The annual Fund Manager of the Year Awards ceremony was held last night in Sydney, with more than 20 individual and group winners announced. The awards program comprehensively covers the industry’s top performers, including senior professionals, top fund managers, boutique funds, new entrants, as well as the rising stars and leaders of tomorrow.

As the research partner for the awards, we brought our expertise to judging the 18 group award categories, recognising the very best innovations and products and services that help improve the investment outcomes for Australians.

Congratulations to Lazard Asset Management Pacific Co for winning this year’s coveted Fund Manager of the Year award. Lazard was recognised for its breadth of quality products across numerous asset class categories, evidenced by the number of nominations it received in this year’s awards, as well as a strong heritage in the market as a proponent of a ‘value’ investment style.

Congratulations to all the finalists and winners and we look forward to doing this all again next year.

Full list of finalists and winners below. Winners in bold.

Australian Large Cap Equity Fund of the Year

  • Lazard Defensive Australian Equity Fund
  • Merlon Concentrated Australian Share Fund
  • CC Sage Capital Equity Plus Fund
  • Investors Mutual Equity Income Fund
  • Perpetual SHARE-PLUS Long-Short Fund

Australian Small Cap Equity Fund of the Year

  • OC Premium Small Companies Fund
  • Perpetual Smaller Companies Fund
  • Investors Mutual Australian Smaller Companies Fund
  • Pengana Emerging Companies Fund
  • Spheria Australian Microcap Fund

Global Equity Fund of the Year

  • GQG Partners Global Equity Fund – A Class
  • Arrowstreet Global Equity Fund
  • PM Capital Global Companies Fund
  • Lazard Global Equity Franchise Fund

Global Emerging Market Equity Fund of the Year

  • Robeco Emerging Conservative Equity Fund
  • GQG Partners Emerging Markets Equity Fund – A Class
  • Lazard Emerging Markets Equity Fund
  • Realindex Emerging Markets Value – Class A
  • Pendal Global Emerging Markets Opportunities Fund – WS

Australian Property Securities Fund of the Year

  • Macquarie Australian Listed Real Estate Fund – Class A Units
  • Zurich Investments Australian Property Securities Fund
  • Pendal Property Securities Fund
  • Martin Currie Property Securities Fund

Global Property Securities Fund of the Year

  • UBS CBRE Global Property Securities Fund
  • Resolution Capital Global Property Securities Fund
  • Dimensional Global Real Estate Trust Unhedged Class
  • Quay Global Real Estate Fund

Infrastructure Fund of the Year

  • Lazard Global Listed Infrastructure Fund
  • ATLAS Infrastructure Australian Feeder Fund AUD Hedged Class
  • ClearBridge RARE Infrastructure Value Fund — Hedged
  • Colonial First State FirstChoice Global Infrastructure Securities Fund

Australian Fixed Income Fund of the Year

  • Yarra Enhanced Income Fund
  • Perpetual Diversified Income Fund
  • Pendal Short Term Income Securities Fund
  • Betashares Active Australian Hybrids Fund (Managed Fund)
  • La Trobe Australian Credit Fund 12 Month Term Account

Global Fixed Income Fund of the Year

  • Colchester Emerging Markets Bond Fund – Class I
  • Bentham Syndicated Loan Fund
  • Invesco Wholesale Senior Secured Income Fund
  • PM Capital Enhanced Yield Fund
  • Janus Henderson Diversified Credit Fund

Multi-Asset Fund of the Year

  • Australian Retirement Trust – Super Savings – Growth
  • Perpetual Balanced Growth Fund
  • CareSuper – Balanced
  • Morningstar Growth Real Return Fund
  • ipac Income Generator (Class K)

Passive – Equity Fund of the Year

  • iShares Core S&P/ASX 200 ETF
  • VanEck Australian Equal Weight ETF
  • SPDR S&P World ex Australia Carbon Control Fund
  • Vanguard MSCI Index International Shares ETF
  • iShares S&P Mid-Cap ETF

