASAM has received interest from interstate universities such as Bond University and University of Tasmania.

“COVID-19 has taught us that we can collaborate with students interstate remotely,” Gallagher says.

Liu says her role has a mentor has also been affected by the pandemic, limiting her ability to hold workshops and interact with the students in person but said that her email is always open.

“It’s not too much effort from me either, I really enjoy that project and I’ll do what I can to help the next generation come through,” she says.

“Some of the bright students are so intelligent and are good at what they do but all they need sometimes is a little bit of help at the beginning to find the right attitude towards something.” fs

24

Between the lines

www.financialstandard.com.au 14 September 2020 | Volume 18 Number 18

Industry fund cuts some fees

01: Bob Sahota

chief investment officer Revolution Asset Management

Karren Vergara

The majority of Christian Super’s 28,000 members will benefit from asset allocation changes, lower fees paid to investment managers, and reduced indirect costs for some investment options.

Non-pension members in the following options will see investment fees and the indirect cost ratio decrease: My Ethical Super (from 1% to 0.89%), Ethical Growth Plus (1.02% to 0.98%) and Ethical Stable (from 0.92% to 0.81%).

A member invested in the My Ethical Super option with $50,000 for example, will save about $55 per annum.

The super fund was able to reduce the overall investment fees and costs it pays to external fund managers, resulting in about $1.4 million of savings each year. It also reviewed the way that investment fees are allocated between 15 investment options to better reflect the underlying costs of each option.

However, some fees will increase for a minority of options. Pension fund members in the Pension Ethical Growth Plus will see costs go up from 0.97% to 1.01%.

Last year, the super fund reduced its administration fees to $1.25 per week from $1.75.

Christian Super chief executive Ross Piper said the changes are a result of the fund’s focus on process improvement and efficiency in order to serve its members by investing in line with Christian values and beliefs.

“We’re pleased to be able to pass on savings from efficiency gains to our members at this time,” he said. fs

Sydney boutique wins $300m QIC mandate Kanika Sood

The quote

What we have witnessed over the last two to three months is that the market for secondary transactions is providing the opportunity to participate in high quality transactions.

A

Sydney boutique co-founded by three former Challenger investors has won a $300 million mandate from QIC to co-invest in local private debt.

Revolution Asset Management will originate and manage Australia and New Zealand private debt from QIC via the co-investment relationship.

The boutique will lead origination of new transactions, provide credit analysis and structure investments alongside other funds.

Revolution was set up in 2018 by Bob Sahota01, Simon Petris and David Saija as partners and cofounders. It currently has about $1.1 billion in total assets, with over $550 million committed.

It invests predominantly in senior secured assets such as corporate leveraged loans, private asset backed securities (ABS) and real estate loans.

“In terms of deal flow, what we have witnessed over the last two to three months is that the mar-

ket for secondary transactions is providing the opportunity to participate in high quality transactions at a significant discount to the original face value of loans and ABS securities,” Revolution chief investment officer Bob Sahota said.

“The effect of this is that we are able purchase the same assets that we know extremely well (that we’ve invested in our first fund) but buying at a much more opportunistic level, and have our co-investors participate. Sellers are forced to liquidate otherwise performing assets, as a result of having to raise liquidity to meet redemptions in their own funds.

“This has been the key focus of what we’ve been able to achieve while the primary market’s been somewhat subdued.”

Late last year, the boutique raised $100 million for its second fund with Sydney superannuation fund Australian Catholic Superannuation and Retirement Fund investing again with it. fs

Rainmaker Mandate Top 20

Note: Latest investment mandate appointments

Appointed by

Asset consultant

Investment manager

Mandate type

Australian Catholic Superannuation and Retirement Fund

Frontier Advisors

PGIM, Inc.

International Fixed Interest Emerging Markets

28

Australian Catholic Superannuation and Retirement Fund

Frontier Advisors

Ashmore Investment Management Limited

Emerging Markets Fixed Interest

26

Australian Catholic Superannuation and Retirement Fund

Frontier Advisors

IFM Investors Pty Ltd

International Fixed Interest

13

Australian Catholic Superannuation and Retirement Fund

Frontier Advisors

Perennial Value Management Limited

Australian Equities

10

AvSuper Fund

Frontier Advisors

Other

International Equities

65

Care Super

JANA Investment Advisers

GQG Partners (Australia) Pty Ltd

International Equities

104

Care Super

JANA Investment Advisers

IFM Investors Pty Ltd

Australian Equities

20

Energy Industries Superannuation Scheme - Pool A

Cambridge Associates; JANA Investment Advisers

Hyperion Asset Management Limited

Australian Equities

100

Energy Industries Superannuation Scheme - Pool A

Cambridge Associates; JANA Investment Advisers

IFM Investors Pty Ltd

Alternative Investments

Ironbark Asset Management Pty Limited

Australian Unity Investments

Other

Macquarie Investment Management Australia Limited

Independent Franchise Partners, LLP

Global Equities

Maritime Super

JANA Investment Advisers; Quentin Ayers

Ardea Investment Management Pty Limited

Alternative Investments

Maritime Super

JANA Investment Advisers; Quentin Ayers

Other

Australian Equities

86

Meat Industry Employees Superannuation Fund

Internal

IFM Investors Pty Ltd

Global Infrastructure

40

MTAA Superannuation Fund

Whitehelm Capital

Perennial Value Management Limited

Other

16

Retail Employees Superannuation Trust

JANA Investment Advisers

First State Investments

International Equities

WA Local Government Superannuation Plan

Willis Towers Watson

Putnam Investments Australia Pty Limited

Fixed Interest

26

WA Local Government Superannuation Plan

Willis Towers Watson

BlueBay Asset Management

Alternative Investments

21

Warakirri Asset Management Pty Ltd

Northcape Capital Pty Ltd

Australian Equities

Warakirri Asset Management Pty Ltd

Northcape Capital Pty Ltd

Global Equities

Amount ($m)

46 5 23 129

461

303 46 Source: Rainmaker Information

Super funds

www.financialstandard.com.au 14 September 2020 | Volume 18 Number 18 PERIOD ENDING – 31 JULY 2020

