Money Management | Vol. 34 No 7 | May 7, 2020

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Vol. 34 No 7 | May 7, 2020

26

GENDER

Will remote working help women?

MENTAL HEALTH

30

Supporting staff through COVID-19

Long/short funds

A year out from the LIF review, ClearView urges no change

SMSFs

BY MIKE TAYLOR

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SMSFs are weathering the COVID-19 storm but will they ultimately pay a price?

SELF-MANAGED superannuation funds (SMSFs) have been weathering the challenges created by the COVID-19 pandemic well, but there are concerns that the real threats will come later as the Government looks at its tax options to help restart the economy.

Unlike what occurred during the Global Financial Crisis, there appears to have been no significant diminution in the numbers of SMSFs being established, with the SMSF Association pointing to the opposite.

“Interestingly, for the first time in several years the trend of declining SMSF registrations has reversed this year,” SMSF Association chief executive, John Maroney said.

“The number of SMSF registrations received between July 2019 – December 2019 was 11,558. This compares with 10,954 SMSF registrations received for the same period in 2018, representing an increase of 5.5% in registrations.

“SMSF registrations for January and February 2020 were 3,246 compared with 2,807 SMSFs registered during the same period last year. That is an increase of 15.6%.”

However, SMSF sector veteran and managing director of Heffron SMSF Solutions, Meg Heffron worries that the real challenge for SMSF trustees will come down the track when the pandemic is over and the dust has settled.

The SMSF sector will need to be alert to the consequences of the large and rapid policy measures the Federal Government put in place.

“The SMSFs themselves and Australia generally are clearly going to have to pay for the stimulus one day,” she said. “Sadly, people who have accumulated wealth are often soft targets here and that’s SMSFs. The attack on franking credit refunds will make a re-appearance as will capital gains tax (CGT) and superannuation tax concessions I suspect.”

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32

TOOLBOX

Full feature on page 22

LESS than a year out from the Australian Securities and Investments Commission (ASIC) review of the Life Insurance Framework (LIF) major insurer Clearview has strongly reiterated its view that life insurance commissions should be retained.

Giving testimony before the House of Representatives Standing Committee on Economics, ClearView chief executive, Simon Swanson, backed the position of no change to the LIF. The committee is currently hearing submissions from the major insurers as part of its broader inquiry into the four major banks and other financial institutions.

Swanson said Clearview’s public policy position was that the most pressing matters for the

industry, aside from managing the impact of COVID-19, remained: • Stable life insurance commission rates with no further changes; • Tax deductibility of advice fees; and • Unrestricted choice of life insurance provider for financial advisers and their clients.

Responding to questioning from West Australian Labor member, Dr Anne Aly, that 78% of consumers who obtained life insurance through an adviser preferred to pay an upfront fee for advice with lower insurance premiums over the lifetime of the policy, Swanson said that advisers and their clients should continue choosing the most appropriate payment method, based on a client’s unique circumstances and needs.

Continued on page 3

Which boards are delivering value for money?

WHEN it comes to getting value for money from their boards, shareholders in Magellan Financial Services have little to complain about while shareholders in AMP Limited might have some questions to ask.

The boards of Challenger, Link Group and Bank of Queensland may also have to look to their laurels.

That appears to be the bottom line of new research conducted

by Sydney-based firm, Apollo Communications which ranked the market capitalisation of all Australian Securities Exchange (ASX) 100 companies and analysed which boards within which industries were paid more or less than their market size dictated.

And, interestingly, the financial services industry through up some stark contrasts which were pointed up by Apollo’s chief executive, Adam Connolly.

“When board remuneration is ranked against company size, the top 10 best value boards in Australia are CSL, Newcrest Mining, Magellan Continued on page 3

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May 7, 2020 Money Management | 3

News

AZ NGA to acquire risk advice business ANZ reports 51% stage where it needed the capital and support of first half decline a large, experienced partner to help capitalise on

BY JASSMYN GOH

AZ Next Generation Advisory (AZ NGA) is set to acquire financial planning firm Certe Wealth Protection, subject to settlement terms and government approvals.

In an announcement, AZ NGA said the deal included a cash payment of 51% upfront and a share swap of 49% of Certe Wealth Protection for AZ NGA shares, with a progressive buy-back of these shares.

Based in Sydney and Brisbane, Certe was a specialist risk insurance advice business with four advisers, seven support staff, and was founded by principal Jeremy Boller. The firm had approximately $16 million of inforce premiums.

Boller said the firm had reached a size and

Numbers game at AFA on constitutional Continued from page 1 “ClearView does not promote one remuneration model over another for life insurance advice,” he said, noting that within the company’s LifeSolutions product series, advisers could opt to receive commissions or reduce the commission to zero and charge a fee.

Advisers could also rebate commissions to the client and charge a fee or accept a combination of fees and commissions.

The Australian Securities and Investments Commission is scheduled to begin reviewing the LIF next year but signalled to the Royal Commission in 2018 that in the absence of significant improvement on the part of the industry it was minded to recommend the removal of commission-based arrangements.

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opportunities.

“The COVID-19 crisis reinforces the relevance and importance of life insurance. At this time, we are more active than ever. We are calling our clients, checking that they are okay and reassuring them that they are covered should something go wrong. We are not sitting back and crossing our fingers that clients don’t cancel their policies,” he said.

“Risk is a specialist area and sadly there are fewer and fewer risk specialists around, but that is also an opportunity for us. AZ NGA is the ideal partner to take this business forward.”

AZ NGA now has acquired an interest in about 60 accounting and financial advisory firms.

BY MIKE TAYLOR

ANZ is the latest of Australia’s big four banks to reveal the impact of the COVID19 pandemic, reporting a 51% decline in first half net profit to $1.55 billion.

The ANZ half follows on from a similar result for National Australia Bank (NAB) with ANZ saying the result was largely driven by credit impairment charges of $1.674 billion that included credit reserves for COVID-19 impacts of $1.031 billion.

It said cash profit from continuing operations was down 60% to $1.41 billion The board decided to defer a decision on its 2020 interim dividend until there was greater clarity.

ANZ chief executive, Shayne Elliott, described it as a reasonable result given the tough trading conditions before the crisis hit.

He said the coming months would be difficult but noted that the swift action of the Australian and New Zealand Governments as well as the healthy state of corporate balance sheets going into the crisis had both countries well placed to not only manage the health aspects but also the economic impacts.

Which boards are delivering value for money?

Continued from page 1 Financial Group Limited, Coles Group, GPT Group, Afterpay Touch, Xero Limited, Sydney Airport, the a2 Milk Company and Sonic Healthcare,” Connolly said.

“In contrast, the top 10 highest remuneration-to-market-cap ratio boards in Australia are Virgin Money UK, AMP, Resmed, Bank of Queensland, Link Group, Star Entertainment Group, Soul Pattinson, Worley Parsons, James Hardie and Challenger.

“In some cases, individuals sit on four ASX-listed boards simultaneously, while others have served for up to 45 years on one board, when contemporary governance guidelines suggest the maximum tenure should be no more than nine years,” Connolly said.

He also noted that one of the interesting outcomes of Australia’s economic engagement with the world was the rise of the

fly-in-fly-out (FIFO) board director, with onein-five of Australia’s ASX-100 directors living offshore, and either phoning in for board discussions or attending in person.

The Apollo research revealed the bestpaying boards in Australia were not necessarily the largest. They were BHP (third by market cap), Resmed (51st by market cap), Macquarie (seventh by market cap), Rio Tinto (12th by market cap) and NAB (fifth by market cap).

It named the highest-paid board director as being Gordon Cairns who had earnings of $1.8 million from directorships on Woolworths, Origin Energy and Macquarie, followed by Lindsay Maxsted ($1.6 million) from his service with Westpac, Transurban and BHP. The research found that, although Mike Wilkins earned $2 million through his directorships with AMP, QBE and Medibank, this was distorted by his short-term tenure as acting AMP CEO.

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4 | Money Management May 7, 2020

Editorial

mike.taylor@moneymanagement.com.au

CRITICISMS OF LIFE/RISK ADVISERS DON’T HOLD WATER

FE Money Management Pty Ltd Level 10 4 Martin Place, Sydney, 2000 Managing Director: Mika-John Southworth Tel: 0455 553 775 mika-john.southworth@moneymanagement.com.au Managing Editor/Editorial Director: Mike Taylor Tel: 0438 789 214

With the Australian Securities and Investments Commission’s review of the Life Insurance Framework just around the corner, the last thing life/risk advisers need is criticism based on selective interpretations of industry data.

mike.taylor@moneymanagement.com.au Associate Editor - Research: Oksana Patron Tel: 0439 137 814 oksana.patron@moneymanagement.com.au News Editor: Jassmyn Goh Tel: 0438 957 266 jassmyn.goh@moneymanagement.com.au

AS the old saying goes – there are lies, damned lies and statistics.

And that is why, when the Australian Prudential Regulation Authority (APRA) issues its statistical analyses of the insurance industry, it is usually careful to caution readers that the data needs to be read carefully and in context.

Sadly, for life/risk advisers who are within 12 months of facing the Australian Securities and Investments Commission (ASIC) review of the Life Insurance Framework (LIF) their case was not assisted by the efforts of plaintiff law firm, Maurice Blackburn, which used recent APRA data to question the value of advised life cover.

The basis of the Maurice Blackburn argument was that, on the face of it, APRA data released in mid-April suggested members of group insurance plans within superannuation funds experienced better admittance rates for claims around death and total and permanent disablement than people who gained their cover via a life/risk adviser.

But what the law firm should have noted was APRA’s comment contained in its full data set which noted a “significant variance in the admittance rate between different cover types and distribution channels, from 99% (group ordinary death) to 36%

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(individual advised accident)”.

It then noted: “These results, however, are affected by the number of observations” noting that those included some categories where only 11 claims had been finalised compared to other categories where more than a thousand had been finalised. In other words, apples were not necessarily being compared with apples.

Financial Planning Association (FPA) chief executive, Dante De Gori, added further clarity to the issue when he noted that the activities of financial advisers in contesting claims on behalf of their clients could actually impact the data collected by regulators such as APRA. “…financial planners regularly lodge disputes on behalf of clients. This will automatically increase the dispute rate from non-advocacy channels.

Consumers may not be aware of dispute channels available to them. Financial planners are therefore effectively advocating and this increases the complaints, which will skew the reported data,” he said.

Further, De Gori said the recommended insurance amounts through financial planners were optimal to the client and tended to be higher to cover debt and address actual lifetime needs and that therefore, the higher the insured amount the higher the chance that the insurer would

undertake a more rigorous approach to the claim.

In other words, while the APRA data was certainly not wrong it did not reflect the reality of how life/risk advisers work on behalf of their clients both in obtaining cover and then at claims time – something which was significantly canvassed at the time of the prolonged debate around the establishment of the LIF. What needs to be understood is that there is a continuing agenda within some consumer groups and plaintiff law firms to see an end to the current commission-based arrangements for life/risk advisers and a realisation that ASIC will report on the issue next year.

In a submission to the Royal Commission in November, 2018, ASIC signalled strongly that it believed then that unless the industry improved its ways there “would be a compelling case to remove the exemption from the ban on conflicted remuneration currently afforded to the sale of life insurance products altogether”.

Neither the APRA data nor Maurice Blackburn’s interpretation of it has made that case and the ASIC should dismiss such claims as a factor in its broader review of the LIF.

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Mike Taylor Managing Editor

29/04/2020 2:49:00 PM

May 7, 2020 Money Management | 5

News

AFA demands APRA collect data on what Almost $4b left managed fund lawyers are extracting from group life

sector in March

BY MIKE TAYLOR

BY OKSANA PATRON

THE Association of Financial Advisers (AFA) has called on the Australian Prudential Regulation Authority (APRA) to begin collecting data on fees paid to lawyers on group life insurance claims.

