News & Insights Archives - Page 16 of 18

Crunch time for emerging market debt

This year has been challenging for fixed income investors across all sectors, but the extraordinary developments in emerging market currencies and yields spelled significant pain for Lonsec’s fixed income fund managers. Volatility had long been anticipated by investors but it finally reared its head in 2018 with February’s selloff, followed by a similar bout of volatility and drawdowns in October. That, along with rising yields in the US led to many moving out of credit markets in favour of more defensive assets.

As the chart below shows, emerging market debt experienced a significant reversal in fortunes, going from the top performing peer group in 2016 and 2017 to the worst performing in 2018 (to the end of September). This was driven by a variety of events, including a strengthening US dollar, rising geopolitical risks—especially in Turkey—and investors moving back into the perceived safety of global bonds.

Australian fixed income manager returns were weaker than last year with only seven out of 13 managers outperforming the benchmark over the year ending September 2018. Over the three-year period returns were much weaker, with only one manager outperforming out of nine, although mostly with lower levels of volatility than the benchmark.

Average peer group returns by calendar year

Source: Lonsec

Average returns in the alternative income groups have been lower than last year, reflecting the challenging credit conditions across the board. Overall, eight managers outperformed the Lonsec sector benchmark while five underperformed. The strongest performing manager returned 3.3% while the worst returned -0.1%, demonstrating further compression in results from the previous year. Over three years, performance is stronger with ten out of eleven managers having outperformed the benchmark.

Within the unconstrained bond universe, results have been underwhelming, with 10 of 23 managers outperforming the Bloomberg AusBond Bank Bill Index. The unconstrained sector is highly diverse, and returns can vary greatly given that mandates are very flexible and implicitly seek to outperform cash at a minimum. However, compared to last year the dispersion of results was narrower with the best performing fund returning 2.9% and the worst returning -3.8%. Over the past few years, unconstrained bond managers as a peer group have delivered modest returns and have generally underperformed Australian fixed income funds year to year.

Growth in fixed income products covered by Lonsec

Source: Lonsec

Unconstrained bond products remain one of the drivers of product growth, along with post-retirement income-focused solutions. For investors willing to take on additional credit risk, there has been growth across both high yield and investment grade products, while at the other end of the spectrum Exchange Traded Funds (ETFs) and passive products have also experienced steady growth. There has also been notable growth in the number of funds offering responsible investment strategies. Investors should remain mindful of the role fixed income plays in an overall portfolio and how riskier assets may be impacted during adverse market events.

To find out more about Lonsec’s fixed income product research, sign up for a free research trial or get in touch with our client services team.

IMPORTANT NOTICE: This document is published by Lonsec Research Pty Ltd ABN 11 151 658 561, AFSL 421 445 (Lonsec).

Please read the following before making any investment decision about any financial product mentioned in this document.

Warnings: Lonsec reserves the right to withdraw this document at any time and assumes no obligation to update this document after the date of publication. Past performance is not a reliable indicator of future performance. Any express or implied recommendation, rating, or advice presented in this document is a “class service” (as defined in the Financial Advisers Act 2008 (NZ)) or limited to “general advice” (as defined in the Corporations Act (C’th)) and based solely on consideration of data or 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.

Warnings and Disclosure in relation to particular products: If our general advice relates to the acquisition or possible acquisition or disposal or possible disposal of particular classes of assets or financial product(s), before making any decision the reader should obtain and consider more information, including the Investment Statement or Product Disclosure Statement and, where relevant, refer to Lonsec’s full research report for each financial product, including the disclosure notice. The reader must also consider whether it is personally appropriate in light of his or her financial circumstances or should seek further advice on its appropriateness. It is not a “personalised service” (as defined in the Financial Advisers Act 2008 (NZ)) and does not constitute a recommendation to purchase, hold, redeem or sell any financial product(s), and the reader should seek independent financial advice before investing in any financial product. Lonsec may receive a fee from Fund Manager or Product Issuer (s) for reviewing and rating individual financial product(s), using comprehensive and objective criteria. Lonsec may also receive fees from the Fund Manager or Financial Product Issuer (s) for subscribing to investment research content and services provided by Lonsec.

