Welcome to the first in a new Lonsec Insights series called Manager in Focus. Manager in Focus aims to demystify the investment process and give access to the brightest minds in Australia’s investment community.

In this first Manager in Focus video, Peter Green, Head of Equities Research at Lonsec Research brings together Dushko Bajic, Head of Australian Equities, Growth at First Sentier Investors, Jared Pohl, Cofounder of ECP Asset Management and Stephen Wood, Principal and Portfolio Manager at Eiger Capital to discuss their qualitative research and investment processes, what they look for in target investments, how they have built and maintain their team and what they do when things don’t go as planned. Each of these managers run funds that have been rated as Highly Recommended by Lonsec Research in the recent Australian Equities review.

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.

Following Lonsec’s Asset Allocation Investment Committee meeting in June, we asked Chief Investment Officer Lukasz de Pourbaix to give us an update on his views of the current market drivers and challenges, and how these impacted Lonsec’s latest dynamic asset allocation views.

The main topic of discussion at this meeting was inflation – is it transitory or are we seeing a structural shift up in inflation? Lonsec’s current view is that whilst inflation will continue to rise in the short-term, after that, it’s still questionable whether we will see a structural rise in inflation. One of the other matters we’re focused on is wage growth. We have not seen a material rise in wages, which is important in the context of looking at inflation.

As part of our dynamic asset allocation process, we also look at a number of key factors: valuation (are assets cheap or expensive), where we are in the business cycle, and policy (such as monetary policy) and liquidity. In this video, Lukasz looks into each of these factors and explains how these were considered to determine Lonsec’s current asset allocation

Transcript

Inflation and its implication for asset allocation

Hello, my name is Lukasz de Pourbaix, I’m the CIO of Lonsec Investment Solutions. Today, I’ll be providing an update on our latest takeouts from our asset allocation Investment Committee, which is responsible for our dynamic asset allocation views. Now we hold that committee every quarter.

The main topic, really this investment committee was inflation, and whether inflation is transitory in nature, or whether we are seeing a structural shift up in inflation. And certainly, we’ve seen CPI numbers go up, most recently in the US announced the significant jump in CPI to levels we haven’t seen since 2008. And so, as part of that discussion, part of the narrative was, is this driven by supply/demand issues as a result of COVID? Or is there genuinely an inflation increase? And it’s fair to say that the market at the moment does believe that it’s transitory in nature, we are seeing significant disruptions to supply chains, which has impacted a range of assets. If you look at things like some of the commodities, Lumber (LBS), the one that suddenly is sort of focused on, through the microchips to make computers, mobile phones, etc. We’ve seen prices certainly spike up in a lot of these areas. And our view would be that once we get spending come back to pre-COVID levels, inflation will continue to rise in the short term, but after that, it’s still questionable whether we will see structural rise inflation.

Our base case at the moment is that it is likely to be transitory in nature, but that it will rise in the shorter term. One of the other aspects that we’re certainly focused on in that context is wage growth. Today, we haven’t seen a material rise in wage growth. It is a lagging indicator. However, it is important in the context of looking at inflation and while we have seen pockets of rises in wage growth, if anyone’s been out to try to hire staff in places like cafes, restaurants, fruit pickers, we all know that there’s shortages there, but across the board, we haven’t seen wage growth right rise and certainly that would be an area that we would be keen to focus on.

What changes were made in June to Lonsec’s Asset Allocation positions?

As part of our dynamic asset allocation process, we look at a couple of key factors that we think determine the direction of where different asset prices will go into the future. And those are valuation – so are assets cheap or expensive. Where are we in the business cycle, and then policy and liquidity.

If we take those three metrics in isolation, from a valuation perspective, it’s probably fair to say that most assets from an absolute perspective look pretty expensive. However, we are in the game of allocating capital. And so we have to look at things from a relative perspective. If we look at asset classes, from a relative perspective, we’ve continued to think that risk assets such as equities are favorable compared to things like bonds and cash, where know there’s you’re getting little reward for that risk. From an equity perspective, we probably have a bias towards emerging markets and Australian equities over some developed markets, particularly the US, from a pure valuation perspective. So overall picture is that from a relative perspective, risk assets are still looking attractive, you’re still being rewarded for risk from a valuation perspective. If you look at other indicators, and one of those is cyclical indicators – so where are we in the cycle? Cyclical indicators continue to look positive. A lot of economic data that’s been coming out, whether it’s looking at PMIs, whether it’s looking at job growth, all of them pointing in the right direction.