The AFA made the call in the face of heavy criticisms directed at life/risk advisers by plaintiff law firm, Maurice Blackburn which claimed group life insurance within superannuation represented better value than advised life insurance and that life/risk advisers therefore needed to justify their value.

Responding to the attack, the AFA issued a bulletin to members which stated that a comparison of the average claims benefit actually paid showed that people who received advice are 306% better off when claiming death benefits than those utilising group life and 391% better off when it came to total and permanent disability (TPD) claims.

“The average claim benefits demonstrate very clearly that those clients who receive specific tailored life insurance advice from a financial adviser receive a benefit far more relevant to their

THE uncertainty around COVID-19 led to the largest-ever net outflow of almost $4 billion from the Australian managed funds sector in March, according to global funds network Calastone.

This was also the sharpest redemptions surge ever recorded, with over $11.8 billion flowing out of Australian funds in a single month, however this was cushioned by strong inflows of $8 billion as investors reacted differently to the gravity of COVID-19, the firm said.

The firm’s managing director, Ross Fox, said that the magnitude of redemptions in March illustrated the effect COVID-19 was having on investment momentum in Australia, where aside from modest volatility events, the market saw month-on-month net inflows over a long period of time.

What is more, March saw the ASX 200 bouncing around in a range of 25% to 30% below its February peak combined with long-term interest rates at historical lows, therefore the impact for the funds management sector was more acute as investor redemptions compounded the effects of market downgrades and reduced asset bases.

At the same time, fund flows in Australia remained largely in line with international markets as both Hong Kong and the UK recorded in March net outflows of $2.7 billion and $7.3 billion, respectively.

In Asia and Europe, the bond funds saw the highest outflows as political uncertainty produced more volatility throughout 2019 relative to Australia.

As far as April was concerned, Fox said the applications narrowly outweighed redemptions so far, a move which was viewed as a positive turnaround.

“The heightened activity that we have seen across our funds network at a time when most people are working from home is a testament to how well the sector has embraced technology and automation to solve pain points, whether they are legacy or new ones such as we are experiencing with COVID-19,” Fox said.

circumstances and their household debt and living costs. This clearly demonstrates significantly more value for financial advice clients,” it said.

The AFA then went on to point to what lawyers were charging superannuation fund members to dispute group insurance claims, stating: “From what we understand, these lawyers often charge at least 30% of the claims benefit.

“There are no statistics on how much of life insurance benefits end up being paid to lawyers, however the inclusion of this information in the data collected

would be very important when measuring value. We call for the collection of data on fees paid to lawyers on life insurance claims,” it said.

“In terms of the full cost to the client, this would need to take into account any costs incurred by the super fund that are otherwise paid for by the member out of their super fund fees, and not just through life insurance premiums. This might include insurance administration, call centres, general advice and even intra-fund advice related to insurance,” the AFA said.

Was ISA inflating its super release impact figures?

KEY Federal Government back-benchers are claiming vindication after a senior Treasury official suggested Industry Super Australia (ISA) may have overstated the long-run superannuation balance effects of people taking early hardship access of up to $10,000.

The Government back-benchers including Victorian Senator and former IPA staffer, James Paterson and NSW Senator and former Financial Services Council policy director, Andrew Bragg, have highlighted testimony given to a Senate select committee by the Treasury’s head of retirement income policy, Robert Jeremenko.

Senator Paterson pointedly asked the Treasury official about the validity of ISA’s claim that a 30-year-old who withdrew $20,000 over the next two years would have $97,214 fewer dollars in retirement savings by age 67.

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Paterson suggested that this figure was substantially higher than indicated by ASIC’s MoneySmart calculator.

Jeremenko said the reason was that the ISA was using “nominal figures, rather than real”.

He suggested this was “inconsistent with what the Australian Securities and Investments Commission (ASIC) has told super funds, or anyone who is making public statements about balances on withdrawal of super balances”.

“Generally the well-respected methodology to predict the time value of money is to take into account an inflation adjustment,” he said suggesting that using a “nominal figure gives a larger hit to retirement balances”.

Senator Paterson later used social media to distribute a video of Jeremenko’s testimony, something which was retweeted by Senator Bragg.

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6 | Money Management May 7, 2020

News

‘Go further than the code’ ASIC tells life insurers

BY MIKE TAYLOR

LIFE insurers should be prepared to go beyond the hardship provisions of the Life Insurance Code of Conduct when dealing with people suffering financial hardship as a result of the COVID-19 pandemic, according to the Australian Securities and Investments Commission (ASIC).

In a letter sent to the life insurers, the regulator said it “expects insurers to consider, where appropriate and reasonable, going beyond the hardship provisions of the code and reviewing options for premium ‘holidays’ or deferrals for consumers who are no longer able to pay premiums due to reduced income”.

It said the same level of leniency was demonstrated by the life insurers in dealing with the summer bushfires and that it expected a similar approach could be adopted with respect to COVID-19.

“We recognise that some insurers introduced this type of flexibility in response to the tragic bushfires of summer 2019-20, and we consider a similar approach is just as important now, given the broad effect that the COVID-19 pandemic is already having on many Australians. We expect insurers to try to find workable options to allow consumers in hardship to continue their cover.

“ASIC also expects insurers to consider

whether outcomes will be fair for consumers if they have to actively ‘opt in’ or make a request in order to receive any benefit insurers offer in response to the COVID-19 pandemic,” it said. “For example, consumers who are struggling to pay their insurance premiums may simply allow the policy to lapse rather than contact their insurer to cancel it. If an insurer relies on consumers to contact them to discuss options for retaining their cover, this can result in inconsistent and unfair outcomes for policyholders.

“Vulnerable consumers will be under considerable stress – accordingly, for some benefits to be effective they may need to take

effect automatically, without the need for any action by the consumer,” the ASIC letter said.

The letter said that insurers should also apply appropriate flexibility in their treatment of consumers whose personal and/or working conditions have changed as a result of the COVID19 pandemic, “for example where these working conditions impact their income protection or total and permanent disability [TPD] claim outcome”.

“In particular, insurers should proactively apply the urgent financial need provisions in sections 8.27 to 8.30 of the code for all affected claimants, including consumers making a COVID-19 pandemic related income protection or TPD claim.”

Financial Planning Association defends life/risk adviser role IN the wake of harsh criticism of life/risk advisers by plaintiff law firm Maurice Blackburn, the Financial Planning Association (FPA) has defended the role played by advisers in representing their insurance clients, particularly at claims time.

FPA chief executive, Dante De Gori, pointed out the manner in which the activities of financial advisers could actually impact data collected by regulators such as the Australian Prudential Regulation Authority (APRA). “…financial planners regularly lodge disputes on behalf of clients. This will automatically increase the dispute rate from nonadvocacy channels. Consumers may not be aware of dispute channels available to them.

Financial planners are therefore effectively advocating and this increases the complaints, which will skew the reported data,” he said.

Further, De Gori said the recommended insurance amounts through financial

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planners were optimal to the client and tended to be higher to cover debt and address actual lifetime needs.

“Therefore, the higher the insured amount the higher the chance that the insurer will undertake a more rigorous approach to the claim. This is because one or more reinsurers may be involved complicating the claims process,” he said. “Disputes arise because the assessment may not be as straightforward as the consumer would hope. Financial planners are aware of this and it forms part of their service when handling such disputes.

“When consumers obtain retail insurance through a financial planner or directly via the insurer, they are required to make various disclosures to the underwriter. This also occurs if the consumer tries to increase their group policy.

“If the policy is underwritten, then the

insurer has the right to investigate the truthfulness of the disclosures such as health history, occupation check and past times. This causes frustrations and delays and investigations can result in a reduction or denial of the claim. This gives rise to disputes,” De Gori said.

“However, with group insurance, more often than not it is an at-work test. The policy composition limits the insurer’s ability to go back historically, therefore there would be less dispute about non-disclosure issues. Financial planners play a critical role in educating consumers in the importance of being truthful at the time of application to reduce the risks of disputes.”

De Gori pointed out that financial planners are bound by the best interest duty and a rigorous Financial Adviser Standards and Ethics Authority (FASEA) Code of Ethics that required the client’s interests come first.

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8 | Money Management May 7, 2020

News

SMSFA applauds ATO lodgement deferral

BY CHRIS DASTOOR

THE Self-Managed Superannuation Fund (SMSF) Association has applauded the decision by the Australian Tax Office (ATO) to allow deferral of SMSF lodgements to the end of June.

Lodgement and payment deferrals would be automatically applied to SMSF 2018-19 annual returns with the 15 May lodgement date pushed back 30 June, 2020.

John Maroney, SMSF Association chief executive, said they had been able to constructively work with the ATO to find solutions for SMSFs affected by the lockdown, as well as market volatility.

“Discussions, which have included the ATO commissioner Chris Jordan who attended a

recent association board meeting, and SMSF assistant commissioner Dana Fleming, have been extremely fruitful, allowing us to work through numerous issues since the COVID-19 public health crisis erupted in March, with [the] announcement simply highlighting this,” Maroney said.

The ATO had also provided guidance related to limited recourse borrowing arrangements (LRBAs), rent and interposed entity relief.

“These initiatives are indicative of how the ATO has responded in a constructive way to the economic and market consequences of this tragic pandemic, and we will continue to work with the regulator to ensure the SMSF sector emerges from this crisis in the best possible shape,” Maroney said.

No precedent for COVID-19 and fund management

Explain your value – Law firm attacks risk advisers

BY LAURA DEW

BY MIKE TAYLOR

FUND managers are having to review their strategies and economic assumptions on a daily basis, as the unusual nature of COVID-19 means history offers them no precedent for how to handle the crisis.

Kej Somaia, co-head of multi-asset solutions at First Sentier Investors, said the economic and stockmarket effects of COVID-19 were ‘fundamentally different’ to anything that occurred in markets before.

Much has already been cited about how this crisis is different to 2008-2009’s Global Financial Crisis which was caused by a highly-leveraged banking system, affecting the demand side of the economy.

“The key difference this time is the changes in the economy are fundamentally different in their speed and magnitude and depth and we’ve had to speed up our own process,” said Somaia.

“We have to review our economic climate assumptions much more regularly – even on a daily basis – not every six months as we would do normally.

“So, instead of looking for qualitative similarities, we look at the world more statistically for times of high turbulence, because that’s what has been common to all crises. This statistical overlay provides more insight and we think is a smarter way to understand correlations and inform us about volatility, or risk more broadly.”

He said the combination of dynamic and neutral asset allocation used in multi-asset funds allowed them to react to the changing conditions in markets. Neutral covered the traditional bonds and equities while dynamic was implemented through synthetic securities.

“This means we can adjust risk settings through dynamic asset allocation, without having to touch the direct securities. This has allowed us to reposition portfolios without needing to step into markets experiencing liquidity issues.

“We’ve been taking a defensive stance – we’re at about half of our usual exposure for equities, as defined by our neutral asset allocation.

Maybe equity markets will look through the short term – but in reality we think we’re going to see negative results by large number of corporates in coming months, with some of their earnings falling by 45% or more.”

THE financial planning industry must explain why, based on new Australian Prudential Regulation Authority (APRA) data, consumers appear to be worse off when they consult a risk adviser, according to a senior lawyer within plaintiff law firm, Maurice Blackburn.

The firm’s superannuation and insurance principal, Josh Mennen has pointed to APRA data released in April dealing with life insurance claims and handling processes and has claimed the report reinforces the superior value of group insurance through superannuation.

He said the report had shown group insurance continued to have a key role in delivering value and strong outcomes for consumers, particularly when compared to policies sold by financial advisers.

“This report has some very compelling data that makes clear that group insurance through super remains a crucial product that delivers significantly greater value for consumers than other policies, including those supposedly tailored by financial advisers,” Mennen said.