Workplace Super Products

1 year % p.a. Rank

3 years

5 years

SS

% p.a. Rank % p.a. Rank Quality*

GROWTH INVESTMENT OPTIONS

25

* SelectingSuper [SS] quality assessment

Retirement Products

1 year % p.a. Rank

3 years

5 years

SS

% p.a. Rank % p.a. Rank Quality*

GROWTH INVESTMENT OPTIONS

UniSuper - Sustainable High Growth

4.7

1

10.3

1

8.0

1

AAA

UniSuper Pension - Sustainable High Growth

5.6

1

11.5

1

9.0

1

AAA

Equip MyFuture - Growth Plus

0.6

9

8.1

2

6.8

6

AAA

Equip Pensions - Growth Plus

0.1

15

8.7

2

7.3

9

AAA

Vision Super Saver - Just Shares

1.6

3

7.9

3

7.3

3

AAA

Vision Income Streams - Just Shares

0.9

7

8.4

3

7.9

4

AAA

AustralianSuper - High Growth

0.2

10

7.4

4

7.0

4

AAA

AustralianSuper Choice Income - High Growth

0.3

12

8.2

4

7.7

5

AAA

First State Super Employer - High Growth

0.6

8

7.3

5

6.8

5

AAA

Cbus Super Income Stream - High Growth

-0.1

17

8.2

5

8.5

2

AAA

HOSTPLUS - Shares Plus

0.1

11

7.2

6

7.7

2

AAA

First State Super Pension - High Growth

0.7

8

7.9

6

7.5

7

AAA

WA Super - Diversified High Growth

1.1

6

7.0

7

5.9

30

AAA

WA Super Retirement - Diversified High Growth

1.4

3

7.9

7

6.6

37

AAA

-1.0

28

7.0

8

6.4

16

AAA

HOSTPLUS Pension - Shares Plus

0.1

14

7.8

8

8.5

3

AAA

1.2

5

6.9

9

6.2

20

AAA

Lutheran Super Pension - High Growth

-0.4

22

7.7

9

6.6

33

AAA

VicSuper FutureSaver - Equity Growth

-0.8

23

6.9

10

6.3

17

AAA

HESTA Income Stream - Active

-1.3

36

7.7

10

6.9

21

AAA

Rainmaker Growth Index

-3.0

Rainmaker Growth Index

-3.0

HESTA - Shares Plus Equip MyFuture - Growth

5.3

5.1

BALANCED INVESTMENT OPTIONS

5.9

5.7

BALANCED INVESTMENT OPTIONS

UniSuper - Sustainable Balanced

3.8

2

8.5

1

6.7

3

AAA

UniSuper Pension - Sustainable Balanced

4.7

2

9.8

1

7.7

3

AAA

WA Super - Sustainable Future

6.2

1

7.9

2

6.6

5

AAA

HESTA Income Stream - Eco

1.1

8

8.1

2

8.5

1

AAA

HESTA - Eco-Pool

1.0

9

7.5

3

7.8

1

AAA

WA Super Retirement - Sustainable Future

6.7

1

7.9

3

6.7

12

AAA

AustralianSuper - Balanced

0.2

21

6.8

4

6.7

2

AAA

Australian Catholic Super RetireChoice - Socially Responsible

0.6

15

7.6

4

5.6

42

AAA

Australian Catholic Super Employer - Socially Responsible

0.7

12

6.7

5

4.8

52

AAA

AustralianSuper Choice Income - Indexed Diversified

0.5

16

7.5

5

6.3

24

AAA

CareSuper - Sustainable Balanced

1.8

4

6.7

6

6.1

13

AAA

ESSSuper Income Streams - Basic Growth

-0.4

39

7.3

6

AAA

Australian Ethical Super Employer - Balanced (accumulation)

0.0

24

6.6

7

6.2

11

AAA

Cbus Super Income Stream - Growth (Cbus Choice)

0.7

12

7.3

7

7.8

2

AAA

Vision Super Saver - Balanced Growth

1.5

6

6.5

8

6.2

10

AAA

TASPLAN Tasplan Pension - Balanced

0.0

31

7.2

8

6.6

17

AAA

Media Super - Growth

-2.1

93

6.4

9

6.4

8

AAA

Sunsuper Income Account - Balanced Index

0.3

20

7.2

9

6.1

32

AAA

TASPLAN - OnTrack Sustain

0.3

17

6.4

10

AAA

Media Super Pension - Growth

-2.2

79

7.2

10

7.3

5

AAA

Rainmaker Balanced Index

-1.4

Rainmaker Balanced Index

-1.4

4.8

4.7

CAPITAL STABLE INVESTMENT OPTIONS

5.4

5.1

CAPITAL STABLE INVESTMENT OPTIONS

QSuper Accumulation - Lifetime Aspire 2

0.7

36

6.7

1

6.4

1

AAA

VicSuper Flexible Income - Socially Conscious

3.6

1

7.2

1

6.4

4

AAA

VicSuper FutureSaver - Socially Conscious

3.2

1

6.3

2

6.0

2

AAA

Cbus Super Income Stream - Conservative Growth

2.2

5

6.7

2

6.9

1

AAA

TASPLAN - OnTrack Control

0.6

41

5.7

3

AAA

AustralianSuper Choice Income - Conservative Balanced

1.2

24

6.4

3

6.5

3

AAA

AustralianSuper - Conservative Balanced

1.0

25

5.7

4

5.7

3

AAA

QSuper Income - QSuper Balanced

-0.5

69

6.3

4

6.8

2

AAA

VicSuper FutureSaver - Balanced

0.9

29

5.6

5

5.4

5

AAA

Energy Super Income Stream - SRI Balanced

-0.4

65

6.3

5

4.8

24

AAA

-0.6

79

5.4

6

4.3

22

AAA

VicSuper Flexible Income - Balanced

0.9

31

6.2

6

5.9

5

AAA

First State Super Employer - Balanced Growth

0.4

49

5.4

7

5.3

6

AAA

First State Super Pension - Balanced Growth

0.4

41

6.0

7

5.9

7

AAA

HESTA - Conservative Pool

1.8

6

5.2

8

5.0

7

AAA

UniSuper Pension - Conservative Balanced

-0.9

78

5.8

8

5.7

8

AAA

StatewideSuper - Conservative Balanced

0.1

57

5.2

9

5.4

4

AAA

TASPLAN Tasplan Pension - Moderate

1.3

21

5.8

9

AAA

TASPLAN - OnTrack Maintain

1.2

20

5.1

10

AAA

Media Super Pension - Moderate Growth

-0.2

57

5.7

Rainmaker Capital Stable Index

-0.1

Energy Super - SRI Balanced

Rainmaker Capital Stable Index

-0.1

3.8

3.6

Notes: A ll figures reflect net investment performance, i.e. net of investment tax, investment management fees and the maximum applicable ongoing management and membership fees.

WORKPLACE SUPER | PERSONAL SUPER | RETIREMENT PRODUCTS

Compare superannuation returns across asset classes using over 27 years of industry insights and research with SelectingSuper’s performance tables.

Simply visit selectingsuper.com.au/tools/performance_tables

4.1

10

4.8

25

AAA

3.9 Source: Rainmaker Information www. rainmakerlive.com.au

26

Managed funds

www.financialstandard.com.au 14 September 2020 | Volume 18 Number 18 PERIOD ENDING – 31 JULY 2020

Size 1 year 3 years 5 years

Size 1 year 3 years 5 years

Fund name

Fund name

Managed Funds

$m

% p.a. Rank

% p.a. Rank

% p.a. Rank

GROWTH IOOF MultiMix Growth Trust

$m

% p.a. Rank

% p.a. Rank

% p.a. Rank

CAPITAL STABLE 616

0.1

1

7.9

1

6.8

1

Macquarie Capital Stable Fund

29

7.3

1

6.7

1

5.3

1

Vanguard High Growth Index Fund

3026

-1.7

3

7.5

2

6.3

3

IOOF MultiMix Moderate Trust

576

0.9

6

6.0

2

5.3

2

Vanguard Growth Index Fund

5348

0.0

2

7.1

3

6.0

5

Vanguard Conservative Index Fund

2539

2.6

2

5.7

3

5.0

4

138

-2.5

7

6.8

4

6.2

4

IOOF MultiMix Conservative Trust

655

2.4

3

5.0

4

4.6

6

62

-2.8

8

6.4

5

Fiducian Capital Stable Fund

309

1.0

5

4.8

5

4.2

7

187

-2.2

6

6.2

6

6.6

2

UBS Tactical Beta Fund - Conservative

92

1.9

4

4.5

6

3.8

9

11

-4.6

12

6.2

7

5.5

7

Dimensional World Allocation 50/50 Trust

517

-1.4

13

4.5

7

4.7

5

MLC Wholesale Horizon 6 Share

236

-4.8

14

6.2

8

5.6

6

Perpetual Diversified Growth Fund

103

-2.1

15

4.1

8

3.8

10

BT Multi-Manager Growth Fund

40

-4.1

10

5.6

9

5.1

8

Perpetual Conservative Growth Fund

337

-0.4

9

4.0

9

3.7

11

MLC Wholesale Horizon 5 Growth

509

-3.6

9

5.3

10

4.8

9

BT Multi-Manager Conservative Fund

34

-0.9

12

3.8

10

3.5

13

Sector average

543

-4.2

4.9

4.4

Fiducian Growth Fund MLC Wholesale Index Plus Growth Fiducian Ultra Growth Fund BT Multi-Manager High Growth Fund

Sector average

BALANCED Macquarie Balanced Growth Fund IOOF MultiMix Balanced Growth Trust BlackRock Tactical Growth Fund Vanguard Balanced Index Fund SSGA Passive Balanced Trust