Disclaimer: This document 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 document, which is drawn from public information not verified by Lonsec. 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 document following publication. Except for any liability which cannot 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 information.

December 6, 2018/by Jude McDonnell

News & Insights

Portfolio diversification in volatile markets

This article is intended for licensed financial advisers only and is not intended for use by retail investors.

Markets have continued to experience volatility over the month. The US market in particular has endured significant volatility with technology stocks bearing the brunt of the turbulence. Until recently the tech sector was a significant driver of US market returns making up over 20% of the S&P 500 Index. Over the last 5 years stocks such as Facebook have seen their share price rise phenomenally from around US$48 in November 2014 to over US$200 in July this year. Since then the stock price for Facebook has declined due to stock specific issues, as well as momentum turning negative on tech stocks generally. We expect market volatility to continue as the market digests the prospect of possible lower growth in the US economy in the future and the potential for further interest rate rises.

In such an environment portfolio diversification becomes increasingly important. This means diversification by investment strategy, such as active, long only, long/short and absolute return, as well as asset class diversification. Lonsec’s Multi-Asset Managed Portfolios are diversified by manager strategy and styles which are designed to perform differently in different market environments. From an asset allocation perspective, we continue to monitor asset valuations and where we are in terms of the business cycle and market momentum. We believe we are at the later stages of the cycle with economic indicators such as global PMIs declining, however overall growth still remains positive hence we have maintained a relatively neutral position to equities. Our main active tilt has been towards alternatives which we have recently reflected in our Multi-Asset portfolios. For portfolios where our mandates do not invest in alternative assets, we have continued to ensure that the portfolios have exposure to managers that have the ability to actively manage their exposure to market risk via their active investment approach.

This article has been prepared for licensed financial advisers only. It is not intended for use by retail clients (as defined in the Corporations Act 2001) or any other persons. This information is directed to and prepared for Australian residents only. This information may constitute general advice. It has been prepared without taking account of an investor’s objectives, financial situation or needs and because of that an investor should, before acting on the advice, consider the appropriateness of the advice having regard to their personal objectives, financial situation and needs.

December 3, 2018/by Lukasz de Pourbaix

News & Insights

The US housing market is sounding concerns for the economy

While consumer spending continues to propel the US economy, GDP growth slowed in the September quarter, with a conspicuous downturn in fixed investment. Recent signs of weakness in the housing sector have raised fears that this downturn could continue through the December quarter, but more importantly markets are concerned that Fed tightening could exacerbate the situation, triggering a further fall in housing activity and putting pressure on consumer spending.

Although housing starts have fallen only modestly from an annual pace of 1.3 to 1.2 million, sales of new homes have fallen 13% over the course of 2018, while the NAHB builder sentiment index has reached its lowest level in two years. Housing activity remained weak in October, with single-family housing starts falling by 1.8% and permits falling by 0.6%. As the chart below shows, both existing and new home sales appear to be coming off, coinciding with the most recent cycle of monetary policy tightening.

The US housing market is sounding concerns for the economy

Source: St Louis Fed, Lonsec

At a recent speech at the Dallas Fed, Jerome Powell listed three possible challenges to growth in 2019, including a weaker global economy, fading fiscal stimulus, and the lagged economic impact of the Fed’s past rate increases. More broadly, financial conditions have tightened, with credit spreads widening, equity prices declining, and the currency strengthening. There is now a distinct possibility that the Fed may pause during the course of 2019.

In the meantime, trade tensions continue to impact confidence. President Trump has threatened to impose tariffs on almost all Chinese exports to the US and to ramp up the rate to 25%. Whether reduced options for stimulus force the Trump administration into a deal on trade with China remains to be seen. The recent impasse between the US and China on trade at the APEC conference does not instill confidence, although talks between Donald Trump and Xi Jinping at the G20 summit in Argentina in late November could bear fruit.

IMPORTANT NOTICE: This document is published by Lonsec Investment Solutions Pty Ltd (Lonsec), ACN 608 837 583, a corporate authorised representative (CAR number 1236821) of Lonsec Research Pty Ltd, ABN 11 151 658 561, AFSL 421 445.

