Efficient portfolio implementation is sometimes overlooked as a ‘nice-to-have’ rather than something that adds value to the investment process. This attitude is far less viable today given recent market volatility and product rationalisation, which have made the ability to implement timely portfolio changes essential for advisers and their clients.

The market downturn in March prompted many of us to reassess our investment strategies. We tried to understand where the pockets of risk were in our portfolios and identify opportunities presented by the market dislocation. Most of the key platforms in the market recorded a significant increase in portfolio changes during this period as managers of managed portfolios repositioned their allocations, taking into account their revised view of the world.

This shift in the way we viewed the world resulted in changes to the overall asset allocation positioning of portfolios, as well as changes to underlying investments. Lonsec was no different. From an asset allocation perspective, we increased our exposure to risk assets such as equities and identified a window of opportunity to gain exposure to assets that in our view were mispriced by the market, such as parts of the credit markets.

An example of this was the syndicated loan and high yield market, which experienced a significant blowout in credit spreads as the market priced in a significant uptick in defaults in these assets. We believe the market over anticipated a rise in defaults and that a pricing opportunity presented itself. Lonsec acted on this view by adding the Bentham Syndicated Loan Fund to the Lonsec Multi-Asset portfolio in late May. We have subsequently reduced our allocation to the fund given the strong return the fund has generated as we have seen credit spreads narrow.

The addition of Bentham offers an excellent example of how timely implementation affects return. As at 30 November 2020, Bentham added 7.38% for the five months since the fund was added to the portfolios. If implementation was delayed by a month, the return would have been only 5.70%, and if a two-month implementation delay was experienced, the return would have been even less, at 3.52%.


Source: Lonsec iRate Bentham Syndicated Loan Fund

A one- or two-month implementation delay is not uncommon outside of a managed account structure, where advisers may be following a model portfolio and having to issue ROAs to clients to implement changes.

Efficient implementation can also be additive where a product issuer decides to close a product. Such occurrences can be difficult to predict, but there are times when the risk of a product being wound up increases, particularly where a fund may be in significant outflow.

A recent example has been the winding up of the CFM IS Diversified Trust. The trust was held in the Lonsec Multi-Asset portfolios before being removed earlier in the year. The rationale to remove the trust was primarily driven by the inconsistent nature of fund returns and a recognition of the challenges faced by systematic risk premia strategies, which generally struggled to perform in a market distorted by central bank policy.

Recently, the product issuer made the decision to wind up the trust. In contrast to a traditional model portfolio approach, whereby clients may still be invested in the trust because the portfolio change has not yet been implemented, the managed account structure ensured that—in the case of Lonsec’s Multi-Asset portfolios—all clients invested in the managed portfolio were exited from the trust.

There are numerous ways to measure value. We believe that one of the key value propositions of managed accounts is the ability to implement portfolio changes in a timely manner, allowing clients to capture portfolio exposure as intended by the model manager. We believe that platform technology will continue to evolve to allow model managers to increasingly finesse portfolio implementation with a view of adding value to end clients.

IMPORTANT NOTICE: This document is published by Lonsec Investment Solutions Pty Ltd ACN 608 837 583, a Corporate Authorised Representative (CAR 1236821) (LIS) of Lonsec Research Pty Ltd ABN 11 151 658 561 AFSL 421 445 (Lonsec Research).  LIS creates the model portfolios it distributes using the investment research provided by Lonsec Research but LIS has not had any involvement in the investment research process for Lonsec Research. LIS and Lonsec Research are owned by Lonsec Holdings Pty Ltd ACN 151 235 406. Please read the following before making any investment decision about any financial product mentioned in this document.