From our economic perspective, we’ve clearly seen a recovery and continue to see a recovery, those indicators are looking positive. Finally, from a policy perspective, if we think about monetary policy, and my earlier reference to inflation, the two are obviously related. Policy, however, does remain supportive of risk assets, interest rates remain low. Central Banks, in our view, aren’t going to pull the trigger anytime soon. They will want to see evidence of growth, and more evidence that if this inflationary environment is transitory, they’ll probably be a bit more standoffish in pulling the trigger on rates. But as it is at the moment, that environment in terms of policy does remain supportive of risk assets. We are also seeing material fiscal support. So net net if you think about those longer-term indicators, such as valuation, which is very much longer term indicator is supportive of risk assets. The policy settings continue to be supportive of risk assets. And then obviously, liquidity is there supporting markets as well, all things pointing to risk assets from an overall directional perspective, we do like risk assets over some of the more defensive assets. Having said that, we do think we’re in an environment where we are seeing a lot more dispersion between returns within asset classes. We do think that being selective within asset classes, be it equities or bonds, is becoming much more important. And we do think that dispersion between winners and losers will be wider going forward than it has been in the past.

Overall, the outcome of our dynamic asset allocation committee has been to make no change at this point. From our last quarter, we do remain positive on risk assets, underweight, Fixed Income, underweight Cash, we continue to have a neutral position to Alternatives. We are looking at if there are others? Potentially at some point, do we review that allocation to alternatives? Do we potentially increase that? From a portfolio perspective, we already have some exposure. Some of you will note will have we’ve had exposure to Gold, which has seen a significant increase in price over recent months. And if we do see that inflationary environment be more than just transitory those type of assets can contribute to helping protect the portfolio in that environment. So overall, there are some risks out there. Some inflation is probably the number one risk at the moment. But net net, we think that the environment is still conducive to risk assets.



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 © 2021 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.

Watch the recording.

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.


Lonsec’s experts look at four key themes we believe every financial adviser needs to understand to help their clients weather the storm and be in the best position possible to take advantage of future market conditions.

Bonds

Lukasz de Pourbaix, Executive Director & Chief Investment Officer

Providing insight into current market dynamics and performance-driven by historically high levels of volatility and tight liquidity conditions

Equities

Danial Moradi, Portfolio Manager Listed-Products

An overall update on the banking sector, focusing on the future of dividends in the current environment and a look into what the future may hold.

Performance of portfolios

David Wilson, Senior Investment Consultant

A summary of the overall performance of Lonsec’s managed accounts, including a deeper dive into the underlying strategies used and drivers of returns at the security selection level.

Dynamic Asset Allocation

Brook Sweeney, Senior Investment Consultant

Insight into Lonsec’s dynamic asset allocation process and the valuation, cycle, policy, and momentum factors that drive decision making.

 


This information is provided by Lonsec Investment Solutions as a corporate authorised representative of Lonsec Research Pty Ltd who holds 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

Our Head of Listed Equities, Peter Green, takes a look at the impact of COVID-19 on equity markets, and highlights some of the companies that have benefited from the COVID-19 outbreak, as well as the ones that have been most adversely affected.

Copyright © 2020 Lonsec Research Pty Ltd ABN 11 151 658 561 AFSL 421 445 (Lonsec). Lonsec receives fees from fund managers and financial product issuers for rating financial products using objective criteria and for services including research subscriptions. Lonsec’s fee and analyst remuneration are not linked to the rating outcome. Lonsec, its representatives and their associates may hold the financial product(s) rated. Warning: Past performance is not a reliable indicator of future performance. Any advice is General Advice based on the investment merits of the financial product(s) alone, without considering the objectives, financial situation and needs of any person. It is not a recommendation to purchase, redeem or sell the relevant financial product(s). Before making a decision read the PDS and consider your financial circumstances or seek personal advice. Disclaimer: Except for ratings, 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 and ratings 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. 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.

The coronavirus has had a major impact on equity markets in the past few days, and the uncertainty surrounding looks set to continue for some time. Peter Green, our Head of Listed Products, looks at the stocks that have been directly and indirectly affected, as well as some of the reporting season’s best and worst performers.

The strength of equity markets during 2019 and the start of 2020 saw an increase in valuation premiums in the market resulting in a number of sectors trading at record highs. But the reporting season outlook has been impacted by a slowing global economy, the devastating bushfires across Australia and the coronavirus, elevating the risk profile of the market.

In this first video of our Reporting season series, Lonsec’s Listed Products Portfolio Manager, Danial Moradi, takes an in-depth look at how companies performed over the first two weeks of the reporting season.

Hear from Lukasz de Pourbaix, Chief Investment Officer – Lonsec Investment Solutions, on some of the key themes that are set to dominate markets in 2020, and the implications they could have on your clients’ portfolios.

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.