Please read the following before making any investment decision about any financial product mentioned in this document.

Warnings: Lonsec reserves the right to withdraw this document at any time and assumes no obligation to update this document after the date of publication. Past performance is not a reliable indicator of future performance. Any express or implied recommendation, rating, or advice presented in this document is a “class service” (as defined in the Financial Advisers Act 2008 (NZ)) or limited to “general advice” (as defined in the Corporations Act (C’th)) and based solely on consideration of data or 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.

Warnings and Disclosure in relation to particular products: If our general advice relates to the acquisition or possible acquisition or disposal or possible disposal of particular classes of assets or financial product(s), before making any decision the reader should obtain and consider more information, including the Investment Statement or Product Disclosure Statement and, where relevant, refer to Lonsec’s full research report for each financial product, including the disclosure notice. The reader must also consider whether it is personally appropriate in light of his or her financial circumstances or should seek further advice on its appropriateness. It is not a “personalised service” (as defined in the Financial Advisers Act 2008 (NZ)) and does not constitute a recommendation to purchase, hold, redeem or sell any financial product(s), and the reader should seek independent financial advice before investing in any financial product. Lonsec may receive a fee from Fund Manager or Product Issuer (s) for reviewing and rating individual financial product(s), using comprehensive and objective criteria. Lonsec may also receive fees from the Fund Manager or Financial Product Issuer (s) for subscribing to investment research content and services provided by Lonsec.

Disclaimer: This document 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 document, which is drawn from public information not verified by Lonsec. 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 document following publication. Except for any liability which cannot 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 information.

Copyright © 2018 Lonsec Investment Solutions Pty Ltd, ACN 608 837 583, a corporate authorised representative (CAR number 1236821) of Lonsec Research Pty Ltd, ABN 11 151 658 561, AFSL 421 445. All rights reserved.

November 22, 2018/by Lukasz de Pourbaix

News & Insights

Lonsec appoints new Executive Director of Sales and Marketing

Leading research and investment solutions house Lonsec has appointed Rob Hardy to the newly created role of Executive Director of Sales and Marketing.

Mr Hardy joins Lonsec after seven years at Clime Asset Management, most recently as Chief Operating Officer, and brings over 30 years of experience in sales, marketing and business leadership across a number of industries, including as head of the International Direct Marketing Division of Time Warner.

As Executive Director, Mr Hardy will lead Lonsec’s combined sales and marketing efforts, supported by an experienced team of relationship managers, client service professionals and marketers.

“I’m very pleased to announce Rob as our new Executive Director of Sales and Marketing,” said Lonsec CEO Charlie Haynes. “Rob’s wealth of experience both inside and outside the financial services domain will allow us to have deeper conversations with our clients to better understand their needs during a critical time for the industry.”

The appointment forms part of Lonsec’s new executive structure which establishes greater unity between the Lonsec Research, SuperRatings and Investment Solutions businesses, to provide more holistic investment solutions.

“I’m very excited about the opportunities for Lonsec within a financial services industry undergoing significant change,” said Mr Hardy. “I look forward to leveraging the strong relationships we have with advisers, fund managers and super funds, and driving the continued evolution of our investment research and tools in line with the industry’s future needs.”

Release ends

IMPORTANT NOTICE: This document is published by Lonsec Holdings Pty Ltd ABN 41 151 235 406 (Lonsec).

Please read the following before making any investment decision about any financial product mentioned in this document.

Warnings: Lonsec reserves the right to withdraw this document at any time and assumes no obligation to update this document after the date of publication. Past performance is not a reliable indicator of future performance. Any express or implied recommendation, rating, or advice presented in this document is a “class service” (as defined in the Financial Advisers Act 2008 (NZ)) or limited to “general advice” (as defined in the Corporations Act (C’th)) and based solely on consideration of data or 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.