-0.2

4.0

4.0

6.3

CREDIT 725

4.4

1

7.8

1

7.1

1

Principal Global Credit Opportunities Fund

173

13.1

1

7.1

1

1771

1.1

4

7.4

2

6.3

3

VanEck Vectors Aust. Corp. Bond Plus ETF

229

3.1

9

5.7

2

443

-1.4

8

6.9

3

4.9

9

Pendal Enhanced Credit Fund

410

3.8

5

5.3

3

4.8

5

5247

1.5

3

6.6

4

5.6

5

Vanguard Australian Corp Fixed Interest Index

169

3.4

7

5.3

4

4.8

4

83

-3.2

14

6.5

5

5.5

6

Metrics Credit Div. Aust. Sen. Loan Fund

2357

4.8

4

5.1

5

5.0

3

Vanguard Aust Corp. Fixed Interest Index ETF

Fiducian Balanced Fund

348

-1.5

9

6.5

6

5.9

4

Ausbil Balanced Fund

112

-3.8

18

6.5

7

4.9

10

PIMCO Global Credit Fund

Responsible Investment Leaders Bal

604

0.0

5

6.1

8

4.7

14

Vanguard Managed Payout Fund

30

-2.5

10

5.6

9

5.2

8

BT Multi-Manager Balanced Fund

85

-3.3

17

5.2

10

4.8

11

4.8

4.8

Sector average

367

762

-2.3

Note: The performance figures for diversified funds are net of fees, performance figures for sector specific funds are adjusted for fees.

1

338

3.1

8

5.0

6

1241

4.9

3

4.3

7

4.6

6

Franklin Australian Absolute Return Bond

396

3.0

11

4.0

8

3.9

9

Yarra Enhanced Income Fund

543

-0.3

26

4.0

9

5.1

2

Janus Henderson Diversified Credit Fund

544

3.7

6

3.8

10

4.1

7

Sector average

745

2.9

3.5

3.7

Source: Rainmaker Information

Big Super bad egg?

“Dedicated to the workers of Australia.” o begins Senator Andrew Bragg’s latest book S How to fix super: Bad Egg, a 120-page monograph, launched in June, that has lit a fire under

Brumbie

By Alex Dunnin alex.dunnin@ financialstandard .com.au www.twitter.com /alexdunnin

the superannuation establishment.

That a short book written by a first-term backbencher, albeit one as highly credentialed as a former Liberal Party national director, policy adviser to the Financial Services Council and the Business Council of Australia, who already is a chair of a parliamentary committee, has done this speaks volumes to how vulnerable the super sector is.

But who could blame it given its tumultuous year defending its members from the challenges of COVID-19, dealing with massive regulatory reforms and administering the Early Release of Superannuation (ERS) scheme that has so far seen $33 billion in hardship payments go to about one-quarter of the workforce.

What has arguably worn them down more is that some of the sector’s most fundamental tenants of faith are being openly contested.

The legislated timetable for rises in the Superannuation Guarantee rate are likely to again be slowed and the government has redefined superannuation’s purpose so it isn’t just for

retirement but it can be called on in times of national emergencies.

The sustained nature of some of the criticisms heaped on the superannuation sector has led some of its advocates to counterattack the senator.

Before I turn to the substance of the book, it must be said Senator Bragg isn’t easy to tag. Yes he’s an economic dry but he’s also progressive.

The reason the book is getting so much attention is simple. The super sector is not used to being attacked on the left by someone from the right.

This line of attack is happening across a few fronts. First, by labelling anyone from large industry funds or their associations as Big Super bunches them together with their retail rivals, undermining the clean bill of health they got from the recent Royal Commission.

Second, it uses the sector’s own words to pincer it on efficiency, effectiveness, fairness and gender equality.

Thirdly, it argues that compulsory super is one of Australia’s biggest ever economic initiatives yet is poorly understood and not properly benchmarked.

Does this mean the senator is trying to tear superannuation down? In my view, no. But he

definitely wants it reformed, but so too do most people who work in the sector.

For example, if people in superannuation are going to infer you need almost $1 million in superannuation to retire comfortably, the fact that only 7% of people achieve this milestone means the system isn’t working.

If superannuation is meant to get people off the age pension, is it working if two-thirds of retirees are on the age pension with two-thirds of them still on the full rate?

The superannuation system costs $80 billion a year to run, $40 billion as tax subsidies most of which goes to high income earners, $30 billion as fees and $10 billion as insurance premiums.

What’s the evidence it delivers more than it costs?

Is it fair to force young people and low-income people, many of whom are women, to save 9.5% of their wages in superannuation if they can’t afford to buy their own home meaning they’ll likely retire into poverty? The book meanwhile argues that even if SG was 12% it would still be inadequate.

Sure the book contains some simplistic analyses. But to dismiss it because you don’t like its author is a reform opportunity missed. Doing that will just vindicate why this book needed to be written. Giddyup. fs

International

www.financialstandard.com.au 14 September 2020 | Volume 18 Number 18

NPS buffers COVID-19 shocks

01: Therese Coffey

work and pensions secretary

Karren Vergara

South Korea’s National Pension Service (NPS) has delivered positive results for its members despite the havoc wreaked by the global pandemic in the investing world.

In the six months to June NPS posted 0.5%, buoyed by investments in global fixed income and alternatives, which returned 7.9% and 4.24% respectively on a year-to-date basis.

NPS invests heavily in domestic fixed income as 43% of funds are allocated to this asset class. About 40% is invested in domestic and international equity.

The first half of 2020 has been “extremely difficult” as financial markets inside and outside of Korea suffered unprecedented challenges of the worldwide spread of coronavirus, NPS said.

Despite the domestic and global stock markets plunging by 30% in mid-March, the fund delivered about -6.08% in the first quarter.

South Korea’s main stock market index, KOSPI, returned -32.5%, while the MSCI ACWI dropped by 31.8% over the same period.

NPS said such adverse market conditions pushed the fund into negative territory for a period, but rebounded to positive territory at the end of June as a result of its diversification and risk management strategies.

The performance of its alternative investments was mostly driven by interest and dividend income, as well as foreign currency translation gains from an increase in the USD-KRW exchange rate.

NPS is the world’s third largest pension fund with KRW752.2 trillion ($859bn) assets under management. Since it was established in 1988, it has delivered 5.30% at an annualised average rate. fs

UK pensions to factor in climate change risk Jamie Williamson

U

The quote

Our reforms will ensure trustees are held more accountable than ever before.

BNY Mellon expands to APAC BNY Mellon Investment Management announced Rebecca Chu will spearhead the firm’s growth as head of Taiwan, focusing on local clients with presence in the greater China region. Chu is based in Taipei.

Her promotion comes after serving as vice president of institutional distribution since 2016.

Prior to that she was a fund manager with CTBC Investments for three years; an assistant manager in Cathay Life’s foreign fixed income investment team; and spent over seven years with Nan Shan Life in different roles.

Jessie Chen, who was named a business development manager, will help Chu drive the investment manager’s footprint. She is formerly an associate of BlackRock, working in intermediary sales for four years before moving to BNY Mellon.

Opening a new office was made possible by acquiring a Securities Investment Consulting Enterprise (SICE) business licence.

Head of Asia Pacific ex Japan Doni Shamsuddin commented the SICE approval is an important part of BNY’s expansion plan in greater China.

“Our focus continues to be on growing our institutional business in Taiwan while working closely with our master agent Taiwan Cooperative SITE to deliver investment excellence and industry-leading client experience,” he said. fs

27

K pension funds may soon be required by law to report on the risks climate change could have on their members’ investments, becoming the first major economy to do so.

Speaking recently the UK’s work and pensions secretary Therese Coffey01 proposed legislation that would require occupational pension scheme trustees to consider the long-term financial risks posed by climate change.