“The data show that the claims paid ratio – the dollar amount paid as a percentage of annual premiums – for super total and permanent disability insurance was 85%, compared with 45% when sold by financial advisers,” he said. “It also shows that income protection through super led to just 33.7 disputes per 100,000 people insured, compared to retail income protection policies, which came in at a staggering 150.5 disputes per 100,000 people insured.

“This reinforces that while adviser-sold policies are often marketed as a bespoke product, too often they are compromised by conflicts of interest, including insurers paying trailing commissions that result in poor product selection and claim disputes caused by underwriting complications.

“The financial planning industry must explain why, based on this data, consumers appear to be worse off when they consult a risk adviser,” Mennen said. “It also must outline how it is going to ensure insurance recommendations are genuinely in consumers’ best interests in order to win back public confidence.”

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29/04/2020 1:00:00 PM

May 7, 2020 Money Management | 9

News

Challenger points to super funds sell-off

BY MIKE TAYLOR

CHALLENGER Limited has confirmed the degree to which major superannuation funds have been rebalancing their portfolios in pursuit of liquidity.

At the same time as the Australian Prudential Regulation Authority (APRA) has confirmed its close watch on superannuation fund governance and liquidity through the COVID-19 crisis, Challenger acknowledged a significant hit on its funds under management (FUM).

It reported a 10% decline in FUM for the quarter to $74.8 billion – a decrease of $8.1 billion “FUM was impacted by the significant equity market sell-off as a result of the coronavirus and increased redemptions by superannuation funds seeking liquidity,” the Challenger market update said.

“The impact of the coronavirus pandemic

and market sell-off resulted in significant fund movements as large superannuation funds and other investors rebalanced their portfolios and sought liquidity,” the Challenger announcement to the Australian Securities Exchange (ASX) said.

“For Fidante Partners in Australia this led to strong equity inflows of $0.6 billion which were partially offset by lower margin fixed income outflows of $0.4 billion.”

Overall, Challenger reported third quarter results entailing total Life sales up 9% driven by strong Japanese and institutional sales, while total assets under management (AUM) were down 8% to $79 billion following the significant investment market sell-off in March.

Challenger reaffirmed its guidance for normalised net profit before tax to be between $500 million and $550 million in FY20.

It said this guidance reflected the impact of changes to Life’s investment portfolio and lower funds management earnings from lower funds under management following the equity market sell-off.

ASIC disqualifies and suspends six SMSF auditors

BY OKSANA PATRON

THE Australian Securities and Investments Commission (ASIC) has announced it has disqualified, suspended or added conditions to the registration for a number of self-managed super fund (SMSF) auditors.

The regulator expressed concerns with regards to SMSF auditors due to their inability to meet independence and auditing standards, comply with continuing professional development (CPD) requirements and not being a “fit and proper person”.

As a result of that, ASIC disqualified the following auditors:

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• Kent Hacker of Queensland, for significant auditor independence breaches, deficiencies in auditing asset valuation and compliance arm’s-length transaction requirements, and for otherwise not being a fit and proper person as he had failed to comply with undertakings made to the Australian Taxation Office (ATO).

• Sofranios Vlahos of New South Wales, for significant auditor independence breaches.

• Stephen Sproats of New South Wales, for significant auditor independence breaches and deficiencies in auditing asset

valuation and ownership, compliance with arm’s-length transaction requirements, and compliance with borrowing requirements.

• Mark Higgins of New South Wales, for significant auditor independence breaches, deficiencies in auditing asset valuation and compliance with financial reporting requirements, failing to obtain signed financial statements, and breaching CPD requirements.

Following this, one-year suspension and conditions were also imposed on the following SMSF auditors: • Ronald Cuthbertson of Western Australia, for deficiencies in

auditing the valuation of fund assets, compliance with separation of fund and trustee asset ownership, compliance with related party and arm’s-length requirements, and compliance with personal use and collectable asset rules; and failing to report a fund contravention to the ATO as required.

• Malcolm Heasman of Western Australia, for auditor independence breaches, deficiencies in engaging, planning and performing audits, and deficiencies in auditing the valuation of assets, compliance with separation of fund and trustee asset ownership, and compliance with financial reporting requirements.

Under the SIS Act, from 1 July, 2013 all auditors of SMSFs were required to be registered with ASIC in order to meet the base standards of competency and expertise.

Also, ASIC and ATO work closely together as co-regulators of SMSF auditors and the ATO monitors SMSF auditor conduct and may refer matters to ASIC for possible action such as disqualification or suspension of their registration while ASIC may also impose conditions on SMSF auditors.

28/04/2020 4:06:42 PM

10 | Money Management May 7, 2020

News

Capital preservation needed for deepest post-war recession

BY JASSMYN GOH

A decline in global activity of between 10% to 20% in the first half of 2020 is plausible and investment strategies should aim to preserve capital, look for strong balance sheets and good

quality assets that have been oversold, according to Aviva.

Aviva head of investment strategy and chief economist, Michael Grady, said the firm had increased its preference to be overweight government bonds, which reflected its view that central banks

would continue to act to maintain easy monetary conditions, and at the same time allow fiscal space to be created without higher yields.

“Our modest underweight equity allocation reflects our concern that economic weakness will translate into historically

weak corporate earnings in 2020, which we do not think markets are fully discounting at this time,” he said.

“We have moved to a more cautious stance in our currency allocation, with a preference to be long Japanese yen and short other Asian currencies. We have a neutral view across credit, where corporate bonds spreads have widened sharply, but where there is now significant support from central bank asset purchase programmes.”

The global asset manager said the result of COVID-19 would be the deepest global recession of the post-war period and the scale of the economic shock had yet to be fully felt.

Although the risks remained heavily tilted to the downside in the short-term, Aviva said it expected activity to begin recovering in late 2020.

Adviser relief for now, but how will Standard 3 be enforced?

BY CHRIS DASTOOR

ALTHOUGH regulators have taken a soft approach to enforcement of Standard 3 of the Financial Advisers Standards and Ethics Authority (FASEA) Code of Ethics, since its implementation at the start of the year, there’s still the issue over how proper enforcement will work.

Last November, the Australian Securities and Investments Commission (ASIC) said it would not monitor or enforce the Code of Ethics.

John Maroney, SMSF Association chief executive, said the combined messages from FASEA, ASIC and the Australian Financial Complaints Authority (AFCA) had given the adviser community confidence it won’t have an immediate impact and that it will be a long-term view of lifting ethical standards.

“The main regulator and the complaints handling body have said they recognise we are in a transition period; the code has been finalised but there’s still extra guidance expected,” Maroney said.

Standard 3 had been the best example of ambiguity with the code which said: “you must

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not advise, refer or act in any other manner where you have a conflict of interest or duty”.

FASEA had said to Parliament last December: “The code does not seek to ban particular forms of remuneration nor does it determine that particular forms of remuneration are always an actual conflict”.

However, Maroney said it was still a concern given how the code was worded and the potential risk it opened advisers up to.

“That’s a very explicit statement and the concern was it would be very difficult for many advisers not to have conflicts because of the way things are structured in the industry,” Maroney said.

“And the approach up until before the code came into force was advisers were expected to manage any conflicts so they could still act in the best interest of their clients.”

An example of a potential conflict of interest would be if an adviser owned shares in a company and recommended those shares to a client.

“It can be a very immaterial conflict if it’s a BHP share, but it can be more significant if it’s a small-cap company that doesn’t have a

lot of shareholders,” Maroney said.

“But Standard 3 is pretty black and white, [which said] if you’ve got any other conflict, you can’t advise and you have to tell your client to go somewhere else.”

There was another issue of ambiguity in the code that said: ‘Unless this code expressly says otherwise, do not read down any of the provisions of this code by reference to any other provision of this code.’

“Which seems to say – and I’m not a lawyer but having spoken to a few lawyers – that would mean you have to comply with each standard regardless of what the other standards say,” Maroney said.

“Whereas FASEA has said all the standards should be read together and as long as you are acting in the best interest of your client overall then you don’t have to necessarily tick-off each and every single standard.”

Maroney said he hoped that it would be reviewed after operating for a year, which was typical of legislative instruments.

“It would be good to have this reviewed and see if there are any features of the code that could be worded better,” Maroney said.

28/04/2020 4:07:03 PM

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News

Early release superannuation fund laggards could be identified

BY MIKE TAYLOR

THE Australian Prudential Regulation Authority (APRA) has revealed the degree to which it will be monitoring the impacts of the Government’s hardship early release superannuation regime on superannuation fund liquidity via weekly data collections from super funds.

As well, APRA will be using the data to monitor the timeliness with which superannuation funds deliver on their early release obligations with laggards likely to be revealed in published reports.

The regulator announced that superannuation fund licensees would need to complete and submit APRA’s new Early Release Initiative (ERI) data collection form weekly until further notice.

It said the ERI reporting form would gather a range of information from licensees, including the number and value of early release

benefits paid to superannuation members and the processing times of those payments.

“It will help the Government, APRA and other stakeholders monitor the take-up of the new scheme among superannuation members, and ensure licensees are processing eligible applications in a

timely manner,” it said.

APRA said it intended publishing the data at both industry and fund level and that if funds refused to cooperate it would implement a legally binding reporting standard.

The first ERI data collection was due on 29 April, 2020, for information as at 26 April, 2020.

Financial services sector reports wage cuts despite job retention

BY LAURA DEW

THERE was an 8.9% decline in total wages in the financial services and insurance sector between 28 March and 4 April, one of the highest changes across industry sectors.

According to the Australian Bureau of Statistics (ABS), total wages in that sector fell by 8.9% compared to an industry average decline of 5.1% across 18 different sectors. This was a significant decline on the previous week, the ABS said, when wages only declined by an average of 1.3%.

This put financial services and insurance in the top 20% behind accommodation and food services at 17.7%,

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professional, scientific and technical services at 9.7% and arts and recreation services at 9.1%.

Between 14 March, when Australia reported its first COVID-19 case, and 4 April, there was a 7.8% decline in total wages in financial services and insurance.

However, there had only been a 3.2% change in employee jobs during the same period, one of the lowest across the sectors.

This compared to a 25% change in accommodation and food services and 18.7% for arts and recreation services, both sectors significantly impacted by the COVID-19 lockdown restrictions which had led to closures and job losses.

Funds shrug off falling oil price

THE price of West Texas Intermediate (WTI) crude oil has turned negative for the first time in history but funds exposed on the oil and gas sector have, so far, managed to shrug off its effect.

Prices of crude oil plummeted from around US$60 ($93.1) per barrel at the start of the year to negative in April as flights were cut and cars stayed off the road. This led to a steep excess in supply and limited demand as refiners struggled to store it all.

An agreement between OPEC and non-OPEC nations to cut supply earlier in the year proved too little too late.

While funds have reported losses, the majority have still managed to outperform its equivalent benchmark with the ASX 200 Oil and Gas sector reporting losses of 42% since the start of the year to 20 April.

According to FE Analytics, there were eight funds with 10% or more exposure to oil and gas and only two which performed worse than the sector.

These were BetaShares Global Energy Companies ETF Currency Hedged which lost 44% and BetaShares Crude Oil Index ETF (AUD Hedged) which lost 68%.

Looking at the best-performing funds, RARE Infrastructure Value Unhedged had lost only 7.3% and RARE Infrastructure Income lost 9.3%.

Ben Jones, multi-asset class strategist at State Street Global Markets, said: “Less than 100,000 people are now passing through US airports according the Transport Security Administration [TSA]. Even when economies begin to open up again we do not expect people to rush to start travelling for ‘unnecessary’ reasons straight away meaning the oil demand hangover will have a long tail.”

Scott Haslem, chief investment officer at Crestone Wealth Management, said the recent fall was an indicator of a possible sharp correction in mid-2020.