Warnings and Disclosure in relation to particular products: If our general advice relates to the acquisition or possible acquisition or disposal or possible disposal of particular classes of assets or financial product(s), before making any decision the reader should obtain and consider more information, including the Investment Statement or Product Disclosure Statement and, where relevant, refer to Lonsec’s full research report for each financial product, including the disclosure notice. The reader must also consider whether it is personally appropriate in light of his or her financial circumstances or should seek further advice on its appropriateness. It is not a “personalised service” (as defined in the Financial Advisers Act 2008 (NZ)) and does not constitute a recommendation to purchase, hold, redeem or sell any financial product(s), and the reader should seek independent financial advice before investing in any financial product. Lonsec may receive a fee from Fund Manager or Product Issuer (s) for reviewing and rating individual financial product(s), using comprehensive and objective criteria. Lonsec may also receive fees from the Fund Manager or Financial Product Issuer (s) for subscribing to investment research content and services provided by Lonsec.

Disclaimer: This document 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 document, which is drawn from public information not verified by Lonsec. 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 document following publication. Except for any liability which cannot 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 information.

November 15, 2018/by Gordon Toy

News & Insights

Understanding super no longer optional for advisers

Financial advisers are now able to access investment research, encompassing clients’ whole of life needs, with the announcement by Lonsec of the inclusion of superannuation fund research in its iRate platform.

The research is provided by SuperRatings, Lonsec’s specialist superannuation product research team, which has provided in-depth superannuation fund benchmarking and research for over 20 years.

To date financial advisers have lacked an end-to-end investment research solution that provides superannuation fund research along with managed funds, equities, Separately Managed Accounts (SMAs), listed securities, and individual super fund investment options.

The inclusion of SuperRatings research in the Lonsec platform addresses this gap, giving advisers access to whole of cycle investment research that enables them to gain a full picture of their client’s portfolio while helping them address potential regulatory blind spots.

Lonsec CEO Charlie Haynes said it was critical for the advice industry to respond to the call for increased professionalism and stay ahead of the regulatory curve.

“Advisers are wary of superannuation advice becoming the next flashpoint in the ongoing push to professionalise the industry,” said Haynes. “Even well-educated and well-resourced advisers could end up in hot water if they cannot clearly show how their superannuation and investment advice is in the best interest of the client.”

Lonsec’s superannuation fund research allows advisers to efficiently compare more than 600 superannuation products across over 300 different fund characteristics based on the most extensive fund benchmarking survey conducted in the Australian market.

The aim is to make it easier for advisers to meet their best interest duty, especially when it comes to superannuation product switching, which requires the adviser to clearly explain how the change benefits the client.

“Justifying a particular product recommendation means being able to explain how it stacks up across a wide range of criteria, such as the member servicing environment, insurance coverage and cost, and fund governance and administration,” said Haynes.

“That’s why we’ve made this research available to advisers – to make it easier for them to gain a deeper understanding of super products and to satisfy themselves, their clients and the regulators that their recommendation is the right one.”

Release ends

IMPORTANT NOTICE: This document is published by Lonsec Research Pty Ltd ABN 11 151 658 561, AFSL 421 445 (Lonsec). SuperRatings refers to SuperRatings Pty Ltd ABN 95 100 192 283, AFSL 311 880.

Please read the following before making any investment decision about any financial product mentioned in this document.

Warnings: Lonsec reserves the right to withdraw this document at any time and assumes no obligation to update this document after the date of publication. Past performance is not a reliable indicator of future performance. Any express or implied recommendation, rating, or advice presented in this document is a “class service” (as defined in the Financial Advisers Act 2008 (NZ)) or limited to “general advice” (as defined in the Corporations Act (C’th)) and based solely on consideration of data or 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.

Warnings and Disclosure in relation to particular products: If our general advice relates to the acquisition or possible acquisition or disposal or possible disposal of particular classes of assets or financial product(s), before making any decision the reader should obtain and consider more information, including the Investment Statement or Product Disclosure Statement and, where relevant, refer to Lonsec’s full research report for each financial product, including the disclosure notice. The reader must also consider whether it is personally appropriate in light of his or her financial circumstances or should seek further advice on its appropriateness. It is not a “personalised service” (as defined in the Financial Advisers Act 2008 (NZ)) and does not constitute a recommendation to purchase, hold, redeem or sell any financial product(s), and the reader should seek independent financial advice before investing in any financial product. Lonsec may receive a fee from Fund Manager or Product Issuer (s) for reviewing and rating individual financial product(s), using comprehensive and objective criteria. Lonsec may also receive fees from the Fund Manager or Financial Product Issuer (s) for subscribing to investment research content and services provided by Lonsec.

