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

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

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

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

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


Source: Lonsec iRate Bentham Syndicated Loan Fund

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

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

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

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

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

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

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

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

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

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

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



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

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

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

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

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

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

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

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

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

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

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

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

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

Release ends

Throughout history, financial crises have been caused by an economic shock or a fundamental demand/supply imbalance. This crisis is different. When the pandemic hit, the global economy was in a growth cycle and share markets were performing reasonably well. Lockdowns put economies effectively into hibernation and triggered an immediate and profound market response. Although the limits on movement and restrictions on discretionary spending such as travel and entertainment are universal, the greatest financial jolt has been felt mostly by individuals who are at the beginning and at the end of their working lives. It is the young, due to the cascading impact on savings and jobs, and the elderly, due to falling investment yields that are most impacted.

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!

The live webinar was held on Wednesday at 10 AM AEST, 15th of July, 2020

Overview

During our past webinar “Sustainability vs ESG: What is your client looking for?”, our platform was inundated with questions from attendees.

We weren’t able to respond to everyone, so by popular demand, we decided to hold a special Q&A event, so Lonsec could respond to the questions we received about the Sustainability and ESG process. 

Financial advisers are increasingly being asked to take their clients’ environmental, social and governance (ESG) expectations and ethical considerations into account when recommending financial products. Whilst the term ESG is becoming increasingly common, the objectives of fund managers and end investors don’t always align and can be a source of great confusion.

Darrell Clark, Manager, Multi-Asset, and Tony Adams, Head of Sustainable Investment Research at Lonsec delved deeper into the topic and responded to attendees’ burning questions!

 

If you attended our live webinar, please note that further instruction on how to receive the CPD Points will be delivered to your inbox in the next 8-12 business days. Whilst we aim to ensure every attendee receives CPD Points, it is within the guidelines provided that you are required to attend the full duration of the live webinar to receive your CE accreditation. Our technology platform collects data that reflects the duration and your full engagement during the live session.

CE/CPD accreditation is provided by our CE Accreditation Partner, Portfolio Construction Forum.


The content, presentations and discussion topics covered during this event are intended for licensed financial advisers and institutional clients only and are not intended for use by retail clients. No representation, warranty or undertaking is given or made in relation to the accuracy or completeness of the information presented.
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, these presentations or any loss or damage suffered by the attendee or any other person as a consequence of relying upon the information presented.
Lonsec advises that all content presented at this event by any Symposium partner (not part of the Lonsec group of companies) is 3rd party content and forms representations and opinions of those 3rd parties alone. The contents of the presentations at this event are not in any way endorsed by Lonsec.

 

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.

The live webinar was held on Wednesday at 10 AM AEST, 1st July, 2020

Overview

We were blown away by the response to the Lonsec Webinar Series, which saw over 3,000 people attend across five webinars. Unfortunately, given the range of topics and limited time available, we weren’t able to get to everyone’s questions. So for this webinar, we opened it up to the floor. Join our portfolio construction experts in an exciting panel discussion.

Moderator: Brook Sweeney, Senior Investment Consultant

Panel:

• Lukasz de Pourbaix – Chief Investment Officer
• Veronica Klaus – Head of Investment Consulting
• Dan Moradi – Portfolio Manager, Listed Products
• Deanne Baker – Portfolio Manager, Multi-Assets

 

If you attended our live webinar, please note that further instruction on how to receive the CPD Points will be delivered to your inbox in the next 5-10 business days. Whilst we aim to ensure every attendee receives CPD Points, it is within the guidelines provided that you are required to attend the full duration of the live webinar to receive your CE accreditation. Our technology platform collects data that reflects the duration and your full engagement during the live session.

 


The content, presentations and discussion topics covered during this event are intended for licensed financial advisers and institutional clients only and are not intended for use by retail clients. No representation, warranty or undertaking is given or made in relation to the accuracy or completeness of the information presented.
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, these presentations or any loss or damage suffered by the attendee or any other person as a consequence of relying upon the information presented.

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

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

The biggest challenge for investors in an environment such as the one we are experiencing now is that there is a lot of information, the environment is changing rapidly and there are many unknowns. In the past several weeks we have witnessed one of the fastest drops in markets in history, bond market liquidity has dried up, unemployment is rising, robust business models have unraveled with businesses such as Virgin Australia forced into administration and we have seen unprecedented levels of government stimulus. This follows an extended period where equity market returns were strong and volatility was at historically low levels.

Whether you are running an investment committee or speaking to clients in such an environment, going back to basics is warranted. Referring to your investment philosophy and the investment framework that underpins it is fundamental in periods such as this. Importantly, it will assist in avoiding making reactive investment decisions that can have an adverse impact on the long-term outcomes of your portfolios. This is particularly important in the current environment where there is a proliferation of news flow. On a client level, dusting off the investment philosophy and refocusing your client’s attention on your fundamental investment beliefs will help you deal with nervous clients and aid in preventing them from making kneejerk decisions relating to their investments.  If we cast our minds back to the GFC, we know that clients that were reactive and cashed out from a typical balanced portfolio locked in a loss of about 8.5% on average, whereas those that remained invested, benefitted from the subsequent rebound in markets.

At the core of Lonsec’s investment philosophy is our belief in a diversified portfolio approach across asset classes and investment strategies with a strong focus on risk management. We aim to do this through a combination of active asset allocation decisions focused on managing risk and active bottom-up investment selection focused on ensuring portfolio are diversified not only by asset class but also investment strategies. As a practical example, in the current environment our focus within asset allocation remains on valuation, cyclical and liquidity factors and market sentiment. This provides us a starting point for assessing the current environment.

From a bottom-up fund selection perspective, we remain focused on understanding the role that every fund plays in the portfolio recognising that during periods of severe market dislocation, our ‘risk control’ funds should provide some dampening against this volatility, whereas our ‘growth’ funds will more than likely suffer the full extent of any market moves.

The strength of having an investment framework will assist navigating through uncertain times as it helps understand performance drivers and ‘where to from here” scenarios. Additionally, it ensures that conversations we have with clients on expectations of portfolio performance are clear and easily understood.

For more information about how Lonsec can help you with your investment philosophy and process, please contact us on 1300 826 395 or info@lonsec.com.au.

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.