The government wants to see the 100 largest occupational pension schemes – those with £5 billion or more in assets, and all authorised master trusts – to publish and produce climate risk disclosures by the end of 2022. For all those with at least £1 billion in assets would have until 2023 to meet the requirements.

If all goes according to plan, by the end of 2023 the reporting will have captured more than 70% of assets under management, and over 80% of members.

“In the UK, pension institutions control some £1.8 trillion of investments. Pension scheme trustees are entrusted with our savings and finances for retirement – investments that bear fruit in 10, 20, 30, 40 years’ time,” Coffey said.

“So it is only right that they take into account the long-term financial risks and they are also in the ideal position to benefit from that change to a sustainable, low-carbon economy.”

Coffey said that any pension scheme that has

not yet designed or implemented a plan for transition is risking its future and that of its members.

“Schemes of all sizes need to be acting right now for the financial risks and opportunities climate change presents, providing sustainable returns that will keep many pensioners comfortable in their retirement,” she said.

The requirements would be extended to smaller schemes down the line, following further consultation.

The requirements do not apply to personal or public sector funds, with Coffey saying it is up to other regulators to decide whether or not to follow suit.

“But I think it is right that long-term investors, such as trustees, take action to address these risks and protect the retirement savings of hard-working people,” she added.

Acknowledging that some may say complete divestment is the better option, Coffey said such an approach is overly simplistic and actually makes it harder to achieve net zero.

Pension schemes need to act in their members’ best interests, not take moral stances on their members’ behalf, she said.

“And while some high-carbon firms will fail to make the transition to a low carbon economy, this is an opportunity to make companies transform their business models to be sustainable,” Coffey said.

“Our reforms will ensure trustees are held more accountable than ever before.” fs

Fund manager charged with fraud Ally Selby

The founder of a distressed debt hedge fund faces civil and criminal charges in the US, after it was found he abused his position in the bankruptcy proceedings of luxury retailer Neiman Marcus Group.

The Securities and Exchange Commission has charged Daniel Kamensky with violating anti-fraud provisions, with the regulator seeking both a permanent injunction and civil penalties in the federal district court in New York.

Simultaneously, the US Attorney’s Office for the Southern District of New York has announced it is pursuing criminal charges against Kamensky.

Kamensky was the co-chair of the bankrupt retailer’s unsecured creditors committee, tasked with acting as a fiduciary to all of Neiman Marcus’ creditors.

The SEC alleges that Kamensky took advantage of his position on the committee to manipulate a bidding process at the benefit of his New York-based fund, and at the expense of the unsecured creditors.

In his role as a fund manager of value-orientated distressed hedge fund Marble Ridge Capital, Kamensky sought to purchase

securities that were being distributed as part of the proceedings.

The SEC alleges that on July 31, Kamensky coerced a competing bidder for the securities to withdraw its offer, which was in fact, higher than Kamensky’s own bid (and would have led to a larger distribution for the retailer’s creditors).

“Kamensky allegedly indicated that, in his position as co-chair of the committee, he would not allow the competing bidder to successfully buy the securities,” the SEC alleged.

“When his actions came to light, Kamensky allegedly attempted to cover-up his misconduct by trying to persuade the other bidder not to describe Kamensky’s conduct as a threat.”

The SEC division of enforcement’s complex financial instruments unit chief Daniel Michael said this type of “deceptive conduct” has no place in securities offerings.

“Kamensky abused his position as a fiduciary to the Neiman Marcus unsecured creditors by secretly working against them,” he said.

According to his hedge fund’s website, Kamensky actually began his career as a bankruptcy attorney.

He has spent the last 21 years investing across “complex, multi-jurisdictional, distressed and event-driven situations”. fs

28

Economics

www.financialstandard.com.au 14 September 2020 | Volume 18 Number 18

Gone fishing Ben Ong

“Give a man a fish and you feed him for a day.

Teach a man to fish and you feed him for a lifetime.”

R

eserve Bank of Australia (RBA) governor Philip Lowe didn’t exactly quote this proverb when he testified before the House of Representative’s Standing Committee on Economics on August 14, he offered a different prescription.

“Give man a fish” – JobKeeper, JobSeeker, Backing Business Initiative, Homebuilder initiative – “and you feed him for a day” (these schemes have limited the negative impact of the coronavirus pandemic on the domestic economy).

Borrow to create jobs “and you feed him for a lifetime”.

“In going forward, the challenge we face is to create jobs, and the state governments do control many of the levers here. They control many of the infrastructure programs. They do much of the health and education spending. They’re responsible for much of the maintenance of much of Australia’s infrastructure. So I would hope, over time, we would see more efforts to increase public investment in Australia to create jobs, and the state governments have a really critical role to play there,” Lowe said.

Credit ratings be damned.

“To date, I think many of the state governments have been concerned about having extra measures because they want to preserve the low levels of debt and their credit ratings. I understand why they do that, but I think preserving the credit ratings is not particularly important; what’s important is that we use the public balance sheet in a time of crisis to create jobs for people. From my perspective, creating jobs for people is much more important than preserving the credit ratings. I have no concerns at all about

Monthly Indicators

Jul-20

Jun-20

May-20 Apr-20 Mar-20

Consumption

the state governments being able to borrow more money at low interest rates. The Reserve Bank is making sure that’s the case. The priority for us is to create jobs, and the state governments have an important role there, and I think, over time, they can do more. But the federal government may be able to do more as well. We may need all shoulders to the wheel.”

Sure, there’s no better time to borrow. Based on FactSet data, Australia can issue 30-year government bonds at just 1.75% – accounting for inflation, that’s practically free money.

But as the chair of the Economics Committee Tim Wilson asked:“Is one of the core reasons we have been able to cushion the economic impact that we have had fiscal space to do so because there was a certain degree of prudence in the lead-up to this crisis? If we were to take on more debt, at what point would you say debt would become too high such that we wouldn’t be being prudent in making sure we were prepared if there were another crisis—another pandemic or some other event—where we need fiscal policy as a lever to support people?”

Lowe’s response: “You’re right: in principle, the level of debt could be so high that you don’t have that option in the future. I’m not worried about that at all in the foreseeable future, though. The starting position here was very good. The more pressing issue is, I think, what the next couple of years look like.”

“To date it’s been income support, and over time in the recovery phase there will need to be greater focus on direct creation of jobs through government spending and through improving the investment and hiring environment. That’s more than just giving people money to help them through, which is what the focus has been on so far.” fs

Retail Sales (%m/m)

3.34

2.72

16.86

-17.67

8.47

Retail Sales (%y/y)

12.21

8.52

5.79

-9.18

10.07

Sales of New Motor Vehicles (%y/y)

-12.84

-6.44

-35.29

-48.48

-17.85

Employment Employed, Persons (Chg, 000’s, sa)

114.72

228.38

-264.14

-607.40

-3.14

Job Advertisements (%m/m, sa)

16.75

41.38

-0.09

-53.32

-9.20

Unemployment Rate (sa)

7.49

7.45

7.08

6.37

5.23

Housing & Construction Dwellings approved, Tot, (%m/m, sa)

-

-5.68

-4.05

2.42

-0.58

Dwellings approved, Private Sector, (%m/m, sa)

-

-4.94

-15.76

-2.36

-1.39

Housing Finance Commitments, Number (%m/m, sa) - Housing Finance Commitments, Value (%m/m, sa)

-

Survey Data Consumer Sentiment Index

87.92

93.65

88.10

75.64

AiG Manufacturing PMI Index

53.50

51.50

41.60

35.80

91.94 41.60

NAB Business Conditions Index

0.26

-7.70

-24.50

-33.97

-21.93

NAB Business Confidence Index

-13.93

0.48

-21.38

-45.99

-65.63

Trade Trade Balance (Mil. AUD)

-

8202.00

7341.00

7864.00

Exports (%y/y)

-

-14.90

-16.93

-6.28

6.99

Imports (%y/y)