Disclaimer: This document 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 document, which is drawn from public information not verified by Lonsec. 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 document following publication. Except for any liability which cannot 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 information.

November 15, 2018/by Libby Newman

News & Insights

Lonsec WINS Research House of the Year 2018

For the third year in a row, Lonsec has been announced as the Research House of the Year according to Money Management’s 2018 Rate the Raters Survey, voted on by financial advisers, winning eight out of a possible ten categories. Most notably, Lonsec ranked first for quality of staff, client service and corporate strength, highlighting the depth of knowledge and expertise across our Research team.

Here’s a full list of categories in which Lonsec was rated highest:

Website and Tools
Demonstrating the strength of our online Research portal, iRate.

Staff
Quality of staff and the level of professional experience amongst the team.

Client Service
Client-focused and helping our clients achieve their goals.

Value for Money
The level of value our research gives financial advisers as part of the high-quality, tailored advice solutions offered to clients.

Corporate Strength
Our corporate governance has strengthened this year.

Asset Allocation Research
Recognition of the rigorous research methodology and the value-add it brings to our clients.

Model Portfolio
Quality of the tailored, institutional-grade model portfolios created by the Investment Solutions team.

Overall
Our research offering provides the highest value available in the market.

To find out more about the Money Management Rate the Raters survey, visit: https://www.moneymanagement.com.au/features/rate-raters/planners-keep-lonsec-top-podium

November 12, 2018/by Dylan Pike

News & Insights

The real cost of delaying portfolio implementation

The past decade has seen managed accounts transform from a technologically viable but largely unexplored solution to one that is now fully embedded in financial advice models.

A key benefit of managed accounts is the efficiency they bring to financial advice practices. A large component of this efficiency relates to the fact that once a client is invested within a separately managed account structure there is no requirement for the financial adviser to issue a Record of Advice (RoA) when portfolio changes are made.

For the average advice firm with an average book size, this represents a serious advantage. Advisers can be high-energy individuals but contacting 80 clients every time a change is made to the portfolio is a tall order. Not only is it inefficient, but by the time the adviser is part way through the process of implementing the changes and notifying clients, market dynamics have changed, and previously identified investment opportunities have faded away.

This raises another significant advantage of managed accounts: responsiveness. Changes made to managed and SMA portfolios are instructed to all relevant platforms usually within two days after an investment committee has recommended a change. This means that advice clients can be aligned to the recommended portfolio structure almost immediately, allowing them to capture the full benefits of portfolio changes.

The advantage this provides for financial advisers and their clients goes beyond saving advisers time and making the process of portfolio implementation more efficient. Delays in implementation can cost clients investment upside, and in the long run can have a significant impact on investment performance and outcomes.

Measuring the cost of delay

While the cost of delayed implementation might seem like an academic issue, it isn’t. These costs are quantifiable, and they have a real impact on investment performance.

Lonsec conducted analysis using the Lonsec SMA – Australian Equities Core to illustrate the impact portfolio implementation delays can have on portfolio performance. The portfolio is an active concentrated portfolio investing in Australian listed equities. We have used actual portfolio changes recommended in December 2016 and then measured what the hypothetical excess return would look like over a three-month, six-month and one-year period under four implementation scenarios.

What these results show is that over a one-year period, implementing the portfolio changes with no delay resulted in an excess return of 1.3% above the benchmark S&P/ASX 200 Accumulation Index. This compares to an excess return of 0.2% with a six-month delay, a -2.0% excess return for a 12-month delay, and a -3.5% excess return if the portfolio change was not implemented.

Hypothetical excess return to March 2018 (delays to implement December 2016 portfolio changes)

Source: Lonsec

Responsive implementation allows clients to capture the full upside associated with changes in dynamic asset allocation and security selection. This is invaluable in an environment where the expectations of advice clients for actively managed, tailored and responsive portfolio management are growing. Increasingly, advisers need to be able to justify the costs involved in providing advice, and this means being able to show that their investment solutions are fit for purpose and able to respond nimbly to market opportunities in line with the client’s investment objectives.