Passive – Other Asset Class Fund of the Year

  • Vanguard Global Aggregate Bond Index (Hedged) ETF
  • Betashares Australian Bank Senior Floating Rate Bond ETF
  • iShares Government Inflation ETF
  • Vanguard Australian Corporate Fixed Interest Index ETF
  • VanEck Australian Floating Rate ETF

Responsible Investment Fund of the Year

  • Nanuk New World Fund
  • Bell Global Sustainable Fund – Unhedged Class Units
  • T. Rowe Price Global Impact Equity Fund – I Class

Alternatives Fund of the Year

  • Aspect Diversified Futures Fund – Class A
  • Schroder Specialist Private Equity Fund
  • Hamilton Lane Global Private Assets Fund (AUD)
  • Challenger IM Credit Income Fund – Class A
  • P/E Global FX Alpha Fund

Innovation Award of the Year

  • Five V Capital Pty Ltd
  • JPMorgan Asset Management (Australia) Limited
  • MLC Asset Management Pty Limited
  • Kohlberg Kravis Roberts & Co. L.P.
  • Centuria Funds Management Ltd

Unlisted Real Estate Fund of the Year

  • Australian Unity Healthcare Property Trust – Wholesale Units
  • Charter Hall Direct Industrial Fund No. 4
  • RF CorVal Property Fund

Emerging Manager of the Year

  • Palisade Investment Partners Limited
  • Five V Capital Pty Ltd
  • GAM International Management Limited
  • Kohlberg Kravis Roberts & Co. L.P.
  • Polen Capital Management, LLC

Fund Manager of the Year

  • Lazard Asset Management Pacific Co.
  • Perpetual Limited PM Capital Limited
  • Vanguard Investments Australia Ltd
  • GQG Partners, LLC

Disclaimer: Lonsec Research Pty Ltd (ABN 11 151 658 561 AFSL 421445) (Lonsec) are acting as a research partner for the Fund Manager of the Year Awards (Awards) issued by Momentum Media Group Pty Ltd on 13 June 2024 The Awards are determined using Lonsec proprietary methodologies, are solely statements of opinion, subjective in nature and must not be used as the sole basis for investment decisions. The Awards do not represent recommendations to purchase, hold or sell any products or make any other investment decisions. Investors must seek independent financial advice before making any investment decision and must consider the appropriateness of the information, having regard to their objectives, financial situation, and needs. Past performance is not an indication of future performance. Awards are current for 12 months from the date awarded and are subject to change at any time. Lonsec does not represent these Awards to be guarantees nor should they be viewed as an assessment of a fund or the funds’ underlying securities’ creditworthiness. Lonsec receives a fee from the financial product issuer(s) for researching the financial product(s), using objective criteria. Lonsec rating(s) outcome is not linked to the fee or the Award. Lonsec and its associates do not receive any other compensation or material benefits from product issuers or third parties in connection with the Award. Lonsec makes no representation, warranty or undertaking in relation to the accuracy or completeness of the Awards. Lonsec assumes no obligation to update the Awards after publication. The Award is for the exclusive use of the client for whom it is presented and should not be used or relied upon by any other person unless with express permission from Lonsec. Except for any liability which cannot be excluded, Lonsec, its directors, officers, employees and agents disclaim all liability for any error or inaccuracy in, misstatement or omission from, this document and any Award or any loss or damage suffered by the reader or any other person as a consequence of relying upon it. ©Lonsec 2024. All rights reserved.

Congratulations to all the winners and nominees for this year’s Fund Manager of the Year Awards. For Lonsec and Money Management, these awards are a celebration of the very best of the funds management industry and we will recognise the very best innovations and products and services that improve the investment outcomes of Australians.

As research partner for the awards, we applied the same rigorous approach we take to researching and rating funds to evaluating the nominees and choosing winners in each of the 18 group award categories. It has been an honour to partner with Money Management for these awards and congratulations again to Franklin Templeton for being named Fund Manager of the Year.