DISCLOSURE AT THE DATE OF PUBLICATION: Lonsec Research receives a fee from the relevant fund manager or product issuer(s) for researching financial products (using objective criteria) which may be referred to in this document. Lonsec Research may also receive a fee from the fund manager or product issuer(s) for subscribing to research content and other Lonsec Research services.  LIS receives a fee for providing the model portfolios to financial services organisations and professionals. LIS’ and Lonsec Research’s fees are not linked to the financial product rating(s) outcome or the inclusion of the financial product(s) in model portfolios. LIS and Lonsec Research and their representatives and/or their associates may hold any financial product(s) referred to in this document, but details of these holdings are not known to the Lonsec Research analyst(s).

WARNINGS: Past performance is not a reliable indicator of future performance. Any express or implied rating or advice presented in this document is limited to general advice and based solely on consideration of the investment merits of the financial product(s) alone, without taking into account the investment objectives, financial situation and particular needs (“financial circumstances”) of any particular person. Before making an investment decision based on the rating or advice, the reader must consider whether it is personally appropriate in light of his or her financial circumstances or should seek independent financial advice on its appropriateness.  If the financial advice relates to the acquisition or possible acquisition of a particular financial product, the reader should obtain and consider the Investment Statement or the Product Disclosure Statement for each financial product before making any decision about whether to acquire the financial product.

DISCLAIMER: No representation, warranty or undertaking is given or made in relation to the accuracy or completeness of the information presented in this document, which is drawn from public information not verified by LIS. The information contained in this document is current as at the date of publication. Financial conclusions, ratings and advice are reasonably held at the time of publication but subject to change without notice. LIS assumes no obligation to update this document following publication. Except for any liability which cannot be excluded, LIS and Lonsec Research, their directors, officers, employees and agents disclaim all liability for any error or inaccuracy in, misstatement or omission from, this document or any loss or damage suffered by the reader or any other person as a consequence of relying upon it.

Copyright © 2020 Lonsec Investment Solutions Pty Ltd ACN 608 837 583 (LIS). This document may also contain third party supplied material that is subject to copyright.  The same restrictions that apply to LIS copyrighted material, apply to such third-party content.

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Markets seem to have taken a sigh of relief post the US election result with risk assets seemingly returning to their upward trajectory. Lukasz de Pourbaix ED, CIO Lonsec Investment Solutions will discuss the latest insights for our recently held asset allocation investment committee. Specifically, Lukasz will discuss the rotation into value style stocks, a discussion of the key economic and market indicators and risks investors should look out for.



This information is provided by Lonsec Investment Solutions as a corporate authorised representative of Lonsec Research Pty Ltd who hold an AFSL number 421445. This is general advice, which doesn’t consider your personal circumstances. Consider these and always read the product disclosure statement or seek professional advice prior to making any decision about a financial product. You can access a copy of our financial services guide at lonsec.com.au

This video is provided by Lonsec Investment Solutions Pty Ltd ACN 608 837 583, a Corporate Authorised Representative (CAR 1236821) (LIS) of Lonsec Research Pty Ltd ABN 11 151 658 561 AFSL 421 445 (Lonsec Research). LIS creates the model portfolios it distributes using the investment research provided by Lonsec Research but LIS has not had any involvement in the investment research process for Lonsec Research. LIS and Lonsec Research are owned by Lonsec Holdings Pty Ltd ACN 151 235 406. Past performance is not a reliable indicator of future performance. This is general advice, which doesn’t consider your personal circumstances. Consider these and always read the product disclosure statement or seek professional advice prior to making any decision about a financial product. While care has been taken to prepare the content of this video, LIS makes no representation or warranty to the accuracy or completeness of the information presented, which is drawn from public information not verified by LIS. The information contained in this video is current as at the date of publication. Copyright © 2020 Lonsec Investment Solutions Pty Ltd ACN 608 837 583

The US election has come and gone (almost) and markets have reacted positively to the likelihood of a Democrat President and a Republican Senate, which would be able to moderate Democrat policies such as tax increases on corporations and capital gains.

The election result, together with positive developments regarding a vaccine for Covid-19, have seen traditional value style stocks (companies deemed to be trading below their intrinsic value), including banks, rally ahead of growth stocks (companies trading at a premium for the growth they offer), such as the much-loved tech stocks, which have dominated market returns over the past decade.

