Partner Insights 2023

Lonsec Symposium aims to provide practical, actionable insights that add real value to investment and advice solutions. We bring together leading industry practitioners to equip financial advisers with educational topics and current issues in the market. We partner with Australian and global fund managers to bring you the latest innovations and insights. Please find the insights from our partners below. 

Alan Dupont

The chips are down for China. Forget Russia’s invasion of Ukraine, Covid, or the war in Taiwan. A package of US export restrictions is set to kneecap China

From Inquirer November 25, 2022

As the year of living dangerously draws to a volatile close, historians will long debate its most consequential event. Russia’s invasion of Ukraine, the lingering effects of Covid and fears that China’s president Xi Jinping may unleash war on Taiwan are prime candidates. But a package of US
export restrictions that aims to kneecap China’s burgeoning technology sector threatens to overshadow them all.

Last month, an obscure agency in the US Commerce Department known as the Bureau of Industry and Security imposed semiconductor export restrictions on dozens of Chinese companies and research institutions after the Pentagon expanded its own blacklist. But the real hammer blow was the Biden administration’s decision to bar companies worldwide from selling supercomputer and artificial intelligence chips to China that are made with US software, machinery or technology.


2023 – Back to bond market fundamentals –
Australian fixed income opportunities

The Australian fixed income landscape in 2023 is very different to what it was just 12 months ago. At the onset of 2022, investors scouring the globe for yield opportunities were continuing to stretch risk and liquidity budgets in their pursuit of reasonable prospective returns.

By the end of March 2022, having peaked at US$18.4 Trillion in December 2020, negative yielding debt outstanding had fallen to US$3Trillion. In hindsight this was a preliminary sign of the conclusion of the ‘easy policy’ era. Central bankers who had driven yields to near zero or beyond to provide cheap funding and promote growth were being forced to reverse course. Then, rising inflationary pressure linked to aggressive monetary and fiscal stimulus, COVID related supply chain disruptions and energy supply shocks all combined to push inflation to record levels. The war in Ukraine only exasperated these challenges on the energy and agricultural fronts and central bankers’ policy rate normalisation quickly followed suit. By the start of 2023, the balance of negative yielding debt evaporated following Japan’s unexpected policy shift and more widely, the yields on fixed income assets had hit compelling levels.

Return of the Developer
Anthony Kavanagh, Portfolio Manager,
Chester Asset Management

9 January 2023

“Ten years ago we were saying that the 15 to 20-year timeline was looking bleak. Now we’re saying, ‘Oh boy, in 5 to 10 years, things can get rough. Investment needs to increase and it needs to increase beyond what we were spending during the last boom in exploration”
— Kevin Murphy SandP Global Commodity Insights Analyst, March 2022

Last month the world witnessed Lionel Messi lead Argentina to a famous World Cup victory in an air-conditioned stadium in the Qatari desert, midway through the European football season. If ever there was an endorsement that anything is possible with willpower and the right (government) support aka funding, it’s Qatar hosting the 2022 World Cup. The task seemed almost insurmountable when announced but Qatar was able to construct 7 stadiums over the course of 12 years with a reported price tag (for the entire event) of USD220bn, changing almost 100 years of football history in the process.

The opportunities in private debt amid a global economic slowdown

Rising inflation and official interest rates helped to bring private debt into the mainstream of investment classes as investors seek to avoid the turbulence of public markets. The risk of a global slowdown is now also testing investment strategies.

Stock market volatility has been elevated as mounting macroeconomic headwinds from a raft of sources including surging inflation, rising official interest rates, and geopolitical tensions added to uncertainty about the economic outlook. Meanwhile, rising official interest rates have eroded the value of fixed income investments, leading to a rout in bond markets last year.

Many investors are again looking beyond equities and fixed income to weather the economic uncertainty in a way that reduces capital volatility and maintains a reliable income.

For investors reliant on income from their portfolio, switching into bank deposits may be the first thing they think of. According to the latest data from the Australian Tax Office, 16 percent, of Australian self-managed super fund (SMSF) capital is invested in cash and term deposits.[i]

While this may be a well-worn path, it isn’t necessarily the best strategy. Money in the bank does provide security but term deposits deliver lower returns that are locked in at a fixed rate and don’t keep pace with inflation.

In the face of rising economic risks, private debt can once again be a better option for income investors because it aims to provide reduced capital volatility and reliable income, but also attractive risk-adjusted returns that are linked to inflation.