Responsive, contemporary, active

Financial advisers can harness the managed account model to create a more efficient financial advice business and create more time to focus on the individual needs of clients. But often overlooked is the way in which responsive implementation enhances the value of the advice offering through better investment outcomes and by meeting the client’s expectations for active and timely management of their investments. This is where financial advice businesses can build a strong value proposition.

Meeting clients’ expectations in today’s advice world means meeting three criteria: responding market developments quickly, providing contemporary multi-asset portfolios, and actively managing and monitoring the client’s investment. In order to achieve this, advisers are increasingly turning to professional managed portfolio managers and SMA providers, outsourcing day-to-day portfolio management to an experienced team of investment consultants and focusing on providing holistic, goals-based advice.

By using Lonsec’s managed portfolios and SMA’s, advisers can access contemporary, actively managed multi-asset portfolios with dynamic asset allocation and active investment selection, backed by an investment committee comprising our senior investment consultants, research sector leads, and external economists.

This means investment solutions are backed by a highly qualified, well-resourced, and experienced group of investment professionals. They can also ensure their clients receive responsive and efficient implementation of investment decisions, avoiding delays that can eat into investment performance while winning back time to build enduring client relationships with an appropriate level of service.

Important Notice: This document is published by Lonsec Investment Solutions Pty Ltd ACN: 608 837 583, a corporate authorised representative (CAR number: 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 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 issuers 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. Lonsec Research receives fees for providing investment consulting advice, approved product lists and other advice, to clients. LIS receives a fee for providing the model portfolios to financial services 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 may hold any financial product(s) referred to in this document. Lonsec Research’s 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 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” (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. 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 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: LIS provides this document for the exclusive use of its clients. It is not intended for use by a retail client or a member of the public and should 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 document, which is drawn from public information not verified by LIS. Financial conclusions, ratings and advice are given on reasonable grounds held at the time of completion (refer to the date of this document) 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, 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 © 2018 Lonsec Investment Solutions Pty Ltd ACN: 608 837 583 (LIS), a corporate authorised representative (CAR number: 1236821) of Lonsec Research Pty Ltd ABN: 11 151 658 561 AFSL: 421 445 (Lonsec Research). This report is subject to copyright of LIS. 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 report 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 LIS.
This report 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 LIS copyrighted material, applies to such third-party content.

November 9, 2018/by Lukasz de Pourbaix

News & Insights

Day of Confrontation 2018: Media highlights

The SuperRatings and Lonsec Day of Confrontation 2018 may be over, but the conversation hasn’t finished. Once again, the event has sparked discussion on a range of critical issues, from the government’s view on the ‘Best in Show’ proposal to the future of financial advice and the vexed issue of licensing. Below is a selection of articles flowing from the day’s event as well as the 16th Fund of the Year Awards dinner.

Market turmoil could force super mergers

Australian Financial Review
A detailed review and survey prepared for the event by SuperRatings executive director, Kirby Rappell, suggest operating expenses for an average super fund are rising by around 5 per cent a year. Read

Top super funds announced by SuperRatings

Sydney Morning Herald
The $70 billion fund for those working in the higher education and research sector, UniSuper, was named fund of the year by researcher SuperRatings at a dinner at Melbourne’s Grant Hyatt on Tuesday night. Read.

Robert wants ‘mutt’ funds closed

The Australian
In remarks at the annual “Day of Confrontation” conference organised by research company SuperRatings, Mr Robert said there were 220 funds in existence — which “would seem to be very, very excessive especially when a whole heap aren’t working.” Read

Super sector faces rising costs as funds fight for active members

Adviser Voice
Super funds are battling to improve active member ratios while operating costs per member are rising across the sector, with long-term implications for the sustainability of smaller funds. Read

November 1, 2018/by Gordon Toy

News & Insights

SuperRatings & Lonsec Award Winners Confirmed!