It has been a long time coming, however whether the rotation into value stocks is a short-term phenomenon or a longer-term structural trend remains debatable and will be largely dependent on what bond yields and cash rates do. If bond yields and cash rates rise substantially, we may see a prolonged value rally. However, this would not be our base case as we don’t see bond yields rising materially in the short to medium term.

The rotation into value, whether a short-term phenomenon or a longer-term trend, does highlight the importance of portfolio diversification. We have observed many investors over recent years discount value style investing and traditional value stocks as a thing of the past. While it is true that there have been headwinds for this part of the market, avoiding value is, in our view, unwise as market dynamics can shift quickly, particularly in today’s environment.

Overall, we are seeing some positive signs that we believe are supportive of risk assets. Liquidity in markets remains strong, the equity premium relative to bonds still supports holding risk assets, and earnings are trending back to pre-Covid levels. Risks still remain, notably the rising numbers of Covid-19 numbers in Europe and the US, but we believe that, moving forward, selecting the right underlying investments will become as important as the asset allocation call.

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Synopsis:

As the popularity of cryptocurrencies like Bitcoin and Ethereum grows, investors are becoming more curious about how these new digital assets work, what drives their value, and why blockchain and similar technologies are so powerful.

In this webinar, Lonsec is partnering with Kraken, one of the world’s largest crypto exchanges, to discuss the fundamentals of crypto and the trends taking place that could see it become an important source of exposure for investors.

Panelists: Lukasz de Pourbaix, the Chief Investment Officer at Lonsec, and Thomas Perfumo, Head of Business Operations & Strategy at Kraken.

 


This information is provided by Lonsec Investment Solutions as a corporate authorised representative of Lonsec Research Pty Ltd who hold an AFSL number 421445. This is general advice, which doesn’t consider your personal circumstances. Consider these and always read the product disclosure statement or seek professional advice prior to making any decision about a financial product. You can access a copy of our financial services guide at lonsec.com.au

This video is provided by Lonsec Investment Solutions Pty Ltd ACN 608 837 583, a Corporate Authorised Representative (CAR 1236821) (LIS) of Lonsec Research Pty Ltd ABN 11 151 658 561 AFSL 421 445 (Lonsec Research). LIS creates the model portfolios it distributes using the investment research provided by Lonsec Research but LIS has not had any involvement in the investment research process for Lonsec Research. LIS and Lonsec Research are owned by Lonsec Holdings Pty Ltd ACN 151 235 406. Past performance is not a reliable indicator of future performance. This is general advice, which doesn’t consider your personal circumstances. Consider these and always read the product disclosure statement or seek professional advice prior to making any decision about a financial product. While care has been taken to prepare the content of this video, LIS makes no representation or warranty to the accuracy or completeness of the information presented, which is drawn from public information not verified by LIS. The information contained in this video is current as at the date of publication. Copyright © 2020 Lonsec Investment Solutions Pty Ltd ACN 608 837 583

Lonsec is very pleased to be able to announce that, for the 5th year running, we have once again been declared the overall winner of Research House of the Year. The award is the result of an annual questionnaire carried out by Money Management magazine.

Lonsec is continuing to invest in its infrastructure, systems and team, to ensure that we stay in this position going forward. Some exciting developments are planned for next year and we look forward to sharing them with you in due course.

In particular we would like thank our many thousands of clients for continuing to use our services and telling us and the wider industry how you value what we do.

Thank you,
The Lonsec Team 

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Synopsis

We’re told our COVID-normal world is just around the corner. But make no mistake, we will be living with the effects of unprecedented fiscal and monetary policy for years and likely decades to come.

Investors must be prepared to think differently about how they generate income, manage risk, and deal with volatility in their portfolio. Nothing can be taken for granted, not even a clear US election result.