“Oil is one of those markets where demand and supply is genuinely more visible and calculable in the short term than others. Notwithstanding oil still ultimately ‘feeds’ final consumer demand, it feed a broad range of it.

“To this end, the latest collapse in the oil price with near-term contract price for WTI falling from under US$20 per barrel to zero (and negative for the first time in history) is telling us less about a lack of storage facilities globally and more about a lack of demand and the sharp correction unfolding in mid-2020 global activity.”

In order of best performance, the eight funds were RARE Infrastructure Value Unhedged, RARE Infrastructure Income, 4D Global Infrastructure, VanEck Vectors FTSE Global Infrastructure ETF, BetaShares Australian Resources Sector ETF, RARE Emerging Markets, BetaShares Global Energy Companies ETF Currency Hedged and BetaShares Crude Oil Index ETF (AUD Hedged).

29/04/2020 3:23:43 PM

12 | Money Management May 7, 2020

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Unlisted assets a better super barometer than listed shares

BY MIKE TAYLOR

A superannuation ratings house is arguing commentators are getting it wrong when they claim unlisted assets held by superannuation funds are valued at artificially high levels.

The ratings house, Chant West, is claiming the opposite is often the case.

In an analysis revealing the degree to which superannuation fund returns have been dragged down by COVID-19 uncertainty and volatility, Chant West said it believed “unlisted valuations are generally a better representation of fair value than listed market valuations which are often influenced by investor sentiment”.

“We know that listed markets tend to overshoot in good times and undershoot in bad times, so in a crisis this can drag prices down a lot further than where they should be. For example, Australian listed property prices fell 35% in March but has rebounded nearly 15% in April so far,” it said.

“In the current market crisis, many super funds invested in unlisted assets (both not-forprofit and retail) are acting responsibly by proactively conducting out-of-cycle revaluations – in other words bringing forward valuations for parts of their portfolios,” the Chant West analysis said.

“These revaluations have typically resulted in

write-downs of between 6% and 10% for property and infrastructure and up to 15% for private equity. The reason those revaluations are not as dramatic as we’ve seen in listed markets is that the process is unemotional.”

Dealing with the overall state of superannuation fund returns, the Chant West analysis said that the COVID-19 pandemic had served to bring a record bull run to end.

“This resulted in the median growth superannuation fund (61% to 80% in growth assets) falling 9% for the month and 10.1% for the quarter,” it said. “The return for the first nine months of the financial year also turned negative at -6.3%.”

ISA survey points to early access super rorters

NAB separates out MLC Wealth amid increased remediation IN what represents a key move, National Australia Bank (NAB) has decided to separate MLC Wealth from its consumer banking division when it issues its first half results later this year.

The big banking group has announced the move to the Australian Securities Exchange (ASX) at the same time as announcing a significant reduction in first half earnings because of a net increase in customer-related remediation matters of $268 million before tax, changes to its software capitalisation policy which it said would reduce NAB’s capitalised software balance by $1,056 million and reduce earnings by $742 million after tax and impairment of the carrying value of NAB’s investment in MLC Life of $214 million.

NAB has been preparing its MLC Wealth business for sale for close to two years but, until now, the business has been reported within the consumer banking division.

Importantly, in explaining the increased provisioning for customer-related remediation, the bank said that 69% were for wealth-related matters, 23% for bank-related matters and 8% for Bank of New Zealand.

It said that of the first half cash earnings charges, $184 million after tax related to additional provision required for existing matters which included adviser services fee charged by NAB Financial Planning salaried advisers to reflect a higher assumed refund rate of 40% compared to 28% as at 30 September, last year.

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INDUSTRY Super Australia (ISA) has produced new research claiming up to 40% of applicants for the Government’s $10,000 hardship early release superannuation package may actually prove to be ineligible because they have not actually been adversely financially impacted by COVID-19.

ISA retained polling firm UMR with the result showing that one million people who had not been financially impacted by the coronavirus shutdowns were intending to access their super early.

The survey was conducted in the first two weeks of April.

ISA claimed this high number of ineligible claimants would not only undermine the policy intent of the scheme but could slow down the processing of applications for those who urgently need financial support.

To qualify for the government’s early release of super, claimants must be eligible for a qualifying social security benefit, have lost their job, or had a reduction of hours or, if a sole trader, turnover, by 20% or more.

It said about 30% of the 1,100 people polled who were under 65 with a super balance, said they were either very likely or likely to take up the scheme and that, on average, they said they would take out about $13,500 each – the scheme allows for $10,000 now and another $10,000 after July 1.

“But worryingly 40% of those who said they intend on making a claim had not yet been financially impacted by the COVID-19 shutdown,” ISA said.

Of those who are very likely to claim 46% said they were still in paid work and their hours had not been reduced due to the COVID-19 economic shut down. And 40% of those very likely to take up the scheme were in households that earn more than $104,000 a year.

It said that 29% of those very likely to claim said they were worried their job might be impacted at some point, indicating they were accessing the scheme to build up a savings buffer.

Treasury has estimated 1.5 million will take out $27 billion from super but the polling and other ISA analysis suggests the take-up could be far higher – in excess of $40 billion.

The ISA said the results should prompt urgent action by relevant regulators including the announcement of random checks on claims to deter inappropriate applications and real time monitoring of claim volumes.

“The ATO should also continuing issuing clear warnings that anyone flouting eligibility rules could be penalised,” it said.

28/04/2020 4:09:34 PM

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Perpetual grows adviser numbers despite COVID-19

BY MIKE TAYLOR

A third quarter update from major financial services house, Perpetual has revealed the full magnitude of the impact of COVID-19, with the company reporting a 19% decline in funds under management (FUA) and a 13% decline in funds under advice.

Delivering to the third quarter update to the Australian Securities Exchange (ASX), Perpetual nonetheless said its acquisition of US-based Trillium Asset Management remained

on track for completion by 30 June, this year.

Commenting on the update, Perpetual chief executive and managing director, Rob Adams, acknowledged COVID-19 had a dramatic impact on global investment markets, “leading to some of the sharpest declines in decades and some of the highest volatility in history during March”.

However, he noted that unlike pure-play asset managers, 40% of Perpetual’s total revenue were not directly linked to investment markets which provided the company with

some protection from global investment market volatility.

Where Perpetual Private was concerned, the company reported that FUA of $13.2 billion had decreased by $2 billion for the quarter.

Nonetheless it noted Perpetual Private had welcomed 12 new advisers during the period across its Melbourne and Sydney offices with one more to start later in the year.

It said this meant the company had added 20 new advisers since it started its growth initiative bringing the total number of advisers to 82.

Emerging markets likely to be hit with recessions: Amundi

BY CHRIS DASTOOR

AFTER the first wave of the COVID-19 outbreak in China and East Asia, and the second wave in Western Europe and North America, a third wave looks to be building in emerging markets (EMs) which will likely be followed by recessions in those regions.

According to analysis from Amundi Asset Management, EMs that relied on an open economy, global supply chains and tourism would be the hardest hit.

“EM and frontier countries may be able to benefit from the experiences and best practices then put in place in countries affected by the pandemic earlier,” the firm said.

“However, most of them do not have well-equipped health systems and lack the resources to deal with a health emergency versus developed countries.

“Recession in emerging markets is materialising, with major uncertainties regarding its depth and length.”

From a longer-term perspective, COVID-19 could be a driver that reinforced “de-globalisation” which had already started to trend.

“This will lead to a focus on new investment opportunities within ‘specific regions’ beyond the traditional geographical perspective,” the firm said.

“The new Silk Road is one important example of this concept, based on the growing influence of China in the geopolitical landscape and beyond Asia.”

Amundi had devised a stress

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ranking system, which pointed to countries like South Africa, Colombia, Hungary or Malaysia being more exposed to risk.

“The combination of recessionary growth rates, a strong US dollar, and very low oil prices could trigger rating downgrades, currency crises and defaults in the worst cases,” it said.

“In order to assess the difficulties that EMs are experiencing, we need to evaluate fiscal fragility and external vulnerabilities.

“As a simple matter of fact, fiscal metrics in 2020 are going to deteriorate based on recessionary level of growth and fiscal measures implemented to address the COVID-19 crisis.

“At the same time, a strong US dollar or a weak local currency increase external vulnerabilities.”

According to data from FE Analytics, within the Australian Core Strategies universe, the emerging markets equities sector lost 14.48% in Q1 and no funds made a return.

The best-performing funds over the last quarter were CFS Wholesale Global Emerging Markets Sustainability (-7.42%), GQG Partners Emerging Markets Equity (-7.47%), GMO Emerging Markets Trust (-7.77%), Northcape Capital Global Emerging Markets (-9.74%) and Paradice Global Emerging Markets (-10.27%).

Paradice was a new fund, which had only launched on 15 May, 2019, and its top holdings included Alibaba, Tencent and Taiwan Semiconductor Manufacturing.

This was common in other top performers, as GQG had the same top three, while GMO held Alibaba

and Taiwan Semiconductor Manufacturing in its top three.

In its market review, Paradice cited Tencent as one of the key performers for the fund in its function as an entertainment source and utility provider during the crisis.

“As the undisputed leader in mobile gaming, it is benefitting from a surge of interest and time spent on its key titles as consumers look for alternate forms of entertainment while spending more time at home,” it said.

“The company has been playing a pivotal role in helping offline companies quickly transition online via mini programs.

“While consumer behaviour will certainly normalize to a degree, it is fair to expect that many of these new behaviours that benefit Tencent will prove quite sticky.”

Chart 1: Best performing emerging market equity funds versus sector in Q1

Source: FE Analytics

28/04/2020 4:29:42 PM

14 | Money Management May 7, 2020

News

Cashflow biggest concern for chief executive officers as confidence declines for SMEs

BY JASSMYN GOH

CHIEF executive officer (CEO) sentiment at mid-sized organisations has significantly dropped since the COVID-19 pandemic started and their main concern is cashflow, according to a survey.

The Executive Connection CEO Confidence Index found CEOs shared Australians’ broader expectations of a significant drop in economic conditions with the index falling 60% from 106 to 42, compared to an average 118 over the past three years.

The Executive Connection economic adviser, Warren Hogan, said social distancing restrictions had put a brake on economic activity and CEO confidence had taken a hit, with the greatest impact felt in investment intentions and sales.

“SME (small and medium sized enterprise) leaders’ confidence in the current economic environment has fallen sharply from a reading of 85 in the first quarter of 2020 to an index reading of five,” he said.

CEOs’ most prominent concern was cashflow as a result of drop in revenues, a rise in non-payment by clients and counterparties, and the commitment to keep employees on the payroll before the JobKeeper payments started to flow in mid-May. Over 43% of CEOs reported an increase in support from their banks but the general consensus was that the current conditions were manageable for three to six months.

“A significant challenge is the behaviour of large corporations, where a generalised

culture of cost cutting is emerging. These effects are becoming apparent for SMEs but will have a bigger impact when the current flow of work is completed over the months ahead,” Hogan said.

“There is concern that further effects will be felt once the Federal Government support packages come to an end in September, with most CEOs favouring a tapering of government support programs such as the JobKeeper rather than a sudden stop as is currently legislated.”

However, CEOs’ economic outlook for the year ahead was more optimistic than views on current conditions, with an index reading of 35 points, the survey found.

“Some CEOs can see the recovery with 14% expecting an improvement in the economy over the year ahead,” Hogan said.

“The results of the latest CEO Confidence Index suggest that Australia fell into a recession in the middle of March, but that the Government’s swift and significant policy response has been well-received by Australian mid-sized businesses.”

The index found a quarter of CEOs described the impact on sales as severe, while 12% said sales prospects were unchanged.

Most firms had also put investment activities on hold over the past month, and half of all businesses expected to pull back on capital expenditure in the year ahead.