Australian Property Securities Fund of the Year 

The nominees for the Australian Property Securities Fund of the Year highlight the variety in the sector by showcasing both A-REIT and ‘real asset’ mandates and differing investment styles. Nominated funds have all been well-rated by Lonsec over an extended period and have been able to deliver consistent risk-adjusted performance over the medium-term.  The nominees are:

  • Cromwell Phoenix Property Securities Fund
  • Martin Currie Real Income Fund – Class A
  • SGH Property Income Fund

Global Property Securities Fund of the Year

The nominees for the Global Property Securities Fund of the Year represent both Australian and off-shore investment firms. These funds, which have been well rated by Lonsec, have navigated a turbulent period for REIT markets well, allowing them to deliver a consistent level of risk-adjusted performance over the medium-term.

  • Ironbark Global Property Securities Fund
  • Quay Global Real Estate Fund – Unhedged
  • UBS CBRE Global Property Securities Fund

Infrastructure Fund of the Year

The nominees for the Infrastructure Fund of the Year are representative of the dynamism in the listed infrastructure space, both by investment style but also the underlying investment structures. The funds have all been well rated by Lonsec over time, with the managers delivering to investors the listed infrastructure premia during a volatile period in markets and meeting their investment objectives.

  • ClearBridge RARE Infrastructure Value Fund — Unhedged
  • CFS FC Global Infrastructure Securities Fund
  • Lazard Global Listed Infrastructure Fund

Unlisted Real Estate Fund of the Year

The nominees for the Unlisted Real Estate Fund of the Year are part of Lonsec’s universe of direct property funds that provide investors with access to a range of commercial and social property sectors. All nominated managers have built strong property capabilities and have demonstrated a commitment to sound capital management over time.

  • Australian Unity Healthcare Property Trust – Wholesale Units
  • Centuria Diversified Property Fund
  • Charter Hall Direct Industrial Fund No.4

Australian Large Cap Equity Fund of the Year

The nominees for the Australian Large Cap Equity Fund of the Year recognise those funds that have been well-rated by Lonsec over an extended period, and those managers that have been able to deliver consistent risk-adjusted performance in line with performance objectives over the medium-term.

  • Allan Gray Australia Equity Fund
  • Dimensional Australian Value Trust
  • DNR Capital Australian Equities High Conviction Portfolio
  • Lazard Select Australian Equity Fund (W Class)
  • Quest Australian Equities Concentrated Portfolio SMA

Australian Small Cap Equity Fund of the Year

The nominees for the Australian Small Cap Equity Fund of the Year recognise those funds that have successfully delivered on investment objectives, demonstrated superior stock selection and have been well-rated by Lonsec over an extended period.

  • First Sentier Wholesale Australian Small Companies Fund
  • OC Dynamic Equity Fund
  • Spheria Australian Smaller Companies Fund

Global Equity Fund of the Year

The nominees for Global Equity Fund of the Year have demonstrated ability to consistently meet their investment objectives, have a track record in applying their investment research and portfolio construction processes, as well as being rated ‘Recommended’ or higher by Lonsec.

  • Arrowstreet Global Equity Fund
  • Barrow Hanley Global Share Fund
  • Lazard Global Equity Franchise Fund
  • PM Capital Global Companies Fund
  • Realindex Global Share Value – Class A

Global Emerging Market Equity Fund of the Year

The nominees for Global Emerging Market Equity Fund of the Year have been sourced from Lonsec’s universe of Global Emerging Markets sector, including funds within the Regional Asia and India sub-sector. The award recognises funds that have been highly rated by Lonsec over the past three years, demonstrated asset allocation and security selection skills, and consistently delivered on its investment objectives.

  • Fidelity Asia Fund
  • FSSA Asian Growth Fund
  • Lazard Emerging Markets Equity Fund

Multi-Asset Fund of the Year

The nominees for the Multi-Asset Fund of the year recognise those products that have been well rated by Lonsec over an extended period of time, and those Managers that have been able to consistently apply their investment process, meet investment objectives through the cycle, and demonstrate portfolio management skill in asset allocation and security selection

  • Australian Retirement Trust – Super Savings – Growth
  • BlackRock Tactical Growth Fund – Class D
  • CareSuper – Sustainable Balanced
  • ipac Income Generator (Class K)
  • Perpetual Balanced Growth Fund

Passive – Equity Fund of the Year

The Passive Equity Fund of Year award recognises an equity based strategy that has demonstrated a strong track record of success with respect to its underlying index, a superior liquidity profile plus costs that are at least in-line with peers.