Lonsec and our retire partners AllianceBernsteinIML and Talaria discussed what this post-Covid world will look like and how you can adapt.


This information is provided by Lonsec Investment Solutions as a corporate authorised representative of Lonsec Research Pty Ltd who hold an AFSL number 421445. This is general advice, which doesn’t consider your personal circumstances. Consider these and always read the product disclosure statement or seek professional advice prior to making any decision about a financial product. You can access a copy of our financial services guide at lonsec.com.au

This video is provided by Lonsec Investment Solutions Pty Ltd ACN 608 837 583, a Corporate Authorised Representative (CAR 1236821) (LIS) of Lonsec Research Pty Ltd ABN 11 151 658 561 AFSL 421 445 (Lonsec Research). LIS creates the model portfolios it distributes using the investment research provided by Lonsec Research but LIS has not had any involvement in the investment research process for Lonsec Research. LIS and Lonsec Research are owned by Lonsec Holdings Pty Ltd ACN 151 235 406.

Past performance is not a reliable indicator of future performance. This is general advice, which doesn’t consider your personal circumstances. Consider these and always read the product disclosure statement or seek professional advice prior to making any decision about a financial product. While care has been taken to prepare the content of this video, LIS makes no representation or warranty to the accuracy or completeness of the information presented, which is drawn from public information not verified by LIS. The information contained in this video is current as at the date of publication.

Copyright © 2020 Lonsec Investment Solutions Pty Ltd ACN 608 837 583

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Many of you will be aware that your clients are increasingly seeking out investments that align with their personal values.

Further to the launch of the Lonsec Sustainability Score, the Lonsec Sustainable Managed Portfolios will utilise Lonsec’s extensive portfolio construction experience, together with detailed sustainable investing (and ESG) research, to provide a solution that genuinely caters to the needs of investors.

Listen to the key members of the Lonsec investment team to find out more about how the portfolios are formulated and how they can help deliver what your clients really need.

During the September 2020 quarter global infrastructure securities (+0.8% in AUD hedged terms) saw early gains almost negated and again underperformed the broader global equities index (+6.3% AUD hedged) for the fourth successive quarter. Unhedged infrastructure returns (-2.0%) were again held back by a stronger Australian dollar. For the calendar year to date, the returns from global infrastructure securities (-12.3% AUD hedged and -13.2% unhedged) underperformed global equities (-1.3% AUD hedged).

The near-term cash flow outlook for most user-pays infrastructure is negative relative to 2019, but the outlook varies greatly by sub-sector. Transport infrastructure has calendar 2020 earnings per share changes of -70% to -90% for airports and -40% to -60% for toll roads due to travel restrictions. While road traffic has bounced back in North America and Europe, air travel internationally is more problematic as cross-border restrictions have been re-imposed to various degrees as COVID-19 has resurged in Europe. In Australia, the expected recovery to 2019 levels continues to be pushed out for domestic (2023) and international (2026) travel.

The share prices of Oil & Gas Pipeline stocks have been hard hit from a combination of concerns over the direct and indirect impact of lower crude prices, counter-party risks, and the deferral of capital expenditure. However, there is little exposure for pipeline operators to direct oil and gas price changes. Similarly, most pipeline companies are not significantly exposed to poor credit quality companies. Most pipeline volumes are supported by take or pay contracted terms. As a result, calendar 2020 earnings are only expected to decline -10 to -20%.

While COVID-19 has resulted in a decline in activity in the physical world, there has been a resulting increase in activity online. This has benefited the Communications Sector with 2020 earnings of cell tower stocks expected to increase between 10% and 15%. Earnings for Water and Electric Utilities have remained resilient, reflecting their essential nature, with 2020 earnings expected to remain flat or increase marginally.

Emerging Markets have been hit particularly hard by COVID-19, with the S&P Emerging Markets Index (Unhedged) returning -34% over the nine months to 30 September 2020. Many of these countries do not have the government resources to mitigate the negative economic effects of COVID-19 for sustained periods. However, the two Australian-based Emerging Markets Managers in the sector, RARE and 4D, both see significant long-term opportunities with earnings multiples at historically low levels. They also note that unlike prior crises, the balance sheets of most emerging market companies have held up relatively well.