-

-19.31

-23.22

-16.15

-9.52

Jun-20

Mar-20

Dec-19

Sep-19

Quarterly Indicators

10631.00

Jun-19

Balance of Payments Current Account Balance (Bil. AUD, sa)

-

8.40

1.72

7.26

4.87

% of GDP

-

1.66

0.34

1.44

0.98

Corporate Profits Company Gross Operating Profits (%q/q)

14.97

1.44

-3.47

-1.15

5.20

Employment Average Weekly Earnings (%y/y)

-

-

3.24

-

3.02

Wages Total All Industries (%q/q, sa)

0.08

0.53

0.53

0.53

0.54

Wages Total Private Industries (%q/q, sa)

-0.08

0.38

0.45

0.92

0.38

Wages Total Public Industries (%q/q, sa)

0.00

0.45

0.45

0.83

0.46

Inflation CPI (%y/y) headline

-0.35

2.19

1.84

1.67

1.59

CPI (%y/y) trimmed mean

1.20

1.80

1.60

1.60

1.50

CPI (%y/y) weighted median

1.30

1.60

1.20

1.20

1.20

Output

News bites

RBA eases While it kept interest rate settings unchanged – the targets for the cash rate and the yield on three-year Australian government bonds of 25 basis points – at its September meeting, the Reserve Bank of Australia also announced that it is increasing the size of the Term Funding Facility and make the facility available for longer. “Under the expanded Term Funding Facility, authorised deposit-taking institutions (ADIs) will have access to additional funding, equivalent to 2% of their outstanding credit, at a fixed rate of 25 basis points for three years. ADIs will be able to draw on this extra funding up until the end of June 2021.”

Australia capex Actual total private new capital expenditures may have surprised on the upside, falling by 5.9% in the three months to June versus expectations for

an 8.4% drop but the latest contraction in business investment marked the sixth consecutive quarter of decline and is the sharpest since the March 2016 quarter. Investment in buildings and structures declined by 4.4% in the June quarter, an acceleration from the March quarter’s 1.1% fall. Similarly, spending on equipment, plant and machinery dropped by 7.6% in the three months ended June, faster than the 3.1% contraction recorded in the first quarter. With regards to expected capital expenditure, the Australian Bureau of Statistics (ABS) reports that:“Estimate 3 for 2020-21 is $98,624m. This is -12.6 lower than Estimated 3 for 2019-20.”

Fed policy change On August 27 at the Jackson Hole Symposium (held online due to the pandemic) US Federal Reserve chair virtually buried the Philips Curve – the inverse correlation between inflation and the unemployment rate – by announcing that henceforth, the Fed is switching from a point target of 2% inflation to achieving “achieve inflation that averages 2% over time. Therefore, following periods when inflation has been running below 2%, appropriate monetary policy will likely aim to achieve inflation moderately above 2% for some time” Powell’s also killed off NAIRU – the nonaccelerating inflation rate of unemployment (or “u-star”) because of the “muted responsiveness of inflation to labor market tightness”. fs

Real GDP Growth (%q/q, sa)

-

-0.31

0.52

0.55

0.61

Real GDP Growth (%y/y, sa)

-

1.39

2.16

1.80

1.56

Industrial Production (%q/q, sa)

-

-0.09

1.25

0.39

1.07

Survey Data Private New Capex, Total, Chain, Vol, (%q/q, sa)

Financial Indicators

-5.89

-2.06

-2.68

-1.33

-0.38

28-Aug Mth ago 3mths ago 1yr ago 3yrs ago

Interest rates RBA Cash Rate

0.25

0.25

0.25

1.00

1.50

Australian 10Y Government Bond Yield

1.02

0.92

0.88

0.88

2.62

Australian 10Y Corporate Bond Yield

1.60

1.64

1.98

1.80

3.16

Stockmarket All Ordinaries Index

6260.8

1.85%

5.09%

-5.15%

8.48%

S&P/ASX 300 Index

6050.0

1.06%

3.98%

-6.37%

6.88%

S&P/ASX 200 Index

6073.8

0.89%

3.81%

-6.57%

6.37%

S&P/ASX 100 Index

5004.8

0.67%

3.74%

-7.06%

5.82%

Small Ordinaries

2801.3

4.07%

5.79%

-0.84%

16.21%

Exchange rates A$ trade weighted index

61.90

A$/US$

0.7348 0.7160 0.6660 0.6742 0.7950

60.00

57.80

59.50

67.30

A$/Euro

0.6175 0.6105 0.6024 0.6087 0.6650

A$/Yen

77.37 75.17 71.67 71.40 86.82

Commodity Prices S&P GSCI - commodity index

359.95

341.36

299.51

400.37

376.96

Iron ore

122.45

107.72

92.05

91.63

76.30

Gold

1957.35 1940.90 1717.35 1537.15 1285.30

WTI oil

42.97

40.89

33.67

55.76

Source: Rainmaker /

46.40

Sector reviews

www.financialstandard.com.au 14 September 2020 | Volume 18 Number 18

Australian equities

Figure 1: Private new capital expenditure

Figure 2: RBA cash rate target and 10-year bonds

40 ANNUAL CHANGE %

6.0

20

Cash rate target 10-year bonds

5.0

10

4.0

0

3.0

-10

Prepared by: Rainmaker Information Source:

PERCENT

7.0

30

2.0

-20 Expected

1.0

Actual

-30

0.0

1989

1992

1995

1998

2001

2004

2007

2010

2013

2016

2019

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

COVID-19 cuts capex Ben Ong

A

ustralian private new capital expenditure (capex) usually commands attention before and during its release for it provides an indication of domestic firms’ optimism towards future growth as well as, itself, being a driving component of that growth (see Figure 1).

So it was surprising when the Australian Bureau of Statistics’ (ABS) ‘Private New Capital Expenditure and Expected Expenditure, Australia, Jun 2020’ report made few headlines and almost nil market reaction.

Perhaps, this is because whatever the capex results and its forward indication remain hostage to the pandemic. Perhaps, it was overshadowed by reports of the Fed’s change in monetary policy strategy and Japanese Prime Minister Shinzo Abe’s resignation (due to ill health).

One thing’s certain, the general uncertainty wrought by the pandemic – second wave and reimposition of lockdowns and how long for –

International equities

has further damaged already weak actual and planned capital investment.

Actual total private new capital expenditures may have surprised on the upside, falling by 5.9% in the three months to June versus expectations for an 8.4% drop but the latest contraction in business investment marked the sixth consecutive quarter of decline and is the sharpest since the March 2016 quarter – one of the factors that prompted the Reserve Bank of Australia (RBA) to cut the official cash rate from 2.0% to 1.75% in April and then again to 1.5% in August of the same year (see Figure 2).

Eighteen months on – the time back in August 2014 when then RBA governor Glenn Stevens told the House of Representatives Standing Committee on Economics that he has done enough: “You can’t make people be confident, I certainly can’t. I’ve allowed the horse to come to the water with cheap funding. I can’t make it drink.”

With three RBA interest rate cuts later (in 2019)

Figure 1: Total COVID-19 confirmed cases

Figure 2: IHS/Markit Economics Eurozone PMI

500000

65

450000

PERCENT

60 Spain

350000

Italy

50

300000

France

45

Germany

40

INDEX

30

150000

25

100000

“One, two, Freddy’s coming for you Three, four, better lock your door Five, six, grab a crucifix Seven, eight, Ya better stay awake Nine, ten, he’s back again.” ust replace “Freddy” with ‘COVID’ and this Jpopular “Nightmare on Elm Street” remake of the nursery rhyme become apropos to the current circumstance the world faces.

It’s back again.