  • Betashares Australia 200 ETF
  • iShares Core S&P/ASX 200 ETF
  • SPDR S&P World ex Australia Carbon Control Fund
  • VanEck Australian Equal Weight ETF
  • Vanguard US Total Market Shares Index ETF

Passive – Other Asset Class Fund of the Year

The Passive Other-Asset class Fund of Year award considers all the passive fixed income, commodities, or alternative strategies within the Lonsec universe. It recognises the Fund with a strong track record of success with respect to its underlying index, a superior liquidity profile plus costs that are at least in-line with peers.

  • Betashares Australian Bank Senior Floating Rate Bond ETF
  • Global X Physical Gold ETF
  • iShares Core Composite Bond ETF
  • iShares Global Bond Index Fund
  • VanEck Australian Floating Rate ETF

Australian Fixed Income

The nominees for the Australian fixed income category are well rated by Lonsec over an extended period of time. The award recognises managers who have the ability to deliver consistent returns while providing downside protection during challenging markets which are a testament to their robust research and risk management processes, skills and expertise.

  • Janus Henderson Australian Fixed Interest Fund
  • Macquarie Australian Fixed Interest Fund
  • Pendal Sustainable Australian Fixed Interest Fund
  • Perpetual Active Fixed Interest Fund (Class A Units)
  • Western Asset Australian Bond Fund – Class A
  • Yarra Enhanced Income Fund

Global Fixed Income of the Year

As with the previous Australian Fixed Income award, the nominees for the Global fixed income category are well-rated by Lonsec over an extended period of time. The award recognises managers who have the ability to deliver consistent returns while providing downside protection during challenging markets which is a testament to their robust research and risk management processes, skills, and expertise.

  • Bentham Global Income Fund
  • Brandywine Global Opportunistic Fixed Income Fund – Class A
  • Perpetual Dynamic Fixed Income Fund
  • PIMCO Income Fund – Wholesale Class
  • T. Rowe Price Dynamic Global Bond Fund – I Class

Alternatives Fund of the Year

The nominees for the Alternatives fund of the year recognise those products that have demonstrated a track record of success, offer several competitive advantages against their closest peers and have been rated highly by Lonsec for at least three review cycles. Further, over the long term, each of these Funds has met or exceeded their respective investment objectives, achieved favourable absolute returns in a risk-adjusted manner while providing diversification to investors’ broader portfolios

  • Australian Retirement Trust – Super Savings – Diversified Alternatives
  • CC Sage Capital Absolute Return Fund
  • Hamilton Lane Global Private Assets Fund (AUD)

Responsible Investment Fund of the Year

The nominees for the Responsible Investment Fund of the year recognise those products that have demonstrated a clear integration of ESG into their investment process and deliver a portfolio with a high alignment with the Sustainable Development Goals as well as having at least a recommended rating from Lonsec.

  • Ausbil Active Sustainable Equity Fund
  • Australian Ethical Emerging Companies Fund (Wholesale)
  • Candriam Sustainable Global Equity Fund
  • Impax Sustainable Leaders Fund

Innovation Award of the Year

The Innovation Award recognises a manager that has brought a differentiated product to the Australian market.  Differentiation can take the form of fee leadership, product structural evolution or additive capabilites to standard asset class products.

  • Betashares Capital
  • Generation Life
  • L1 Capital

Emerging Manager of the Year

The nominees for Emerging Manager of the Year have been selected by Lonsec’s team of Sector Managers. To be eligible for this award, nominees must have a track record of five years or less within the Australian intermediated market, and have at least one product that Lonsec has assigned a ‘Recommended’ or higher rating.

  • Aikya Investment Management
  • Fortlake Asset Management
  • Pzena Investment Management
  • Ruffer LLP
  • Skerryvore Asset Management

Fund Manager of the Year

To be eligible for the Fund Manager of the Year Award, Managers must have demonstrated a sound investment culture and good governance over an investment cycle and across a number of asset classes.