Fire season began early in California this year. While there has been some legal complexity in past seasons, generally Californian utilities (PG&E, Sempra and Edison) are liable if their equipment has contributed to starting a fire. To date, this season’s fires are believed to have been caused by lightning strikes and the share prices of these utilities have not been greatly impacted. Furthermore, there are very few Managers with any remaining exposure to PG&E, which has most of its assets in Northern California. Sempra and Edison have their assets in the southern part of California, where there have been fewer fires.

Issued by Lonsec Research Pty Ltd ABN 11 151 658 561 AFSL 421 445 (Lonsec). Warning: Past performance is not a reliable indicator of future performance. Any advice is General Advice without considering the objectives, financial situation and needs of any person. Before making a decision read the PDS and consider your financial circumstances or seek personal advice. Disclaimer: Lonsec gives no warranty of accuracy or completeness of information in this document, which is compiled from information from public and third-party sources. Opinions are reasonably held by Lonsec at compilation. Lonsec assumes no obligation to update this document after publication. Except for liability which can’t be excluded, Lonsec, its directors, officers, employees and agents disclaim all liability for any error, inaccuracy, misstatement or omission, or any loss suffered through relying on the document or any information. ©2020 Lonsec. All rights reserved. This report may also contain third party material that is subject to copyright. To the extent that copyright subsists in a third party it remains with the original owner and permission may be required to reuse the material. Any unauthorised reproduction of this information is prohibited. 

Lonsec’s managed accounts have posted the fourth consecutive month of record growth in October, adding $100m in net inflows across its broad suite of diversified, retirement and listed portfolios.

The results highlight the success of Lonsec’s research-backed managed account model, which combines Lonsec’s portfolio construction expertise with Australia’s largest investment product research team.

Lonsec CEO Charlie Haynes said more advisers were turning to Lonsec for a professional, actively managed investment solution, whether off-the-shelf or tailored to a licensee or practice’s needs.

“The success of our managed portfolios comes down to three things: our investment philosophy, the diversity of expertise on our investment committees, and our research capabilities,” said Mr Haynes.

“Our active approach to asset allocation and asset selection, coupled with our ability to identify high-quality investments based on our extensive research coverage is proving attractive to advisers.”

The growth in Lonsec’s managed accounts reaffirms the importance of knowledge as well as execution, positioning the company as a major provider of investment solutions, along with its traditional research offering.

Part of the appeal is the breadth of Lonsec’s solutions, including diversified multi-asset portfolios, objectives-based retirement portfolios, listed portfolios, and direct equity SMAs. All are underpinned by the same proven philosophy and dynamic approach to portfolio management.

“Lonsec is known for its research and investment insights advisers and investors can trust, but more and more advisers are approaching Lonsec as a one-stop-shop for their investment solution needs,” said Mr Haynes.

Lonsec will add to its suite of investment solutions with the imminent launch of its Sustainable Managed Portfolios. These draw on Lonsec’s latest sustainability research to construct high-quality, risk-managed portfolios that target sustainable themes.

“The Sustainable Managed Portfolios are a great example of how Lonsec continues to develop its offering to meet a wide range of investment needs,” said Mr Haynes.

“We want to help advisers provide a genuinely sustainable investment solution that aligns to their clients’ values and investment objectives.”

Release ends

SuperRatings and Lonsec have announced the winners of this year’s Fund of the Year Awards, which was held virtually for the first time in the event’s 18-year history.

The Fund of the Year Award went to QSuper, which also took home the Pension of the Year Award and the Smooth Ride Award. UniSuper claimed the MySuper of the Year Award, and Sunsuper clinched the MyChoice Super of the Year Award.