Quarterly Perspective 2Q 2023


Market Insights

Stay Vigilant: The lagged impact of higher rates

1Q 2023 started with an improving outlook for the global economy. The U.S. consumer and labour market were resilient in the face of cost-of-living shocks, while the eurozone managed its energy crisis and avoided a recession. Meanwhile, China’s economic reopening has been swift.

However, the trade-off to better growth has been persistent inflation. Nevertheless, there are some early signs that the sharp increase in rates over the past year is applying pressure on the economy through the banking sector. While developed market central banks are still worried about inflation, financial stability risks suggest we may be approaching the end of the rate hike cycle.

China’s initial recovery is encouraging, and the rebound in consumption has benefited the services sector in Asia. The market may require an additional boost from corporate investments and a recovery of the property sector. Loose fiscal and monetary policies may help, but corporate and investor confidence will take time to recover.

View Video 2Q23 Guide to the Markets Videocast

The Role of Core Earnings in Achieving

The Lazard Australian Equity Team

The current environment of high inflation, normalisation of interest rates and the threat of a global recession will likely lead to more volatile earnings and a much keener focus from investors on companies’ ability to deliver on growth expectations. We believe the days of relying on a multiple inflation boom are over. In 2023, and through this new financial cycle, successful equity investing comes from a focus on earnings growth.

In this paper, we explore the role of earnings in generating outperformance and highlight the potential rewards for investors. The Lazard Australian Equity Team focuses on core or mid-cycle earnings which can help avoid the traps and dangers of capitalising earnings that are temporary, artificial or aspirational. This approach, focused on strong, stable, core earnings has helped the portfolio more than double the MSCI Australia Index’s earnings per share (EPS) growth over the last 15-years.



The asset class should welcome more private individual investors, but products must be carefully tailored to their needs, say Neuberger Berman’s Peter von Lehe, Maura Reilly Kennedy, and José Luis González Pastor

Q Where does Neuberger Berman sit in the private markets ecosystem and how does that inform your perspective on meeting the needs of individual investors?

Peter von Lehe: Neuberger Berman has been in the investment business for around 80 years, and we currently manage around $408 billion of assets, including $134 billion of alternatives, $105 billion of which is in private markets. We are 100 percent employee-owned, with more than 600 of our 2,500 employees holding a share of the business. That is a key feature of our firm, because we think it allows us to take a long-term view, rather than managing to quarterly reporting cycles.

We have been in the private markets business for more than 35 years, partnering with top-tier managers around the world. We invest in those managers on a primary basis; we invest directly into their portfolio companies through our co-investment business; we buy interests in their older or continuation funds through our secondaries business; and we lend money to their portfolio companies through our credit business. Importantly, Neuberger Berman as a firm, since inception in 1939, has been managing money for private individuals. In private markets, we have been designing and managing solutions for individual investors for more than 15 years.

Macquarie Fixed Income

Liquidity – the lifeblood of financial markets. What happens when the
river runs dry?

The abundance of liquidity in the early 2000s, its sudden withdrawal in the Global Financial Crisis (GFC), and the
subsequent emergency liquidity measures introduced by central banks feels eerily similar to the experience of financial
markets over the past few years.

Following a decade of unprecedented liquidity injections, via quantitative easing, in 2022 central banks globally embarked
on the most aggressive tightening cycle in 40 years. This significant rotation from ultra-easy liquidity flooding the system
to a notable contraction or drainage in liquidity is starting to be felt, with Silicon Valley Bank one of the most
recent casualties.

It’s clear that liquidity is a major driver of financial markets, but what does the current liquidity contraction mean for
financial assets, both public and private, liquid and illiquid, in investors’ portfolios?

Passive vs Active

Are active managers really a better bet in this market environment?

There is a common perception that when volatility returns to markets investors should favour active management
and stock picking over passive investing. During the 2020 COVID-19 sell-off, many active managers asserted they
were better placed to provide some downside protection, yet, on average, actively managed funds underperformed
passive during that episode.

At the start of 2022, against the backdrop of elevated stock valuations, rampant inflation, and a possible recession,
we again heard that familiar rhetoric that active management can provide investors with better outcomes through
market volatility.

This narrative is intuitively appealing. In this insights piece we investigate the extent to which it is supported by the
evidence so far.

Assessing workplace culture from the outside in

Culture can catalyse or undermine business success. It cannot be bought; it can only be created. Yet, this critical element is complicated to measure and assess from the outside. This presents a challenge for us as investors.