  • BlackRock Investment Management (Australia)
  • Franklin Templeton Australia
  • Lazard Asset Management
  • Macquarie Asset Management
  • VanEck

Disclaimer: Lonsec Research Pty Ltd (ABN 11 151 658 561 AFSL 421445) (Lonsec) are acting as a research partner for the Fund Manager of the Year Awards (Awards) issued by Momentum Media Group Pty Ltd on 22 June 2023 The Awards are determined using Lonsec proprietary methodologies, are solely statements of opinion, subjective in nature and must not be used as the sole basis for investment decisions. The Awards do not represent recommendations to purchase, hold or sell any products or make any other investment decisions. Investors must seek independent financial advice before making any investment decision and must consider the appropriateness of the information, having regard to their objectives, financial situation, and needs. Past performance is not an indication of future performance. Awards are current for 12 months from the date awarded and are subject to change at any time. Lonsec does not represent these Awards to be guarantees nor should they be viewed as an assessment of a fund or the funds’ underlying securities’ creditworthiness. Lonsec receives a fee from the financial product issuer(s) for researching the financial product(s), using objective criteria. Lonsec rating(s) outcome is not linked to the fee or the Award. Lonsec and its associates do not receive any other compensation or material benefits from product issuers or third parties in connection with the Award. Lonsec makes no representation, warranty or undertaking in relation to the accuracy or completeness of the Awards. Lonsec assumes no obligation to update the Awards after publication. The Award is for the exclusive use of the client for whom it is presented and should not be used or relied upon by any other person unless with express permission from Lonsec. Except for any liability which cannot be excluded, Lonsec, its directors, officers, employees and agents disclaim all liability for any error or inaccuracy in, misstatement or omission from, this document and any Award or any loss or damage suffered by the reader or any other person as a consequence of relying upon it. ©Lonsec 2023. All rights reserved.

Lonsec Research chatted with leading Fixed Income Managers to learn more about the sector, how they are approaching the changing investment landscape and what drew them to this sometimes overlooked, but very important, sector.

In this video, Isrin Khor, Lonsec Sector Manager of Fixed Income is joined by Anthony Kirkham, Head of Melbourne Operations and Investment Management/Portfolio Manager at Western Asset Management, and Sachin Gupta, Managing Director and Head of the Global Desk at PIMCO. The discussion focuses on the key qualitative strengths of PIMCO and Western Asset, particularly on business, people, and the process followed by a market outlook discussion.

IMPORTANT NOTICE: This video is published by Lonsec Research Pty Ltd ABN 11 151 658 561, AFSL No. 421445 (Lonsec). Please read the following before making any investment decision about any financial product mentioned in this video.
Disclosure as at the date of publication: Lonsec receives fees from fund managers or product issuers for researching their financial product(s) using comprehensive and objective criteria. Lonsec receives subscriptions for providing research content to subscribers including fund managers and product issuers. Lonsec receives fees for providing investment consulting advice to clients, which includes model portfolios, approved product lists and other advice. Lonsec’s fees are not linked to the product rating outcome or the inclusion of products in model portfolios, or in approved product lists. Lonsec and its representatives, Authorised Representatives and their respective associates may have positions in the financial product(s) mentioned in this video, which may change during the life of this video, but Lonsec considers such holdings not to be sufficiently material to compromise any recommendation or advice.
Warnings: Past performance is not a reliable indicator of future performance. The information contained in this video is obtained from various sources deemed to be reliable. It is not guaranteed as accurate or complete and should not be relied upon as such. Opinions expressed are subject to change. This video is but one tool to help make investment decisions. The changing character of markets requires constant analysis and may result in changes. Any express or implied rating or advice presented in this video is limited to “General Advice” (as defined in the Corporations Act 2001 (Cth)) 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. It does not constitute a recommendation to purchase, redeem or sell the relevant financial product(s).
Before making an investment decision based on the rating(s) 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 our advice relates to the acquisition or possible acquisition of particular financial product(s), the reader should obtain and consider the Investment Statement or Product Disclosure Statement for each financial product before making any decision about whether to acquire a financial product. Where Lonsec’s research process relies upon the participation of the fund manager(s) or product issuer(s) and they are no longer an active participant in Lonsec’s research process, Lonsec reserves the right to withdraw the video at any time and discontinue future coverage of the financial product(s).
Disclaimer: This video is for the exclusive use of the person to whom it is provided by Lonsec and must not be used or relied upon by any other person. No representation, warranty or undertaking is given or made in relation to the accuracy or completeness of the information presented in this video, which is drawn from third party information or opinion not verified by Lonsec. Financial conclusions, ratings and advice are reasonably held at the time of completion but subject to change without notice. Lonsec assumes no obligation to update this video following publication. Except for any liability which cannot be excluded, Lonsec, its directors, officers, employees and agents disclaim all liability for any error or inaccuracy in, misstatement or omission from, this video or any loss or damage suffered by the viewer or any other person as a consequence of relying upon it.