According to FactSet: “Major Eurozone nations have seen infection rates return to levels not seen since the spring. France recorded the highest number of cases since its March peak, while Germany recorded its highest spike in daily cases since 26-Apr. Spain continued to record the highest rate of cases in the region with Madrid, the biggest hotspot. Italy has also seen a pickup in new cases, albeit more contained than

Australian equities CPD Questions 1–3

1. How many consecutive quarters have capex been declining up to the June 2020 quarter? a) Two quarters b) Four quarters c) Six quarters d) Eight quarters 2. Who said “I’ve allowed the horse to come to the water with cheap funding. I can’t make it drink.”? a) Former RBA governor Glenn Stevens b) RBA governor Philip Lowe c) Former US Fed chair Janet Yellen d) US Fed chair Jerome Powell

Composite

15

0

International equities

Manufacturing

20

50000

CPD Questions 4–6

Services

10 APR20

MAY20

JUN20

JUL20

AUG20

SEP20

JAN18

MAY18

SEP18

JAN19

MAY19

SEP19

JAN20

MAY20

SEP20

COVID-19 comes back to Europe Ben Ong

The Financial Standard CPD Program has been developed for professionals governed by the Corporations Act 2001 and hold an AFS Licence which provides an obligation to undertake continuous professional development (CPD). Test your knowledge with the following questions.

[See next page for instructions on how to submit your answers].

35

200000

MAR20

CPD Program Instructions

3. The RBA cut interest rates at its September meeting. a) True b) False

55

400000

250000

Prepared by: FSIU Sources: Factset Prepared by: Rainmaker Information Source:

– in June, July and October – taking the official cash rate down to 0.75% – consumer spending, business investment and economic growth overall continued to weaken, long before the coronavirus took its first bite and became a pandemic.

The impact of Victoria’s lockdown is captured in the June quarter capex report with the ABS noting that, “Estimate 3 for 2020-21 is $98,624m. This is -12.6% lower than Estimate 3 for 2019-20.”

It didn’t take long for the RBA to respond.

While keeping interest rate steady at 0.25% and its three-year government bond target at 25 basis points at its September meeting, it announced an expansion of its Term Funding Facility to A$200 billion and extended its duration up to June 2021, to keep “funding cost low” and assist “with the supply of credit to households and businesses”.

That may be but the horse would still be afraid to drink until the virus goes away. fs

29

elsewhere. It is a similar picture for the UK, with government officials noted the rate of infection is steadily increasing. Worryingly Europe’s CDC said Croatia, Slovenia, Malta, Austria, Hungary and Greece have all had increases in infections of more than 70% during the week of 10-16 August vs the prior week. In northern Europe, Denmark, Switzerland and Norway have all had spikes of between 46.9% and 59.4%.” (See Figure 2).

Better lock your door.

“In response, containment measures from various European governments have focused on targeted initiatives, such as clamping down on nightclubs, requiring masks in public areas and mandating people returning from hard-hit regions quarantine. Leaders have so far refrained from harsher mitigation measures seen at the start of the outbreak. German Chancellor Merkel this week called on Europe to act with coordination to take targeted measures. Her stance was echoed by French President Macron.”

Just as “Freddy’s” first coming and the social restrictions and lockdowns that followed it, the second wave now hitting the single currency region is slowing economic activity.

This is evidenced by the latest IHS Markit Flash Eurozone PMI survey (see Figure 2).

The flash Eurozone PMI Composite Output Index fell back to a two-month low reading of 51.6 in August after surging to a two-year high of 54.9 in July and April’s all-time low of 13.6.

Not surprising, the drop was due to the sharp weakening in the service sector – down to a preliminary estimate of 50.1 in August from July’s final reading of 54.7.

The manufacturing PMI slowed a tad from 51.8 to 51.7 in August. However, renewed euro strength versus the US dollar – up 3.6% this year to date and up 8.8% from its 2020 low) – amongst other challenges wrought by the virus, would increase the drag on the Eurozone’s economic growth. fs

4. Which Eurozone member country has recently seen an increase in covid cases? a) Germany b) Italy c) Spain d) All of the above 5. Which Eurozone PMI measure retreated back to contraction territory in August? a) Composite PMI b) Manufacturing PMI c) Services PMI d) None of the above 6 The Eurozone’s second wave has forced all member states to reimpose total lockdowns. a) True b) False

30

Sector reviews

Fixed interest

Fixed interest

CPD Questions 7–9

7. To date, how many quarters has the Japanese economy been in contraction? a) One quarter b) Two quarters c) Three quarters d) Four quarters 8. Which PMI measure has remained in contraction for the longest time? a) Composite PMI b) Manufacturing PMI c) Services PMI d) All of the above 9. The BOJ kept policy steady at its July meeting. a) True b) False Alternatives CPD Questions 10–12

10. Which China activity measure/s show continued signs of improvement? a) Retail sales b) Industrial production c) Fixed asset investment d) All of the above 11. Which PMI measure indicates expansion in Chinese private sector activity in July? a) Composite PMI b) Manufacturing PMI c) Services PMI d) All of the above

www.financialstandard.com.au 14 September 2020 | Volume 18 Number 18

Figure 1: Japanese real GDP growth

Figure 2: au Jibun Bank Japan PMI 55

15 PERCENT

10

INDEX

50

5

45

0 -5

40

-10

35 Services

-15 Annualised quarterly growth rate

-20

Prepared by: Rainmaker Information Prepared by: FSIU Source: Sources: Factset

Quarterly

-25

30

Composite Manufacturing

25

Annual

-30

20 2017

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

2018

2019

2020

Loose restrictions fail to halt Japan slide Ben Ong

I

f a technical recession is defined as two successive quarters of negative growth, what do you call a period where the economy contracts for three straight quarters … and counting?

Japan may have imposed less stringent coronavirus containment measures relative to its peers but even this didn’t stop its economy from contracting big time, for the third consecutive quarter.

No matter how it’s measured, the country’s national output dropped sharply – down at annualised rate of 27.8% in the June quarter – the steepest fall on post-war era records – down 10% year-on-year – eclipsing the 8.6% contraction suffered during the global financial crisis – and down 7.8% in the three months to June.

All three measures have been negative since the December 2019 quarter, before the coronavirus became the covid-19 pandemic.

Like many, if not most, nations, Japan de-

Alternatives

livered substantial amounts of fiscal and monetary stimuli to mitigate the fallout from the pandemic.

So far, it’s not looking good. The au Jibun Bank Japan PMI survey shows private sector activity remains in contraction in August – the seventh straight month for the composite PMI; the ninth for the services PMI; and, the 16th for manufacturing (see Figure 1).

Base effects dictate a rebound in GDP in the next quarter but that wouldn’t be enough.

In fact, according to former Bank of Japan (BOJ) policymaker Takahide Kiuchi, “Japan will need about five years for the gross domestic product (GDP) to return to pre-pandemic levels” and that “Core consumer inflation will hover in slightly negative territory for about three years”. Japan’s annual core inflation rate stood at zero in July.

This is based on Kiuchi’s reasoning that, “Japan will likely see more small and midsized

firms go under as the pandemic’s pain deepens, which could boost credit costs for lenders through next year.” (See Figure 2).

Although, “the pandemic has forced the BOJ to be more mindful of the risk of banking-sector problems, which means it can’t cut interest rates easily” and “…the BOJ has already detached its policy from its 2% inflation target, which means it won’t take action to prop up prices”.

The BOJ kept monetary policy settings unchanged – target rate at -0.1% and 10-year JGB yield target at zero – at its 14-15 July meeting.

While sitting BOJ Governor and the Policy Board pledged that they will “closely monitor the impact of the novel coronavirus (COVID19) and will not hesitate to take additional easing measures if necessary”, Kiuchi reckons that taking interest rates deeper into the negative would hurt already weak regional lenders, which could face a build-up of bad loans as they boost lending to cash-strapped firms hit by the pandemic. fs

Figure 1: China GDP growth

Figure 2: Retail sales, FAI and IP

16

30

14

ANNUAL CHANGE %

ANNUAL CHANGE %

ANNUAL CHANGE %

12

5

10

10

8

0

6

0

4

-5

2

12. China went into a technical recession in the second quarter of this year. a) True b) False

-20

-4

Retail sale -RHS

-20

-6

-30

-8 06

07

08

09

10

11

12

13

14

15

16

17

18

19

20

2014

-25 2015

2016

2017

2018

2019

2020

Post-pandemic party

he post-pandemic pool party Wuhan Maya T Beach Water Park that went viral on the August 17 garnered negative – “a slap in the face

All answers can be submitted to our website.