Advisers focused on clients and survival: Centrepoint

BY MIKE TAYLOR

PUBLICLY-LISTED financial planning dealer group Centrepoint Alliance has sought to reinforce the strength of its capital position at the same time as releasing new survey data which suggests financial planners are very focused on the survival of own businesses through the COVID-19 volatility.

The Centrepoint Alliance research found a third of survey respondents were focused on ensuring their practices survived over the medium to long-term.

“The majority of financial

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advisers are small business owners, so many are focused on ensuring their businesses remain viable and sustainable beyond the current period of market uncertainty,” Centrepoint chief executive, Angus Benbow, said. “At the same time, they are focused on doing crucial work to support clients, many of whom have lost their jobs, or are experiencing financial distress or cashflow issues.”

Another key finding from the Centrepoint Alliance research was that more than nine-in-10 advisers (93%) who participated

in a survey of 177 authorised representatives and self-licensed advisers conducted during the first week of April by Centrepoint Alliance said they expected Australia will enter a recession despite the Federal Government’s stimulus packages.

Commenting on the findings, Benbow said that in this environment the value of quality financial advice had never been greater.

On the question of Centrepoint Alliance’s financial strength, Benbow reiterated that the board and executive team had volunteered a temporary

20% reduction in pay and nonexecutive staff had been invited to salary sacrifice six weeks’ leave over six months.

He said the business was also undertaking an on-market share buyback of up to 10% of ordinary shares, reflecting its confidence in the underlying value of the business at current price levels.

“We entered this crisis with a clear strategy and a strong financial position. Our focus is on supporting our advisers and ensuring we are well positioned for growth in the future,” Benbow said.

28/04/2020 4:30:03 PM

May 7, 2020 Money Management | 15

News

Courts dismiss two appeals against complaint authority

BY JASSMYN GOH

TWO courts have dismissed appeals that have questioned the Australian Financial Complaints Authority’s (AFCA’s) fairness in both its superannuation and general divisions, and its decision making approach.

On 9 April, 2020, the Federal Court dismissed an appeal by the QSuper Board that argued AFCA had exercised judicial power in the contravention of Chapter III of the Australian Constitution.

QSuper argued that AFCA had found the fund breached section 1017B of the Corporations Act which required QSuper to give notice of the nature and effect of a significant event.

The court found AFCA did not exercise judicial power and were allowed to make decisions about legal rights such as compliance with the law or compliance with the trust deed.

The Supreme Court of Queensland on the same day dismissed an appeal by Investors Exchange Limited that argued that AFCA’s determination was not open to the facts and had misconstrued the evidence provided.

AFCA’s determination was found to be reasonable, open to the facts, and had

correctly interpreted the documentation.

The court said the principles set out in case law involving External Dispute Resolution (EDR) scheme, the Financial Ombudsman Service, are equally applicable to AFCA. AFCA obtained an order for specific performance to ensure the determination is complied with.

Justice Peter Applegarth noted that AFCA’s primary duty was to do what was fair in all circumstances.

“It is possible that, having had regard to legal principles, the decision-maker decides to not apply them because the strict application of those legal principles would lead to an outcome which is unfair in all the circumstances,” he said.

Three sub-sectors which outperformed index

BY OKSANA PATRON

MERCER’S Quarterly Sector Survey has identified three sub-universes of targeted volatility, socially responsible investing and long short, which saw their relative performance better than the index during the first quarter of 2020.

The survey found 2020’s first quarter was challenging in absolute terms, but in relative terms, the median manager’s underperformance for the quarter compared to the benchmark was marginal and an improvement over the previous market correction in Q4 2018.

During the quarter, managers continued to focus on higher-quality companies with more defensive earnings which performed better. This included Hyperion Asset Management, First Sentier Investors (Australian Equities Growth team), Bennelong Australian Equity Partners and Greencape Capital.

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At the same time, the top-quartile funds for the full year were generally overweight healthcare, consumer staples and communication services while the narrowing of outperformance to defensive sectors in the quarter has resulted in a swift pullback in stocks across most of the other sectors, particularly energy and real estate (Santos, Oil Search, Scentre Group), which saw the largest declines.

According to the survey, the quarter was also notable for the increase in capital raisings in Australia, as corporates sought to bolster their balance sheets so as to better withstand a period of business contraction, or even to prevent insolvency in more extreme cases.

Mercer also found the negative return of the ASX 300 index in the first quarter of 2020 was greater than the last major correction experienced in the fourth quarter of 2008, during the Global Financial Crisis.

Mayfair receives interim restraining order for false advertising

BY LAURA DEW

THE Federal Court has made interim orders restraining Mayfair Wealth Partners (Mayfair Platinum) and Online Investments (Mayfair 101) from promoting debenture products and from using specific words in their advertising.

The ruling followed an application made by the Australian Securities and Investments Commission (ASIC) earlier this month for false and deceptive conduct.

Both firms promoted M+ Fixed Income Notes and M Core Fixed Income Notes, debenture products available to wholesale investors. Payments of capital redemptions from these products were suspended on 11 March, 2020 due to liquidity issues.

The Federal Court rules both firms were restrained from: • All advertising, promotion and marketing of the Mayfair debenture products; and • Using the below prohibited phrases in any advertising, promotion or marketing of any products, including on their websites and through sponsored link advertising, including, via Google AdWords and Bing Ads: - “term deposit”; - “bank deposit”; - “capital growth”; - “certainty”; - “fixed term”; and - “term investment”.

The court declined to restrain the defendants from issuing and accepting new investments in the Mayfair debenture products.

The court also ordered Mayfair Platinum and Mayfair 101 must post the following notice on their websites, and give a copy of the following notice to each prospective new investor in the Mayfair debenture products: “The Mayfair 101 Group of companies reminds investors prior to investing in the products offered by the Mayfair 101 Group that: 1) Mayfair 101 is not a bank, and nor are any of the companies in the Mayfair 101 Group. Therefore, the Mayfair 101 Group is not regulated by the Australian Prudential Regulation Authority (APRA) and investment in its products is not covered by the Australian Government’s Financial Claims Scheme (colloquially known as the ‘Government Bank Guarantee’ which covers deposits up to A$250,000 per depositor, per bank); 2) As with all investment products, there are risks in investing in the Mayfair 101 Group’s products; 3) Investing in the products offered by the Mayfair 101 Group is not the same as depositing money in a term deposit offered by a bank. Investing in Mayfair 101 Group products has a higher level of risk compared to investing in a bank term deposit; and 4) In certain circumstances, the Mayfair 101 Group can exercise the right to suspend some or all redemptions at the end of the fixed term. The Mayfair 101 Group exercised this right on 11 March, 2020. As such, all redemptions are currently suspended until such time as management agrees to lift the suspension and process redemptions. Your investment in the products offered by the Mayfair 101 Group may also be subject to suspension of some or all redemptions at the end of the fixed term. This is a risk that you should take into account.”

29/04/2020 11:01:01 AM

16 | Money Management May 7, 2020

InFocus

HAVE NAB AND CBA LEFT THEIR WEALTH EXITS TOO LATE? Mike Taylor writes that timing is everything and that while Westpac and ANZ have largely cleared their books of their wealth management businesses, the Commonwealth Bank and National Australia Bank continue to have a problem.

WHEN THE BOARDS of both the Commonwealth Bank (CBA) and National Australia Bank (NAB) were scoping out their respective exits from wealth management they could not have contemplated that the fall-out from the Royal Commission would be followed by the impact of the COVID-19 pandemic.

By comparison, the boards of ANZ and Westpac must be congratulating themselves that they managed to exit wealth management with Westpac substantially unloading its financial planning business to Viridian Financial Group in March, last year, while ANZ exited via its transaction with IOOF. The consequence is that while both ANZ and Westpac have had to deal with some residual remediation issues they have not been confronted by the same continuing balance sheet burden as CBA and NAB. That much was made clear in April when NAB released its firsthalf results revealing earnings and revenue declines for MLC Wealth of 46.2%.

The manner in which MLC Wealth is viewed on the NAB balance sheet is reflected in the fact that the business reported a decline in cash earnings of $43 million or 50.6% driven by lower net operating income and higher expenses.

LIFE INSURANCE CLAIMS FINALISED (% OF RECEIVED) 2019

The report to the Australian Securities Exchange (ASX) said net operating income was down 9.2% or $39 million while operating expenses were up 5.8% or $18 million with the bank citing “increased costs associated with the MLC Wealth separation and higher project spend on strategic and regulatory projects”.

CBA reported its half-year result to the ASX in February, well before the real onset of COVID-19 but the numbers pertaining to its wealth management division painted a most unflattering picture with the bottom line being that wealth cash net profit after tax had decreased 50% to $133 million.

What needs to be remembered about CBA is that its original strategy of floating of its wealth

management businesses was substantially stymied by the fall-out from the Royal Commission and the priority was given to advice remediation costs. The result of this was that, in the meantime, it sold Count Financial to Countplus while closing down Financial Wisdom and Commonwealth Financial Planning Pathways – two projects which were still on foot last month.

Having already sold Colonial First State Global Asset Management to Mitsubishi UFJ Trust and Banking Corporation, the question for the CBA board now is how and when it will dispose of the remainder of the Colonial First State business.

It is a question very similar to that being considered by the board of NAB with respect to MLC Wealth.

While the original intention of both big banks appeared to be for a public float of their wealth divisions, the significant disruption caused by the COVID19 pandemic and the consequent substantial capital raisings which have been forced on the banks raises questions about whether this is actually achievable any time inside two years.

This probably explains why, when itemising the banks immediate priorities to investors in its first half results, NAB referenced the separation of MLC Wealth under the heading “long term”.

Notwithstanding this, MLC Wealth chief executive, Geoff Lloyd, is still working assiduously towards a separation, and the underlying message contained in the bank’s first half results was that MLC Wealth was “progressing towards separation via a public markets exit while exploring alternatives”.

Understood to be amongst those “alternatives” is private equity or a foreign financial services player.

Either way, the size of the remediation bills for which both the NAB and CBA have made provision suggests that any new buyers will be seeking indemnities at least equal to those which CBA offered Countplus when it acquired Count Financial.

91%

64%

81%

Death

Total and permanent disability

Disability insurance income

Source: APRA life insurance claims and disputes 2019, released 21 April, 2020

07MM070520_01-16.indd 16

30/04/2020 11:58:45 AM

investmentcentre.moneymanagement.com.au

a part of

RATE CUTS HIT GLOBAL BONDS Laura Dew writes that emergency rate cut by central banks worldwide will create a tough environment for global bonds a part of funds in the future.

THE MOVE BY central banks to mitigate the effects of the COVID19 pandemic on the economy has led to central banks slashing rates to close to 0%.

In the US, the Federal Reserve cut rates in an emergency meeting to 0%-0.25%, the Bank of England moved to 0.1% and Reserve Bank of Australia governor Philip Lowe cut rates to a historic low of 0.25% and indicated rates will remain at this rate for around three years.

This has created a challenge for global bond fund managers who seek positive returns for their investors in an environment where rates are likely to be ‘lower for longer’.

FE Analytics data found that, within the Australian Core Strategies universe, the global bond sector has 87 funds from 48 different providers and are classed as those funds which invest the majority of their assets in global fixed income.

In writing this article, Money Management looked at the sector over the 12 months to 31 March, 2020, towards the beginning of the COVID-19 pandemic. Nevertheless, March still saw unusually strong movements in the bond markets and a rapid change in convexity.

In the global bond sector, there was wide disparity in the range of

returns achieved by funds in the sector, ranging from returns of 25.4% to losses of 29%.

Over one year to 31 March, 2020, the best-performing global fund was JCB Global Bond Unhedged which returned 25.4%. This was followed by Macquarie Enhanced Global Bond at 18.6% and GCI Diversified Income Wholesale Unhedged at 12.6%.