Copyright © 2021 Lonsec Research Pty Ltd (ABN 11 151 658 561, AFSL No. 421445) (Lonsec). This video is subject to copyright of Lonsec. Except for the temporary copy held in a computer’s cache and a single permanent copy for your personal reference or other than as permitted under the Copyright Act 1968 (Cth), no part of this video may, in any form or by any means (electronic, mechanical, micro-copying, photocopying, recording or otherwise), be reproduced, stored or transmitted without the prior written permission of Lonsec.

This video may also contain third party supplied material that is subject to copyright. Any such material is the intellectual property of that third party or its content providers. The same restrictions applying above to Lonsec copyrighted material, applies to such third party content.

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.

As always there will be many different opinions on what might happen to markets in the coming year, but by and large most will agree it is unlikely to top the volatility and uncertainty of 2020. Amid the stimulus packages, lockdowns, PPE and politics, COVID-19 also brought to an end one long running market cycle and ushered in a new one, offering investors new opportunities with the potential for new risks and returns.

We believe understanding and navigating both will be more important than ever.

One of the main risks that still carries over from the last few years is the concentration of the index in just a few mega-capitalization companies. In fact, when considering the S&P 500, the top 10 companies still account for around 28% of the index, and as of late December 2020 the top 6 were worth more than the bottom 372 companies.

 

 

Why is this a problem?

Well if you’re buying the index you’re buying very expensive companies that have already grown substantially during 2020 such as Apple 86% and Amazon 76%. What’s riskier is Tesla (TLA) is nearly 2% of the index but only joined in late 2020, so index investors didn’t receive most of the benefit of its 700%+ growth, but bear all the downside if the stock were to fall.

Investors usually choose indices for their diversity – perhaps now they need to look again.

In addition, while global stimulus and support packages have helped economies from falling off a cliff, they have also pumped a lot more liquidity (cash) into the system. This, along with low interest rates may well support inflation for the first time in decades which even in small amounts can have a profound effect on stocks. Stocks with high valuations that are dominating the index (technology) are more susceptible to the increase in interest rates that usually accompanies inflation, meaning to get your money back you need to wait years if not decades. This is less the case with other sectors.

Is this likely?

While the potential for inflation is there, so too are signs of a rotation away from the tech stocks to those less highly valued sectors of the economy. From September to mid-December 2020, the S&P500 Value index outperformed Growth by around 8%, driven by more certainty about the real economy restarting on the back of a COVID-19 vaccine. While we can’t predict the future there is precedent here going back to the dotcom bust of 2000, where in the following 5 years Value had a resurgence to the point where it outperformed over the 10 years pre and post the bust.

 

To add to this are current data showing a significant increase in activity in the bellwether ISM New Orders Index which measures manufacturing activity, up 40% since the lows of 2020 and its highest level in over 3 years. The opportunity here lies in those sectors and regions that benefit from this new cycle economy, sectors that have been neglected, and so are cheap, but stand to benefit from the surge of global economic activity as populations slowly become vaccinated. The rewards here could be substantial.