-15

Industrial production-RHS

05

“There’s a party goin’ on right here A celebration to last throughout the years So bring your good times and your laughter too We gonna celebrate your party with you…”

- Kool & the Gang

Submit

Fixed asset investment

-2

Ben Ong

Go to our website to

-10

-10

0

Prepared by: Rainmaker Information Prepared by: FSIU Source: IEA / Sources: Factset

15 10

20

to the rest of the world” – and positive – fruit of its hard lockdown.

“Sour grapes” is what the state-backed Global Times newspaper called the negative nellies.

Adding that Wuhan is now “now welcoming an influx of tourists, and its economy is reviving, which local residents believed should not only be seen as a sign of the city’s return to normalcy, but also a reminder to countries grappling with the virus that strict preventive measures have a payback”.

China’s draconian quarantine and isolation measures were criticised and condemned as a violation of human rights and/or an infringement of civil liberties but they worked in Wuhan (as the pool party shows) and in nipping the second wave budding in Beijing in just around two weeks (see Figure 1).

Central government’s cruel restrictions (by western standards) – along with monetary and fiscal stimulus measures – have saved the Chinese economy from falling into a technical recession – GDP growth rebounded by 11.5% in the June quarter (3.2% year on year), more than offsetting the 10.0% contraction (minus 6.8% year on year) in the March quarter.

More recent reports indicate continued growth in the economy with the Caixin China PMI – composite, manufacturing and services – remaining at levels indicating expansion (above 50) over the past three months to July.

Similarly, activity measures – retail sales;

fixed asset investment; industrial production – continues to sequentially improved since their sharp drops in February this year.

Although still in contraction, the annual rate of decline in retail sales had steadily eased to -1.1% in July from -1.8% in June and the sharp 20.5% drop in February (see Figure 2).

Fixed asset investment growth followed the same path of progressive improvement – down by just 1.6% in the year to July from a contraction of 3.1% in June and February’s -24.5% dive.

The same goes for industrial production which grew by 4.8% in the year to July, a sharp reversal from the 13.5% decline recorded in February this year.

The final word comes from Zhang Yong, small taxi company owner in Wuhan, “I guess it also rings a bell for some countries, which are still struggling to fight COVID-19, that without strict measures, the virus won’t be fended off. We fought hard, this is our payback.” fs

Sector reviews

www.financialstandard.com.au 14 September 2020 | Volume 18 Number 18

31

Property

Property

CPD Questions 13–15

Prepared by: Rainmaker Information Source: Australian Human Rights Commission and KPMG

ith investment in Australia’s construcW tion industry expected to grow in spite of COVID-19, research by the Australian Human Rights Commission (AHRC) and KPMG shows the property and construction sector faces elevated risk of modern slavery within its operations and supply chains.

The research found common modern slavery practices in property and construction include forced or unpaid work, unsafe conditions, debt bondage, child labour, inadequate accommodation, passport confiscation and human trafficking.

As the sector grows, so too does the demand for low-skill workers who are vulnerable to exploitation and the issue will be exacerbated in the face of COVID-19 as people choose to work, no matter the conditions, the report states.

Globally, about 7% of the workforce is employed by the property and construction sector, but those working in the sector account for about 18% of all victims of modern slavery.

Supply chains and human rights performance are something that are increasingly being scrutinised by investors as they pay more mind to

Modern slavery a real risk to post-COVID construction Jamie Williamson

environmental, social and governance factors when investing.

“Companies that cannot demonstrate that they are putting in place appropriate systems to identify and address these risks may experience loss of substantial investors or devaluation of their business,” the report reads.

“This applies especially in contexts where third parties raise allegations of modern slavery practices in relation to a company or its supply chains.”

And the pressure is rising with the introduction of the Modern Slavery Act 2018 which commenced in January 2019. The legislation requires Australian entities and those that carry on business in Australia with a minimum annual consolidated revenue of $100 million to report on the risk of modern slavery in their operations and supply chains, as well as the steps taken to respond.

Elsewhere around the world, such reporting is optional.

Entities must provide a statement within six months of their respective financial years’ end.

The first reporting period under the legislation

www.financialstandard.com.au T: +61 2 8234 7500 F: +61 2 8234 7599 A: Level 7, 55 Clarence Street, Sydney, NSW, 2000, Australia

was 1 July 2019 to 30 June 2020 with their statements due 31 December 2020. This has since been extended to allow statement submission up until 31 March 2021 as a result of COVID-19.

For a financial year beginning 1 April 2019 and ending 31 March 2020, the statement was originally due 30 September 2020 but extended to 31 December 2020. For others, the first reporting period is 1 January 2020 to 31 December 2020, with statements due 30 June 2021 – this is unchanged.

According to the AHRC and KPMG report, at present, few companies do any quantitative analysis of financial impacts arising from brand damage, loss of reputation and interruptions to production that may arise from human rights issues.

“Responding effectively to your modern slavery risks involves understanding the types of exploitative labour practices and breaches of human rights that give rise to situations where modern slavery flourishes,” the report reads.

“This understanding will allow your entity to prevent or address high risk situations early, before they rise to the severity of modern slavery.” fs

15. Under the Modern Slavery Act, it is optional for reporting entities to report on risks of modern slavery in their operations and supply chains. a) True b) False

Subscribers can read the Financial Standard newspaper on the go, accessing the very latest news and insights in wealth management.

+61 2 8234 7530

michelle.baltazar@financialstandard.com.au

Editorial Jamie Williamson Kanika Sood Elizabeth McArthur Eliza Bavin Ally Selby Karren Vergara Annabelle Dickson

+61 2 8234 7562 +61 2 8234 7519 +61 2 8234 7553 +61 2 8234 7516 +61 2 8234 7551 +61 2 8234 7541 +61 2 8234 7570

jamie.williamson@financialstandard.com.au kanika.sood@financialstandard.com.au elizabeth.mcarthur@financialstandard.com.au eliza.bavin@financialstandard.com.au ally.selby@financialstandard.com.au karren.vergara@financialstandard.com.au annabelle.dickson@financialstandard.com.au

Research Alex Dunnin John Dyall Benjamin Ong

+61 2 8234 7508 +61 2 8234 7551 +61 2 8234 7563

alex.dunnin@financialstandard.com.au john.dyall@financialstandard.com.au benjamin.ong@financialstandard.com.au

Advertising Stephanie Antonis

+61 2 8234 7547

stephanie.antonis@financialstandard.com.au

Client Services Kayleigh Sotto Corona

+61 2 8234 7524

clientservices@financialstandard.com.au

Design & Production Samantha Sherry Jessica Beaver Shauna Milani

+61 2 8234 7564 +61 2 8234 7536 +61 2 8234 7542

samantha.sherry@financialstandard.com.au jessica.beaver@financialstandard.com.au shauna.milani@financialstandard.com.au

Subscriptions & CPD program Julian Clarkstone Giovanni Munoz

+61 2 8234 7514 +61 2 8234 7537

julian.clarkstone@financialstandard.com.au giovanni.munoz@financialstandard.com.au

THE JOURNAL OF SUPERANNUATION MANAGEMENT

Managing Director Christopher Page

+61 2 8234 7501

christopher.page@financialstandard.com.au

The latest edition of FS Super is out now.

All editorial is copyright and may not be reproduced without consent. Opinions expressed in the Financial Standard are not necessarily those of Financial Standard or Rainmaker Information. Financial Standard is a Rainmaker Information company. ABN 57 604 552 874.