The winners were announced at a virtual awards event on 29 October, broadcast live from the Museum of Contemporary Art, Sydney.

“It’s important to recognise the significant work that all funds have done to support their members through a very challenging year,” said SuperRatings Executive Director Kirby Rappell.
“In a highly competitive field, we decided that QSuper was the fund that performed most strongly across the key criteria of investment performance, fees, member services, financial advice and insurance, and fund governance.”

“Congratulations to the team at QSuper on a fantastic effort. It was a strong field this year and we note the high calibre of all award winners, with the quality of their offerings shining through the pandemic.”

“A lot has changed in super, and there are even more changes to come. We should always be focused on improvement, but we shouldn’t lose sight of the incredible outcomes being produced by a large number of funds, both for their members and the retirement system as a whole. Despite the uncertainty, there is every reason to be positive about super.”

 

Congratulations to all of the finalists for this year’s SuperRatings and Lonsec Fund of the Year Awards Dinner. A full list of the awards is available below.

SuperRatings Fund of the Year Award

Winner

QSuper
 
 
 
 
 
 
 
 

SuperRatings MySuper of the Year Award

Awarded to the fund that has provided the Best Value for Money Default Offering.

Winner
UniSuper

Finalists
AustralianSuper
BUSSQ
CareSuper
Cbus
Equip
HESTA
QSuper
Sunsuper
TelstraSuper
UniSuper

SuperRatings MyChoice Super of the Year Award

Awarded to the fund with the Best Value for Money Offering for Engaged Members.

Winner
Sunsuper

Finalists
AustralianSuper
Aware Super
Hostplus
Mercer Super Trust
NGS Super
QSuper
Statewide Super
Sunsuper
Tasplan
UniSuper

SuperRatings Pension of the Year Award

Awarded to the fund with the Best Value for Money Pension Offering.

Winner
QSuper

Finalists
AustralianSuper
Aware Super
BUSSQ
Cbus
HESTA
Hostplus
QSuper
Sunsuper
TelstraSuper
UniSuper

SuperRatings Career Fund of the Year Award

Awarded to the fund with the offering that is best tailored to its industry sector.

Winner
Cbus

Finalists
BUSSQ
Cbus
HESTA
Mercy Super
TelstraSuper
Hostplus

SuperRatings Momentum Award

Awarded to the fund that has demonstrated significant progress in executing key projects that will enhance its strategic positioning in coming years.

Winner
Aware Super

Finalists
Aware Super
Cbus
Equip
HESTA
Mercer Super Trust
Sunsuper

SuperRatings Net Benefit Award

Awarded to the fund with the best Net Benefit outcomes delivered to members over the short and long term.

Winner
AustralianSuper & HESTA

Finalists
AustralianSuper
Cbus
HESTA
Hostplus
QSuper
UniSuper

SuperRatings Smooth Ride Award

Awarded to the fund that has best weathered the ups and downs of the market, while also delivering strong outcomes.

Winner
QSuper

Finalists
AustralianSuper
Aware Super
BUSSQ
CareSuper
Cbus
QSuper

Infinity Award

Awarded to the fund most committed to addressing its environmental and ethical responsibilities.

Winner
Local Government Super

Finalists
Australian Ethical Super
CareSuper
Christian Super
Future Super
HESTA
Local Government Super

Lonsec Investment Option Award

Seeks to recognise and highlight the work of asset managers and key players incorporating ESG.

Winner
CareSuper – Sustainable Balanced

Finalists
CareSuper – Sustainable Balanced
Cbus – Growth (Cbus MySuper)
Suncorp Multi-Manager Growth
Sunsuper for Life – Balanced

 

Release ends

Important information: Any express or implied rating or advice is limited to general advice, it doesn’t consider any personal needs, goals or objectives.  Before making any decision about financial products, consider whether it is personally appropriate for you in light of your personal circumstances. Obtain and consider the Product Disclosure Statement for each financial product and seek professional personal advice before making any decisions regarding a financial product.