Following the extent of sexual harassment, bullying and racism highlighted in Rio Tinto’s recent workplace culture report, we undertook a research and engagement project to explore the related risks across the industry and deepen our understanding of the factors that can drive, or mitigate, harmful behaviour within a company. Industry reports and one-on-one interviews with ten ASX200 companies in the mining and industrial sectors formed the basis of the investigation.

Despite its multifaceted and obscure nature, we believe a perspective on company culture can be obtained from the outside. We have subsequently developed a framework for investors to assess workplace culture that is characterised by three overarching pillars:

Strong governance: A holistic safety culture driven from the top-down, with Board oversight and remuneration tied to People and Culture.
Safe and inclusive operating environment: A speak up culture and strong diversity, equity and inclusion strategy integrated through the operating environment, together with effective training and awareness programs. Disclosures around complaints, incidents and disciplinary action remain uncommon in company reporting today, but demonstrate the cultural health of a business and leadership in transparency.
Engaged employees: An engaged workforce that includes contractors under the same policies, supported by a strong engagement survey approach and transparent reporting of turnover and absenteeism data.

How Pendal investors helped make the world a better place in 2022

The concept of responsible investing has evolved hugely over the past decade, and the pace of change is accelerating.

Not necessarily in clear directions, however.

We’ve reached a point where there wouldn’t be many boards or management of major Australian listed companies not taking Environmental, Social and Governance (ESG) risks seriously.

A cursory glance at MSCI ESG ratings shows an improvement in scores across the market in recent years.

As one of the leading sustainable investors in the country, Pendal has played an important role in this transition, driving companies to change.

This is something we are very proud of.

It’s also reasonable to believe that the potential alpha available from targeting “box-ticking sustainability improvers” has eroded over time.

Curiously, companies that are deprived of capital as a result of poor ESG behaviours may well have higher expected returns, at least over shorter time periods.

When There is Blood in the Streets – Buy ‘Quality’

What is Quality?

MSCI describe the ‘Quality’ factor as capturing companies with durable business models and sustainable competitive advantages. This is achieved by targeting companies that tend to have high ROE, stable earnings, and strong balance sheets with low financial leverage. ‘Quality’ is categorized as a “defensive” factor, meaning it has tended to benefit during periods of economic contraction (i.e. flight to quality).

Investors may consider “Quality” for additional sources of return and/or for diversification purposes. Furthermore, the ‘Quality’ factor has historically provided downside protection through drawdowns as market participants turn to strong, powerful businesses as a way of navigating headwinds.

Fixed Income: A standout asset class in 2023

April 2023

  • Following the reset of 2022, Schroders see high-quality bonds, both government and corporate, to be a very appealing source of low-risk income and diversification over medium-term investment horizons
  • The cycle is highly likely to be turning in favour of bonds in 2023 as monetary policy bites. Both in absolute terms and relative to other assets, fixed income looks set to be a standout asset class in 2023
  • The market environment is likely to stay volatile as the battle between slowing growth and still-too-high inflation plays out. Staying liquid, with an up-in-quality credit stance, and overweight interest rate duration, is our preference
  • We make a number of recommendations for asset allocators to consider: in particular, to lift strategic allocations, and to lift dynamic allocations and improve their liquidity characteristics and quality

The case for Global Listed Property vs Unlisted Property


The outlook for the global economy and financial markets looks more uncertain today than it has for a long time. Both interest rates and inflation have risen sharply. There is a growing consensus that much of the world will shortly be experiencing slowing economic growth. Understandably, investors are asking what their options are. With a wide array of asset classes available, which are best placed to offer investors resilience in the current environment, but also as a sustainable investment option for the long term?

For investors seeking the opportunity of reliable income flows in addition to capital appreciation, the property has historically, and likely will continue to be, a prime focus. In this paper, the principal attractions and avenues for investment into the asset class will be examined and the case made that now is an attractive point for investors to consider listed property.

Further, the ‘why now’ case for listed real estate is bolstered by recent sharp sell-offs in the sector creating clear dislocations with core private real estate funds. This relationship will be examined in this paper as we highlight the investment opportunity in listed property, as both a compliment and a preference to property as an investment.


The content, presentations and discussion topics covered during Symposium 2023 are intended for licensed financial advisers and institutional clients only and are not intended for use by retail clients. No representation, warranty or undertaking is given or made in relation to the accuracy or completeness of the information presented.

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