14. Those working in the construction and property sector account for what portion of all victims of modern slavery? a) 1.8% b) 18% c) 28% d) 8.8%

Download

Director of Media & Publishing Michelle Baltazar

Financial Standard is proud to work with Pegasus Print Group, an environmentally responsible printing company. Pegasus has Forest Stewardship Council®(FSC®) certification, and Financial Standard is printed on paper from well managed forests and controlled sources.

13. Few companies do quantitative analysis of the financial impact of which area in regard to human rights issues? a) Reputational damage b) Brand damage c) Loss of production d) All of the above

CPD Program Instructions

Search: Financial Standard

FS Super

Each fortnight the Financial Standard will provide you with a selection of CPD questions. You do not have to undertake the CPD program each fortnight.

You can do it as often or as infrequently as you require.

A CPD Activity Statement will be generated and is accessible from our website.

Online access Simply log in using your CPD Program username and password. A record of your CPD work history is maintained for instant online access. You need to have a Principal subscription of Financial Standard to access this service.

For more information please go to our website www. financialstandard.com.au or Freecall 1300 884 434.

32

Profile

www.financialstandard.com.au 14 September 2020 | Volume 18 Number 18

THE FUTURE IS NOW Future Super co-founder and managing director Kirstin Hunter knows what she stands for. Her path to working at one of Australia’s fastest growing super funds was one driven by a moral compass.

Elizabeth McArthur writes.

uture Super must be the envy of many F other start-up superannuation funds. The fossil fuel-free fund appears to have gone from strength to strength.

In just three years, Future Super has managed to double its funds under management to almost half a billion.

Kirstin Hunter’s role with the fund has expanded in that time too. She started as chief operations officer before being promoted to managing director. Now she’s been given the title of co-founder, recognising her work in growing the fund.

And it all comes down to the fact that Hunter is a true believer in Future Super’s mission that capital can make a difference for the better in society. And she’s truly passionate about solving the climate change crisis through investment.

“My background is as a lawyer and a management consultant. I always had a corporate day job but would be more motivated by volunteering and pro bono work, by what my skills could actually do for the community,” Hunter says.

“Around the time I had my baby it all started falling apart though. I didn’t have the time to volunteer and without having that positive work my energy started declining for the corporate work.”

Hunter, who had always been politically active and socially aware, found herself thinking about climate change more and more once she had a newborn to care for.

“I started realising that these things were going to happen in her lifetime,” Hunter says.

“She was going to be 26 in 2040 when the Intergovernmental Panel on Climate Change has forecasted horrific changes in the world.”

Hunter started to feel frustrated about the way she was spending her working hours. She went looking specifically for a “corporate day job” that could make a difference and she describes finding Future Super as the perfect match.

Incidentally, this year has seen Hunter’s role as a parent collide with her career again, when COVID-19 forced her to work from home and keep her daughter home from school.

Hunter says 2020 has thrown her the hardest challenge of her professional life to date. Something that’s been a bit lost to some, she notes, is that not everyone has a home that’s conducive to work - especially when there are small children involved.

“It’s impossible. You feel like you’re failing as an employee and as a parent,” she says.

“I think it was one of the hardest periods of my professional career. The markets were tumbling. The government brought out early release of super. I’m trying to manage a team of 45 thrown into the work-from-home environment. And all of that with a six year old under

foot, it was like every part of my professional and personal life was on fire.”

Earlier in her career, Hunter had some foreshadowing for how tough things can get for parents (particularly mothers) climbing the corporate ladder.

A manager who mentored Hunter at Bain & Company recognised Hunter’s potential and advocated for her, and other women at the company, to have more flexibility around the time she had her child. That manager’s advocacy resulted in Hunter being part of one of the first ever client-facing job shares for Bain globally.

The advocacy was necessary though, because many women were leaving the company because “part-time wasn’t a thing” in the corporate culture. Hunter’s mentor didn’t want her to become part of that statistic.

While 2020 and COVID-19 will surely continue to surprise, things have settled down a bit for Hunter now and she’s pushing ahead with the task at hand.

Her recent promotion to co-founder recognises that in the three and a half years she’s been with the fund it has experienced enormous growth, which Hunter was a part of shepherding.

Not only has Future Super doubled its FUM in the last three years, it’s also gone from 10 employees to 45.

The mission of the fund has solidified in that time too, with a focus not only on climate change but on equality. Future Super brought in internal policies to address the pay gap and super gap within its own team, including paying part-time team members super at a fulltime rate.

Articulating to consumers the mission of Future Super, what makes the fund different and exactly how their money is used to drive change is what Hunter identifies as the key element behind the fund’s success.

“We use the power of money to invest, advocate and campaign. And we want to bring that together in a package so that members can get really excited about what their money is doing, excited enough to talk to their friends about super,” she says.

Hunter seems to innately tap into the psyche of the young, politically engaged, educated and aware which seems to be Future Super’s natural target market.

It might be because she’s one of them; Hunter is a former president of the student union at the University of New South Wales.

Her role at the union was so influential that she switched from a medical degree to law, with a focus on corporate governance.

“I didn’t enjoy the practice of law as much as I enjoyed the theory,” she says.

Working in a financial services job in the city certainly wasn’t on Hunter’s radar as a student.

Ironically, at the time she was supporting herself by working shifts at the Caltex petrol station.

“Some days I’d do a couple of hours

I always had a corporate day job but would be more motivated by volunteering and pro bono work, by what my skills could actually do for the community.

Kirstin Hunter

before school, get the servo set up for the day and then go to school,” Hunter says.

“It was a great job for a kid, actually.”

Growing up in Tweed Heads, Hunter had hoped to one day be a GP working in remote areas.

“I’ve always had a bit of a community mindset,” she says.

As such, volunteering was a thread through Hunter’s younger years and into her professional life.

Growing up she was a surf life saver and then once she graduated she became dedicated to skills-based volunteering, working with the Aboriginal Trust Fund Repayment Scheme to reimburse people who had wages withheld or whose ancestors had wages withheld.

Later, she worked with food waste charity OzHarvest to help communicate the value of a dollar to donors.

“I would say I was more passionate about causes that politically engaged though. In the arts component of my degree I studied Australian history and the frontier conflicts between European settlers and First Nations people.

I’ve always had a real passion for Aboriginal justice and reconciliation,” she says.

But that has evolved into caring about climate change, she says, particularly since her daughter has come into the picture.

“But climate change just incorporates so many different things. First Nations justice is a huge part of taking action on climate,” Hunter says.

“Climate change impacts on vulnerable communities more severely and more quickly.” fs

EARN CPD POINTS

MANAGED ACCOUNTS Video on Demand Series Managed accounts is the fastest growing segment of Australia’s platform market, having grown at an average rate of 70% p.a. since 2016.

MANAGED ACCOUNTS

Advisers continue to access greater transparency and scaleability benefits as a result of implementing managed accounts into their practices.

Available from 16 September 2020

If you are looking into managed accounts or want to capitalise on this platform as an existing user, be sure to register at our annual managed accounts forum, delivered as an online, Video on Demand series.

REGISTER NOW

Scan the QR code to register

Visit financialstandard.com.au/managed_accounts_forum

or call 1300 884 434

Everything from alpha to beta

30 million investors around the globe have chosen Vanguard. A company that’s run for the sole benefit of its investors.

Whether your clients invest in our index, actively-managed factor funds or our new fundamental active series Vanguard Manager Select, one thing is crystal clear. Our client-first mission is not muddied by making a profit for outside interests.

This helps us keep costs low, so more of your clients’ money stays in their pocket—where it belongs.

vanguard.com.au/lowcostactive

Vanguard Investments Australia Ltd (ABN 72 072 881 086 / AFS Licence 227263) is the product issuer. You should consider your circumstances and our Product Disclosure Statements (“PDSs”) before making any investment decision. You can access our PDSs at vanguard.com.au. This publication was prepared in good faith and we accept no liability for any errors or omissions. © 2020 Vanguard Investments Australia Ltd. All rights reserved.