Congratulations to all of the award winners & finalists from 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
UniSuper

SuperRatings Pension of the Year Award

Winner
QSuper

Finalists
AustralianSuper
BUSSQ
Cbus Super
Equip
HESTA
Sunsuper
TelstraSuper
UniSuper
VicSuper

SuperRatings MyChoice Super of the Year Award

Winner
Sunsuper

Finalists

CareSuper
Cbus Super
Hostplus
Mercer Super Trust
QSuper
Statewide Super
TelstraSuper
UniSuper
VicSuper

SuperRatings MySuper of the Year Award

Winner
UniSuper

Finalists
AustralianSuper
CareSuper
First State Super
HESTA
Hostplus
Intrust Super
QSuper
Rest
Sunsuper

SuperRatings Career Fund of the Year Award

Winner
Hostplus

Finalists
Cbus Super
HESTA
Intrust Super
Telstra Super

SuperRatings Best New Innovation Award

Winner
Sunsuper BEAM

Finalists
BUSSQ Centrelink Asssist Program
QSuper Online Tax Deduction Claims Facility
WA Super Scaled Advice Tool

SuperRatings Rising Star Award

Winner
Tasplan Super

Finalists
HUB24
MTAA Super
netwealth
WA Super

SuperRatings Infinity Award

Winner
Australian Ethical Super

In addition to the SuperRatings honours, Lonsec also presented a number of awards recognising excellence across the broader wealth management industry:

Lonsec Innovation Award

Winner
Magellan Global Trust

Finalists
Challenger CarePlus
Partners Group Global Real Estate Fund

Lonsec Rising Star Award

Winner
Lennox Capital Partners Pty Ltd

Finalists
Affirmative Investment Management Partners Ltd
India Avenue Investment Management

Lonsec Disruptor Award

Winner
BetaShares Australia 200 ETF

Finalists
BetaShares Australian Investment Grade Corporate Bond ETF
CFM IS Trends Trust

Listed Fund Award

Winner
MCP Master Income Trust

Finalists
VanEck Vectors Australian Floating Rate ETF
Vanguard Global Value Equity Active ETF

Pendal Retirement Innovation Award

Winner
Sam Harris – General Manager, Insights and Customer Experience, HESTA

Finalists
Jean-Luc Ambrosi – Executive General Manager, Marketing & Digital, TelstraSuper
Steven Hack – Manager – Product and Advice, BUSSQ
Lyn Melcer – Head of Technical Advice, QSuper

The evening was proudly supported by our principal sponsor Pendal, and the Link Group.

November 1, 2018/by Casey Brown

News & Insights

Echoes of the taper tantrum

For some time, we have flagged that volatility in markets has been subdued, underpinned by a wave of liquidity being pumped into global economies by central banks in the form of Quantitative Easing (QE). We have seen bond yields trade at historic lows and the subsequent low interest rate environment has led to increasing debt levels among both corporates and households.

With central banks unwinding their QE programs and interest rates in the US going up, from an equities perspective the focus will increasingly be on future earnings growth, which to date has been trading above nominal GDP, partly due to low wage growth. The unwinding of the Fed’s balance sheet—which began around a year ago—has been a catalyst for rising yields, as has the prospect of growth with inflation.

US equity market performance and size of Fed balance sheet

Source: Lonsec, Bloomberg

An important factor recently has been uncertainty regarding the so-called ‘neutral’ Fed funds rate. The FOMC has for some time suggested that the neutral rate—meaning the rate that is consistent with full employment and inflation at target—would rise to around 2.9% over coming years. Markets had also implicitly priced in a peak of around 2.9% for the Fed funds rate by mid-2019.

However, Fed Chair Jay Powell surprised markets by commenting that there would be less emphasis on the neutral rate going forward, given that the funds rate is likely converging on the neutral level and that the actual neutral rate cannot be calculated with a high degree of accuracy. New York Fed President John Williams—considered the expert on the neutral policy concept and its measurement—noted that, going forward, the Fed would determine proximity to the neutral rate by observing changes in growth and inflation data. Sensible enough, but hardly the kind of solid forward guidance that markets have become accustomed to.

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Disclaimer: This document 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 document, which is drawn from public information not verified by Lonsec. 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 document following publication. Except for any liability which cannot 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 information.

October 28, 2018/by Lukasz de Pourbaix