In its most recent factsheet to 31 March, 2020, JCB said its global bond fund was helped by its exposure to an “Italian curve flattener” which worked when the Italian debt market was in extreme stress.

“The underlying fund’s best position was undoubtedly the Italian curve flattener which was designed to work when the Italian debt market was in extreme stress. This happened in March and the underlying fund took profit on the position,” it said.

“Another small curve flattener in the US Treasury and a slight underweight in Italy contributed positively to performance.”

Although the fund was one of the most volatile in the sector with volatility of 12.8 over one year, the third-highest in the sector, it had a Sharpe ratio of 1.84 which indicated the risk had paid off, as this was one of the best in the sector.

“Bond markets moved in a few

Chart 1: Global bond sector versus Australian bond sector performance over one year to 31 March 2020

Source: FE Analytics

07MM070520_17-31.indd 17

days in the magnitude that normally occur over one year. Hence, all active risks were scaled in to reflect the sharp rise of volatility,” its factsheet said.

Funds from Colonial First State, specifically those investing in US fixed income, also performed well over one year with three funds featuring in the top 10 of best performers.

These were CFS High Quality US Yield at 11.6%, CFS US Short Duration High Yield at 11.4% and CFS US Select High Yield 9.1%.

Funds in the US high yield sector had been doing well over the past 12 months as they benefitted from the US bull market where everyone was desperate for yield and there were huge inflows. However, the funds later got hit during March as they were sensitive to economic growth and experienced drawdowns.

Since then, the Federal Reserve has indicated it would include corporate bonds and high yield bonds in its bond-buying programme, as well as government bonds, which could see these type of funds rebound.

Looking on a quarterly basis over three months to 31 March, 2020, the best-performing global fixed income fund was also JCB Global Bond Unhedged which returned 19.4%, Macquarie Enhanced Bond at 18.2% and Ardea Diversified Bond which returned 6.3%. In total, 48 funds in the sector reported positive returns in a difficult quarter.

Gopi Karunakaran, portfolio manager at Ardea, said the fund took a pure relative value approach to fixed income by seeking out pricing inconsistencies between bonds.

“This means we have done well over the past year as volatile markets are the best type of market to find relative value as there are lots of flows and dislocations appearing.

There has been a huge amount of turmoil in markets recently,” he said.

LAURA DEW

The worst-performing Q1 fund was SPW Global Income which lost 29.2% and Invesco Senior Secured Loans which lost 16%. These two funds were also the worst over one year with losses of 26.9% and 13.5% respectively.

The SPW fund was the most volatile in the sector at 27 but, unlike the Jamison fund, it had a Sharpe ratio of -7.

However, when compared to Australian bonds, global bonds have underperformed with 3% average gains over one year and losses of 1.1% over Q1. This compared to returns by the Australian bond sector of 4.5% over one year and 1.3% over the first quarter of 2020.

As to what lay ahead for the global market, this would depend on the effectiveness of central bank actions and the move away from traditional monetary policy to fiscal stimulus.

“Bond markets have had a tailwind from central banks and this was turbocharged in February as central banks went in hard but now rates are at close to 0%, how repeatable is that? If a bond fund is based around yield then when interest rates are so low, it is hard to generate returns,” Karunakaran said.

“Secondly, for the past decade monetary policy has been the dominant policy of central banks and now there’s a big shift towards fiscal policy and all this needs to be funded by the governments issuing government bonds.

“But this is not a good combination if bond yields are at record lows and we will see a big supply/demand battle.”

30/04/2020 9:38:01 AM

a part of

a part of

ACS CASH - AUSTRALIAN DOLLAR

ACS EQUITY - AUSTRALIA EQUITY INCOME

Fund name

1m

1y

3y

Crown Rating

Risk Score

Macquarie Australian Diversified Income ATR in AU

-0.9

1.7

2.43

4

Macquarie Diversified Treasury AA ATR in AU

-0.89

1.66

2.41

Mutual Cash Term Deposits and Bank Bills B ATR in AU

0.1

1.65

Mutual Cash Term Deposits and Bank Bills A ATR in AU

0.1

Pendal Stable Cash Plus ATR in AU

Fund name

Crown Rating

Risk Score

1m

1y

3y

Lincoln Australian Income Wholesale ATR in AU

-16.78

-14.26

0.74

88

4

Lincoln Australian Income Retail ATR in AU

-16.85

-14.94

0.04

88

2.04

0

UBS IQ Morningstar Australia Dividend Yield ETF ATR in AU

-19.31

-8.15

-0.49

97

1.64

2.01

0

Lazard Defensive Australian Equity ATR in AU

-11.55

-14.91

-2.01

64

0.09

1.66

1.99

2

Armytage Australian Equity Income ATR in AU

-21.15

-17.85

-2.09

104

Macquarie Treasury ATR in AU

0.1

1.87

1.87

1

Plato Australian Shares Income A ATR in AU

-19.61

-16.14

-2.32

93

Mercer Cash Term Deposit Units ATR in AU

0.09

1.53

1.85

1

Legg Mason Martin Currie Equity Income X ATR in AU

-21.53

-17.44

-4.24

98

Australian Ethical Income Wholesale ATR in AU

-0.08

1.26

1.81

1

CFS Acadian Australian Equity High Yield-Class A ATR in AU

-22.37

-19.19

-4.25

100

IOOF Cash Management Trust ATR in AU

0.07

1.41

1.8

0

Legg Mason Martin Currie Equity Income M ATR in AU

-21.57

-17.95

-4.78

98

Mutual Cash Term Deposits and Bank Bills C ATR in AU

0.07

1.37

1.75

0

BetaShares Australian Dividend Harvester ATR in AU

-5.73

-6.19

-4.93

55

ACS EQUITY - AUSTRALIA SMALL/MID CAP

ACS EQUITY - ASIA PACIFIC EX JAPAN Fund name

1m

1y

3y

Crown Rating

Risk Score

Mirae Asset Asia Great Consumer Equity A ATR in AU

-0.59

25.66

19.41

62

Lakehouse Small Companies ATR in AU

-19.72

-10.85

14.9

167

CI Cooper Investors Asian Equities ATR in AU

0.01

11.27

14.15

52

Fidelity Asia ATR in AU

-8.83

3.88

13.75

T. Rowe Price Asia Ex Japan ATR in AU

-4.46

9.43

Schroder Asia Pacific Wholesale ATR in AU

-9.21

-1.35

Platinum Asia C ATR in AU

-1.02

6.75

Nikko AM TAAM New Asia ATR in AU

-6.73

Premium Asia ATR in AU Aberdeen Standard Asian Opportunities ATR in AU

Crown Rating

Risk Score

1m

1y

3y

Ophir Opportunities Ordinary ATR in AU

-23.37

-9.34

9.05

112

Fidelity Future Leaders ATR in AU

-18.08

-9.85

8.21

101

Hyperion Small Growth Companies (apps closed) ATR in AU

-10.61

-4.04

6.71

98

57

Macquarie Small Companies ATR in AU

-20.86

-13.69

6.2

110

12.21

57

Macquarie Australian Small Companies ATR in AU

-20.82

-13.93

5.63

110

11.43

64

OC Micro-Cap ATR in AU

-21.55

-7.79

5.38

127

10.13

54

Kinetic Emerging Companies ATR in AU

-0.92

-0.03

5.3

63

6.42

9.89

64

Australian Ethical Emerging Companies Wholesale ATR in AU

-23.31

-3.49

5.2

101

-7.62

-1.66

9.07

65

Australian Ethical Emerging Companies ATR in AU

-23.36

-4.02

4.45

101

-8.63

0.96

7.32

53

Fairview Equity Partners Emerging Companies ATR in AU

-23.58

-12.98

4.17

114

1m

1y

3y

ACS EQUITY - EMERGING MARKETS

ACS EQUITY - AUSTRALIA Fund name

Fund name

Crown Rating

Risk Score

Fund name

Crown Rating

Risk Score

1m

1y

3y

DDH Selector Australian Equities ATR in AU

-18.21

-8.53

9.72

109

Fidelity Global Emerging Markets ATR in AU

-11.25

3.51

10.85

59

Lincoln Australian Growth Wholesale ATR in AU

-13.31

-12.71

8.33

97

Legg Mason Martin Currie Emerging Markets ATR in AU

-12.15

1.56

9.98

66

Hyperion Australian Growth Companies ATR in AU

-9.49

5.67

8.25

91

Northcape Capital Global Emerging Markets ATR in AU

-10.79

0.94

9.75

56

Lincoln Australian Growth Retail ATR in AU

-13.13

-13.01

7.69

97

CFS Wholesale Global Emerging Markets Sustainability ATR in AU

-7.89

-1.19

7.06

41

Platypus Australian Equities Trust Wholesale ATR in AU

-17.93

-3.57

7.61

104

Schroder Global Emerging Markets Wholesale ATR in AU

-11.38

-2.09

7.04

62

DDH Selector High Conviction Equity A ATR in AU

-19.12

-10.84

6.93

112

CFS FirstChoice Wholesale Emerging Markets ATR in AU

-11.29

-1.11

6.58

65

AllianceBernstein Managed Volatility Equities ATR in AU

-11.19

-2.49

5.58

72

OnePath Wholesale Global Emerging Markets Share ATR in AU

-12.59

-7.31

6.1

62

APSEC Atlantic Pacific Australian Equity ATR in AU

17.19

14.14

5.44

26

Macquarie True Index Emerging Markets ATR in AU

-10.84

-4.18

5.95

61

Bennelong Australian Equities ATR in AU

-19.54

-7.82

5.13

116

MFS Emerging Markets Equity Trust ATR in AU

-13.36

-8.63

5.69

64

Bennelong Concentrated Australian Equities ATR in AU

-19.38

-5.44

4.33

120

GMO Emerging Markets Trust ATR in AU

-10.63

-2.74

5.01

64

07MM070520_17-31.indd 18

29/04/2020 3:10:57 PM

a part of

a part of

ACS EQUITY - GLOBAL

ACS EQUITY - SPECIALIST

Fund name

1m

1y

3y

Hyperion Global Growth Companies B ATR in AU

-5.88

10.56

20.89

Fund name

1m

1y

3y

73

BT Technology Retail ATR in AU

-5.29

17.86

22.77

83

1.6

30.7

20.82

79

CFS Wholesale Global Technology & Communications ATR in AU

-5.54

16.27

17.34

86

CC Marsico Global Institutional ATR in AU

-2.82

Fiducian Technology ATR in AU

16.53

16.37

83

20.14

73

-4.35

15.05

-2.72

12.76

13.57

80

-5.87

9.53

19.66

73

Platinum International Health Care C ATR in AU

Hyperion Global Growth Companies A in AU Loftus Peak Global Disruption ATR in AU

-0.57

12.85

12.85

79

-2.63

16.35

19.63

76

CFS Wholesale Global Health & Biotechnology ATR in AU

CC Marsico Global B ATR in AU

-3.39

14.46

19.47

73

Platinum International Technology C ATR in AU

-4.7

10.87

10.52

61

Zurich Investments Concentrated Global Growth ATR in AU

-7.88

14.02

18.85

75

Platinum International Brands C ATR in AU

-14.3

-13.27

4.15

81

Findex Advice Services Pty Ltd Custom Portfolio Solutions Global Growth ATR in AU