Added benefit of options

Finally, the market is currently experiencing an unusual set of dynamics. Volatility (uncertainty) is higher than the long-term average, but so is the market. Usually the market is lower when volatility is higher.

This represents both heightened uncertainty alongside optimism, which has been fueled by some arguably unsophisticated market participants.

This creates unprecedented opportunity for professional investors, and especially for Talaria’s process of using put options to enter stock positions because:

  • There is a greater contracted rate of return on the put options we sell, which can generate 3-4% p.a. more option premium into the portfolio p.a. all else being equal.
  • The opportunity cost of not being fully invested is materially reduced given low expectations for equity market returns.
  • Heightened volatility allows us to widen our buffers against loss and maintain our risk credentials.

As we like to say, certainty empowers you.

It’s been nearly a year since the world changed as COVID-19 took hold. Of all that has been written
about and said so far, the word ‘uncertain’ seems to be the most enduring.

Uncertainty is not many people’s preferred state, but for retirees in particular, it’s even more
concerning, coming at a time when the juggle and stress of raising kids and building careers should be a
warm but more distant memory.

We spend 40+ years working to build an asset base to support us in retirement and we need that asset
base to deliver three key outcomes:

• Income generation – but not at the expense of capital loss,
• growth – of outcomes, and
• certainty – of outcomes…

…and do all this for an unknown number of years.

So how has the COVID-19 pandemic impacted these three retirement needs?

While stock markets globally have largely recovered since March, the underlying economy and outlook
for businesses hasn’t. This means dividends have been cut or reduced by many companies – impacting
income. Meanwhile, other asset classes such as Fixed Interest, Bonds, and Property are also delivering
substantially less returns.

Ranjit Das, Principal at Rahali Corporation believes this is a significant problem because of the over
reliance on income since the GFC. “Even over 10 years, traditional income sources like Banks, Telstra
have underperformed the ASX200, so non-traditional income sources are essential in client portfolios,”
Ranjit said.

At the same time, there has been a lot of volatility – a direct outcome of uncertainty – across asset
classes and currencies. This means it’s hard to predict when is a good time to either sell assets if
required or buy back into them.

“Retirees are very nervous in nature as they have no means to rebuild lost wealth. Any sharp spikes to
the downside creates a fear that capital will erode, income will reduce and they will ‘run out of money’.
Any sharp upticks don’t provide any joy as retirees are ‘buy and hold’ – much more than younger clients
who may be tempted to buy/sell and rejig allocations,” said Das.

In addition, the recovery of many markets at an index level has been driven by a few – namely
technology and consumer discretionary stocks – that have skewed the index. This means that those
following the index have a greater risk by being less diversified. If you’re starting out or still in the
accumulation phase of investing this might be ok, but not for retirees as they have additional risks
namely:

Sequencing – incurring large losses early in retirement, endangering a comfortable retirement
Longevity – ensuring your investments are there to support you for the full journey; and
Inflation – ensuring the purchasing power of your investments doesn’t erode.

The culmination of COVID-19 uncertainty, loss of business, and government stimulus that is currently at
play is creating all three of these.

There are solutions however that are genuinely uncorrelated sources of income – from shadow banking
to catastrophe insurance to selling equity insurance. However, the first two are very difficult to access as
a private investor, whereas equity insurance is more accessible and easily available.

So what is it?

In a nutshell equity insurance is really a metaphor for selling put options to enter stock positions that
you want to own rather than buying them directly. This then generates a premium which is treated as
income for the investor, regardless of whether the stock is ultimately bought or not. As a result, the
process creates:

• More consistent income;
• A diversified source of return;
• A downside buffer to first loss; and
• Reduces portfolio volatility.

This means that in periods such as now, investors have somewhere else to go for income. Further, as
option premium increases with volatility, an uncertain environment in most cases increases income
from this source.

Helping to create more certainty in an uncertain world.

www.talariacapital.com.au

With central bankers around the world committing to keep interest rates low for many years to come, this creates an issue for retirees looking for income. Traditional defensive assets such as cash and fixed income which typically form a large percentage of retiree portfolios are producing levels of income significantly below historical averages.