-5.93

10.38

17.48

80

CFS Colonial First State Australian Share Growth ATR in AU

-18.4

-10.11

1.13

96

Legg Mason Martin Currie Global Long-Term Unconstrained A ATR in AU

-3.62

11.24

16.74

63

Barwon Global Listed Private Equity ATR in AU

-22.15

-14.01

-1.24

156

VanEck MSCI World ex Australia Quality ETF ATR in AU

-17.81

-2.54

109

15.61

16.2

70

BlackRock Concentrated Industrial Share D ATR in AU

-21.41

-3.51

CFS FC Baillie Gifford W LT Global Growth ATR in AU

Crown Rating

Risk Score

ACS EQUITY - GLOBAL SMALL/MID CAP

Crown Rating

Risk Score

ACS FIXED INT - AUSTRALIA / GLOBAL

Fund name

Crown Rating

Risk Score

1m

1y

3y

Bell Global Emerging Companies ATR in AU

-8.81

4.17

11.48

73

Ellerston Global Mid Small Unhedged ATR in AU

-11.79

8.94

9.65

Prime Value Emerging Opportunities ATR in AU

-19.07

-6.39

Mercer Global Small Companies Shares ATR in AU

-18.17

Lazard Global Small Caps I ATR in AU

-17.5

OnePath Optimix Wholesale Global Smaller Companies Share Trust B ATR in AU

-15.99

-10.73

Pengana Global Small Companies ATR in AU

-18.09

-8.62

OnePath Optimix Wholesale Global Smaller Companies Share Trust A ATR in AU

-15.99

-10.85

2.01

Yarra Global Small Companies ATR in AU

-19.32

-13.05

Fiducian Global Smaller Companies and Emerging Markets ATR in AU

-14.97

-9.37

Fund name

1m

1y

3y

Crown Rating

Risk Score

85

CFS Colonial First State Wholesale Diversified Fixed Interest ATR in AU

-1.43

5.4

4.63

21

3.52

98

BT Wholesale Multi-manager Fixed Interest ATR in AU

-2

4.82

4.34

20

-11.78

2.82

108

UBS Diversified Fixed Income Fund ATR in AU

-2.49

4.19

4.33

20

-8.03

2.23

107

CFS FirstChoice Wholesale Fixed Interest ATR in AU

-3.68

3.14

4

25

105

-3.27

3.43

3.93

26

2.18

PIMCO Diversified Fixed Interest ATR in AU

-3.39

3.18

3.93

21

2.04

86

Macquarie Dynamic Bond ATR in AU PIMCO Diversified Fixed Interest Wholesale ATR in AU

-3.27

3.4

3.89

26

105

Bendigo Diversified Fixed Interest ATR in AU

-2.84

3.77

3.84

22

1.95

113

0.19

2.28

3.69

3

1.53

83

Dimensional Two Year Diversified Fixed Interest Trust NZD ATR in AU Onepath Wholesale Diversified Fixed Interest Trust ATR in AU

-3.34

3.11

3.68

21

ACS EQUITY - INFRASTRUCTURE Fund name

Crown Rating

Risk Score

ACS FIXED INT - AUSTRALIAN BOND

1m

1y

3y

-10.29

5.37

11.92

95

Fund name

1m

1y

3y

-9.1

1.46

9.45

75

Mercer Australian Sovereign Bond ATR in AU

0.26

8.44

6.46

20

Macquarie True Index Global -11.73 Infrastructure Securities ATR in AU

-0.28

8.53

90

Macquarie True Index Sovereign Bond ATR in AU

-0.04

7.7

6.36

21

AMP Capital Global Infrastructure Securities Unhedged Wholesale ATR in AU

0.13

8.02

6.14

18

-14.89

1.57

7.98

91

Pendal Government Bond ATR in AU Jamieson Coote Bonds Active B ATR in AU

0.13

8.19

6.14

24

4D Global Infrastructure A ATR in AU

-16.56

-2.36

7.97

75

0.1

8.09

6.11

20

ClearView CFML Colonial Infrastructure ATR in AU

Jamieson CC JCB Active Bond ATR in AU

-10.96

-0.23

7.87

89

-0.24

7.38

6

17

AMP Capital Global Infrastructure Securities Unhedged A ATR in AU

QIC Australian Fixed Interest ATR in AU

-14.92

1.34

7.72

91

0.11

7.97

5.91

24

AMP Capital Global Infrastructure Securities Unhedged R ATR in AU

Jamieson Coote Bonds Active C ATR in AU

-14.91

1.24

7.68

91

-1.11

6.4

5.9

17

AMP Capital Global Infrastructure Securities Unhedged H ATR in AU

Legg Mason Western Asset Australian Bond X ATR in AU

-14.94

1.04

7.4

91

Jamieson Coote Bonds Active A ATR in AU

0.11

7.96

5.89

24

RARE Infrastructure Value Unhedged ATR in AU

-10.99

2.28

7.17

84

Pendal Sustainable Australian Fixed Interest ATR in AU

-0.35

7.27

5.74

17

BlackRock Global Listed Infrastructure ATR in AU Magellan Infrastructure Unhedged ATR in AU

07MM070520_17-31.indd 19

Crown Rating

Risk Score

29/04/2020 3:13:41 PM

a part of

a part of

ACS FIXED INT - INFLATION LINKED BOND

ACS FIXED INT - DIVERSIFIED CREDIT Fund name

1m

1y

3y

Crown Rating

Risk Score

DirectMoney Personal Loan ATR in AU

0.55

7.64

7.75

8

Manning Private Debt ATR in AU

0.44

5.77

6.1

7

Macquarie Core Plus Australian Fixed Interest ATR in AU

-5.28

3.74

5.26

37

PRINCIPAL GLOBAL CREDIT OPPORTUNITIES ATR IN AU

-2.8

7.75

4.87

35

Pendal Enhanced Credit ATR in AU

-1.71

4.01

4.37

12

Premium Asia Income ATR in AU

-8.96

0.58

4.2

38

Firstmac High Livez Wholesale ATR in AU

-1.62

2.83

4.02

5

Firstmac High Livez Retail ATR in AU

-1.62

2.59

3.78

5

CFS Wholesale Global Corporate Bond ATR in AU

-4.79

4.55

3.76

48

CFS Wholesale Global Credit ATR in AU

-4.88

0.42

3.42

23

Fund name

1m

1y

3y

Crown Rating

Risk Score

Ardea Real Outcome ATR in AU

-0.69

6.58

5.3

13

Ardea Australian Inflation Linked Bond ATR in AU

-7.48

1.63

3.59

52

Macquarie Inflation Linked Bond ATR in AU

-7.02

0.75

3.32

52

Mercer Australian Inflation Plus ATR in AU

-1.97

2.99

3.11

16

Ardea Australian Inflation Linked Bond I ATR in AU

-7.43

-0.9

2.88

52

Morningstar Global Inflation Linked Securities Hedged Z ATR in AU

-3.07

1.48

2.73

19

Aberdeen Standard Inflation Linked Bond ATR in AU

-4.2

0.82

2.29

22

ACS PROPERTY - AUSTRALIA LISTED ACS FIXED INT - GLOBAL BOND Fund name

1m

GCI DIVERSIFIED INCOME WHOLESALE UNHEDGED USD ATR IN AU

Crown Rating

Risk Score

1y

3y

17.68

10.7

44

Fund name

1m

1y

3y

Crown Rating

Risk Score

CF Property Capital Pty Ltd Chiodo Diversified Property Development Strategy Class in AU

-0.95

10.08

19.81

55

Crescent Wealth Property Wholesale ATR in AU

-10.61

-5.23

7.12

50

Crescent Wealth Property Retail ATR in AU

-10.68

-6.75

5.96

50

Freehold Australian Property ATR in AU

-11.19

-5.47

4.39

55

AU Property Securities Income Units ATR in AU

-12.48

-7.33

2.98

300

Colchester Global Government Bond N ATR in AU

-0.27

8.26

6.45

24

Challenger Guaranteed Income 400 cents pa 30/09/22 ATR in AU

0.27

6.07

6.23

7

Russell Global Bond AUD ATR in AU

-3.43

4.69

5.51

34

Russell Global Bond NZD ATR in AU

-3.43

4.69

5.42

34

AMP Capital Listed Property Trusts ATR in AU

-31.15

-24.15

-0.5

144

Mercer Global Sovereign Bond ATR in AU

-1.99

6.38

5.26

21

AMP Capital Property Securities ATR in AU

-31.74

-24.51

-0.71

146

-2

5.75

5.12

25

AMP Capital Listed Property Trusts A ATR in AU

-31.18

-24.55

-1.01

144

Pendal Global Fixed Interest ATR in AU

0.19

8.82

4.69

21

Pendal Property Securities ATR in AU

-31.19

-24.71

-1.49

142

Pendal Sustainable International Fixed Interest ATR in AU

1.4

8.79

4.56

18

Pendal Property Investment ATR in AU

-31.21

-24.79

-1.52

142

-0.09

2.56

4.16

6

1m

1y

3y

APN Asian REIT ATR in AU

-15.17

-3.04

9.97

121

Reitway Global Property Portfolio ATR in AU

-3.48

13.93

9.3

83

Premium Asia Property ATR in AU

-9.93

-9.52

9.27

75

Resolution Capital Global Property Securities Unhedged II ATR in AU

-10.59

-0.12

9.11

106

Quay Global Real Estate A ATR in AU

-13.33

-4.84

8.54

100

IPAC SIS International Fixed Interest Strategy No 2 ATR in AU

Dimensional Five Year Diversified Fixed Interest Trust NZD ATR in AU

ACS PROPERTY - GLOBAL Fund name

ACS FIXED INT - GLOBAL STRATEGIC BOND 1m

Dimensional Global Bond Trust NZD ATR in AU

-3.54

Dimensional Global Bond Trust AUD ATR in AU

-4.41

IOOF Strategic Fixed Interest ATR in AU

-0.9

0.88

1.86

4

T. Rowe Price Dynamic Global Bond ATR in AU

2.03

2.99

1.37

22

Quay Global Real Estate C ATR in AU

-13.35

-4.78

8.45

100

JPMorgan Global Strategic Bond ATR in AU

-4.68

-1.02

0.99

22

BetaShares AMP Capital Global Property Securities Unhedged ATR in AU

-13.96

-3.35

7.28

112

Pimco Dynamic Bond C ATR in AU

-4.91

-3.24

0.84

31

IOOF Specialist Property ATR in AU

-15.1

-9.27

4.64

122

Pimco Dynamic Bond Wholesale ATR in AU

-4.92

-3.33

0.73

31

Dimensional Global Real Estate Trust Inc AUD ATR in AU

-18.56

-8.71

4.6

132

MacKay Shields Unconstrained Bond ATR in AU

-6.78

-3.92

0.4

41

Macquarie True Index Global Real Estate Securities ATR in AU

-18.63

-11.72

3.49

131

4.84

3.49

3y

6.07

3.87

Risk Score

Risk Score

Fund name

1y

Crown Rating

Crown Rating

28 28

The tables and data contained in the Investment Centre are intended for use by professional investors and advisers only and are not to be relied upon by any other persons.

07MM070520_17-31.indd 20

29/04/2020 3:13:27 PM

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Now, available in Australia in partnership with Money Management, FE fundinfo’s quantitative ratings are designed to help advisers identify funds which have displayed superior performance in terms of stockpicking, consistency and risk control.

A one Crown rating represents a fund that falls into the fourth/ bottom quartile

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29/04/2020 9:43:02 AM

22 | Money Management May 7, 2020

SMSFs

HOW SMSFs ARE WEATHERING THE COVID-19 STORM Self-managed superannuation funds have been weathering the COVID-19 storm, writes Mike Taylor, but should be alert to the price they may be asked to pay as part of the recovery from a deep recession.

IN THE THREE years leading up to the Global Financial Crisis (GFC) in 2007/08 the rate of growth of self-managed superannuation funds (SMSFs) was the talk of the industry. It was, by almost any measure, phenomenal.

In the five years to 2009, the SMSF sector had grown by an average 20% a year making it hardly surprising that both retail and industry fund executives were becoming restive about such growth levels.

07MM070520_17-31.indd 22

However, that 20% growth rate took a momentary hit during the GFC, albeit that momentum was resumed reasonably quickly thereafter. The question in 2020 is whether COVID-19 pandemic is having a similar impact?