In Australia, the RBA is keeping the 3-year yield for government bonds at 0.25%, in what is known as yield curve control. Interest rates have been suppressed for the last decade, however what is unique about the current economic climate, is that with inflation yet to emerge and central bankers focused on generating growth and employment, their signalling to the market has moved further out. Lower for much longer!

 

SuperRatings Executive Director Kirby Rappell shares the latest performance results for superannuation funds and the future outlook for the industry.

Members should be prepared for more ups and downs. However, a patient approach has paid off for members over the long term with the median balanced style fund returning 7.0% per annum since the introduction of superannuation in 1992.

 

 

 


Any advice that SuperRatings provides is of a general nature and does not take into account an individual’s financial situation, objectives or needs. Because the information that SuperRatings receives about superannuation and pension financial products is from a number of sources, it is not guaranteed to be completely accurate. Because of this, individuals should, before acting on the information, consider its appropriateness having regard to their own financial objectives, situation and needs and if appropriate, obtain personal financial advice on the matter from a financial adviser. Before making a decision regarding any financial product, individuals should obtain and consider a copy of the relevant Product Disclosure Statement from the financial product issue.

Although the secrets of a long life remain a mystery, there are now over 300,000 centenarians across the globe and the numbers are rising. Most of us will not survive to 100 no matter how many green vegetables we eat, but there is no doubt life expectancy is increasing. In Japan, 2.5 times more adult than baby diapers are sold. Australian life expectancy from birth is among the highest in the world with the average man living to 80.7 and 84.9 for a woman. It assumes no improvement in healthcare which can increase life expectancy further.

The following lesson is one of IML’s ‘20 lessons for 20 years of quality and value investing’, which were recently published by Anton Tagliaferro and the IML investment team to mark 20 years since IML was founded.

We chose this lesson for Lonsec Retire, as it highlights the need for growth assets in retirement, particularly for early retirees who typically have investment timeframes of 20+ years.

The lesson illustrates the benefits of compounding by showing how companies that reinvest back into their businesses can reward investors with increasing dividends and appreciating share prices over the long-term. Increasing dividends is vital for retirees facing significantly lower returns from popular retirement income streams such as term deposits and traditional fixed income funds.


#6 The Power and Benefits of Compounding Over Time in Equity Portfolios

Most people are familiar with the concept of compound interest when it comes to term deposits, where one can earn interest on interest by continuing to roll over a term deposit. However, many investors do not relate the concept of compounding to their investments in the sharemarket.
Compounding occurs in the sharemarket when income from an investment is reinvested back into the business, and investors are rewarded with the benefits of increasing profits and appreciating share price growth over the long-term.
For investors in the sharemarket, there are two ways compounding can work in their favour to enhance their long-term returns.

These lessons are available both in hard copy and e-book format. For a copy of the book please register your interest here or email iml@iml.com.au

**IML and Lonsec  Investment Consulting will be holding a webinar as part of Lonsec Retire Program on Wednesday, February 12th, find out more.

Real estate offers potential diversification away from traditional stocks and bonds, stable income, the possibility of capital appreciation and has historically offered inflation protection. The average Australian retiree is likely to have exposure to domestic residential real estate – through the family home, an investment property or holiday home – but these assets are likely concentrated in geography and in the residential sector. Commercial real estate can present geographic diversification to the US, Asia and Europe, and sector diversification into offices, shopping centres and industrial parks. The following article explores the investment choices for the commercial real estate asset class across the risk/return spectrum.

  • Real estate may provide investors with the potential to generate attractive long-term returns through possible asset appreciation and current income
  • Real estate also may serve as a hedge against inflation and offer diversification versus traditional stocks and bonds

Anyone who has purchased a home is a real estate investor — but there’s a big difference between taking on a mortgage and investing in office buildings, malls or industrial parks. In this blog, we explain the basics of real estate investing, the potential benefits, and the ways that individuals can add real estate exposure to their portfolio.

To find out more about this article, please contact:

Sam Sorace

Director, Wholesale Sales

Invesco Australia

Direct   +61 3 9611 3744

Mobile  +61 413 050 909

sam.sorace@invesco.com

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