The 20% per annum growth rate in SMSF establishment leading up to the GFC has definitely not been maintained, but nor has the SMSF sector fallen away in terms of its relative scale in the superannuation industry.

According to the latest available data compiled by the Australian Prudential Regulation Authority (APRA) total superannuation industry assets were $2.9 trillion as at 30 June, 2019 and, of this total, $1,924.8 billion were held by APRAregulated superannuation entities and $747.6 billion were held by SMSFs (see Chart 1).

The bottom line of the APRA data is that, while the momentum of SMSF establishments has tapered off somewhat over the

28/04/2020 4:31:51 PM

May 7, 2020 Money Management | 23

SMSFs

Chart 1: Assets of superannuation entities past decade, the level of assets within SMSF funds has continued to grow, albeit not as quickly as those of APRA-regulated funds.

The explanation for this is simple and has remained unchanged for more than a decade. To quote an Australian Taxation Office (ATO) analysis published in 2009 – “Compared to members of other types of superannuation funds, SMSF members are, on average: older; earn a higher income; and have larger superannuation balances”.

“SMSFs hold a majority of their assets directly; with nearly 60% of assets held in cash, term deposits and Australian listed shares. SMSFs are exposed to little direct overseas investments,” the ATO’s 2009 analysis said.

In the intervening decade little has changed in terms of the asset allocations of SMSFs, although there is evidence that in 2020 there is more exposure to overseas investments via managed funds.

SMSF Association chief executive, John Maroney, is alive to what the SMSF sector experienced during the GFC and is paying close attention to what is evolving during COVID-19, but it is not what might be expected.

“Interestingly, for the first time in several years the trend of declining SMSF registrations has reversed this year,” he said. “The number of SMSF registrations received between July, 2019 – December, 2019 was 11,558. This compares with 10,954 SMSF registrations received for the same period in 2018, representing an increase of 5.5% in registrations.

07MM070520_17-31.indd 23

Source: APRA

“SMSF registrations for January and February 2020 were 3,246 compared with 2,807 SMSFs registered during the same period last year. That is an increase of 15.6%.”

Maroney said early indications suggested SMSF registrations had surpassed March, 2019, by 6% (registrations to 25 March, 2020).

“This confirms there has been a spike in registrations following the COVID-19 outbreaks,” he said while noting that there had actually also been a spike in SMSF establishments shortly after the GFC, as shown in Table 1 overleaf.

Industry veteran and managing director of Heffron SMSF Solutions, Meg Heffron, said that, rather than seeing a repeat of the GFC slowdown which impacted SMSFs, she believed the opposite might actually be occurring.

“I think behaviour lands in one of two camps during a crisis,” she said. “a) Bunker down, make no

changes and hope it all passes soon (which would slow SMSF growth) or b) Look at the carnage and take it as a wake-up call that there has never been a more important time to be engaged.

Engagement usually spawns a desire for control and that’s exactly what SMSFs are all about.

“So far, we’re seeing a lot of ‘b’. Elsewhere there may also be a lot of fear and trepidation that stops SMSF creation but we’re not seeing it yet.

“Weirdly, it’s even reminded people of the benefits of SMSFs in terms of being nimble. For example, we had our first ATO determination for a fund where the member asked for the $10,000 early release. He’s been approved and received the ATO notice in the morning. By lunchtime he had the money – the notice allowed him to transfer $10,000 from his fund to his personal account and, as it’s all with the same financial institution, it was instant,” she said.

Continued on page 24

28/04/2020 4:32:49 PM

24 | Money Management May 7, 2020

SMSFs

Continued from page 23 “This is a guy that has been relying on friends to help him feed his kids – today, he could go shopping with his own money. I wonder how long he would have had to wait before a large fund could pay him?

“Similarly, people at the other end of the spectrum – where downturns in markets give them opportunities – have been able to act immediately with new strategies. That just reminds them of why they want an SMSF,” Heffron said.

However, she also urges a note of caution befitting uncertain times.

“All that said, my personal view is that the worst thing to do right now is to dive into anything, be it setting up an SMSF or changing to any other kind of fund.

If an SMSF wasn’t right for you three months ago, why is it right today? I think the fear of market falls, uncertainty etc. sometimes

makes people react too quickly rather than carefully considering their options like they would in normal times.

“That might be absolutely fine (and in fact a good thing) where it prompts people to take bold steps in changing something within their business or getting into new products/revenue lines because

Table 1: SMSF population - annual data

others have dried up, it might be a great trigger for a lot of genuine innovation. But it’s not a good thing when it comes to making long-term retirement planning decisions like ‘should I have an SMSF’,” she said.

“Of course, I think everyone with super should at least think about an SMSF and far more people should have them than do at the moment. But it’s like marriage – totally wonderful thing to be entered into in a considered and careful way.”

EARLY RELEASE As mentioned by Heffron, people may be members and trustees of a self-managed superannuation fund but that has not precluded them from accessing the Government’s $10,000 hardship early access regime.

The SMSF Association’s Maroney acknowledged it did not have any hard data on the issue, and suggested the traditional member demographic was such that it was unlikely to be significantly widespread.

However, he acknowledged that SMSF trustees who were also Source: ATO

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28/04/2020 4:33:02 PM

May 7, 2020 Money Management | 25

SMSFs

running small businesses might be a different proposition.

“There will be some SMSF members with small businesses who may need to access superannuation to deal with cash flow concerns,” Maroney said.

Heffron said there was no question that her firm had some clients who either had or would seek early access.

“Which just goes to show how massive and widespread the impact of this pandemic is – you’ve got to remember that a lot of SMSF members are small business owners whose source of income has just dried up,” she said.

“From a personal income point of view, they are in every bit as tough a place as someone who lost their job. We also have highly paid young professionals who have both lost jobs, have large mortgages etc.”

Having said that, Heffron said that she expected most SMSF members would not need to access their superannuation “because they have some personal wealth behind them and obviously the retirees don’t need this to access their super”.

“A lot of our client base is in pension phase,” she said.

“Obviously the economic impact of the pandemic has put a large dent in a lot of people’s retirement savings so SMSF balances have fallen considerably – so there’s an obvious impact on the most important people in the industry, the trustees themselves.

“The SMSFs that own property are also hit hard by the relief they need to provide to residential and commercial tenants. COVID-19 has really brought home one of the real challenges of having your retirement savings tightly coupled

07MM070520_17-31.indd 25

to your business (e.g. owning the property that the business rents) – in that rough times for the business translates directly into a rough time for the landlord (the SMSF),” Heffron said.

“Having said that, the SMSFs with property leased to third parties are also in a hugely tough place.

The State and Federal Governments have been quick to dive in and mandate some rent relief and support for tenants during the pandemic which – on one level – totally makes sense,” she said.

“But it’s done on the assumption that the tenant is economically weaker than the landlord. That’s just not always the case – in an SMSF where a property is a major asset, allowing the business or residential tenant to just ‘not pay rent’ quite possibly means the retiree trying to live on that income is completely screwed.

They may end up being even more damaged than the tenant.”

AND WHEN THE PANDEMIC IS OVER? Heffron believes that when the pandemic is over and the dust has settled, the SMSF sector will need to be alert to the consequences of the large and rapid policy measures the Federal Government put in place.

“The SMSFs themselves and Australia generally are clearly going to have to pay for the stimulus one day,” she said.

“Sadly people who have accumulated wealth are often soft targets here and that’s the SMSFs. The attack on franking credit refunds will make a re-appearance as will capital gains tax (CGT) and superannuation tax concessions I suspect.

“Certainly our income tax

base is too narrow to fund it via income tax increases and while I love the Government’s optimism that we will grow our way back I think there will need to be a helping hand.

“I just hope the Government takes this as an opportunity to make some sustainable changes rather than just tinkering at the edges or attacking soft targets.

Some reform on the tax and social security treatment of family homes, rationalisation of taxes that are anti-jobs (e.g. payroll tax), bite the bullet and think about raising GST etc,” she said.

Maroney said the SMSF Association had been advocating strongly on behalf of members, particularly to the ATO, on issues arising because of COVID-19 and had been pleased with the hearings it had been receiving.

“As an example the Government positively responded to our request to reduce the minimum requirement for pensions for the 2019/20 and 2020/21 financial year,” he said.

“We are currently exploring further positions to take to Government but with the uncertainty surrounding the financial impact of the COVID-19 pandemic, potential areas of concern are changing rapidly.

“The Government has an opportunity in May to legislate for the extension of measures which will allow more Australians to contribute to superannuation as announced in last year’s budget.

We also think this may be a good time to extend that legislation to repeal the work test to allow more Australians top-up their retirement savings after the negative impact of COVID-19.”

28/04/2020 4:33:10 PM

26 | Money Management May 7, 2020

Gender in financial services

THE SILVER LINING OF COVID-19 The increase in home and remote working in the light of the COVID-19 pandemic is likely to be a benefit to women in the workplace if the policies are implemented long-term, writes Oksana Patron.

THE GOVERNMENT RESTRICTIONS in recent weeks have severely confined people’s movement in order to prevent the spread of COVID-19, causing the majority of firms to move to remote working.

Given the seriousness of the pandemic situation, the changes have occurred at a faster pace than what would have been anticipated in normal circumstances and some firms may have never considered home working until now.

As a result, numerous tools for conducting advice meetings online or via telephone have been created and advisers are meeting clients over Zoom rather than face-to-face.

In some instances, this has been initiated by the client rather than the adviser as they feel uncomfortable coming into an office. Many have since indicated they could keep working this way as it was more efficient from a time perspective.

Although the overall impact of the shutdown on the workforce is yet to be assessed, it seems highly likely that the flexibility of work arrangements which businesses and employees have had to adopt will stay in place for longer than the pandemic and could particularly benefit female employees.

WHAT DOES FLEXIBLE WORKING MEAN? According to the Workplace Gender Equality Agency (WGEA), an Australian government statutory agency responsible for promoting and improving gender in workplaces, flexibility is defined

07MM070520_17-31.indd 26

as a work arrangement between a workplace and an employee to better accommodate an employee’s commitments out of work. This can cover changes to hours, pattern and location of work such as working from home, more flexible hours, compressed working weeks or job sharing.

However, at the same time, the WGEA stressed flexibility does not mean, although it gets often confused with, relatively minor work adjustments such an employee taking time off as carer’s leave, compassionate leave or parental leave.

While part-time work is currently considered to a flexible working arrangement, the realities of part-time work are often much the same as those in full-time work and may not offer much flexibility around time or location of work, the agency said.

Given the current COVID-19 pandemic situation has forced many businesses to choose between adapting rapidly to flexible work arrangements or facing a complete shutdown, it might be expected that the role of the flexibility in the workplace will become more significant going forward.

CHANGES POST COVID-19 According to Alva Devoy, managing director of Fidelity International Australia, the current working arrangements represent a huge shift in society and will play an incredibly important role in improving women’s participation in the

30/04/2020 9:38:55 AM

May 7, 2020 Money Management | 27

Gender in financial services Strap

broader workforce and their ability to stay connected to their workplaces.

“I think that is going to be one of the most powerful effects out of this,” Devoy noted.

“If you look around pretty much every company today has had to adapt to flexible working so I think one of the biggest silver linings to come out of the COVID19 is flexible working that will be now available to all.”

Devoy also stressed current circumstances have forced more men to adopt this sort of working arrangement and those who would have never previously chosen to work from home are now forced to do so.

“I think that levels the playing field, and hopefully makes it easier for women overall to participate and to do well in the workforce.”

Danielle Welsh-Rose, environmental, social, and governance investment director – Asia Pacific at Aberdeen Standard Investments, had a similar opinion and said this was a good time for women to have this conversation with their firm. The fact men were also being forced to work from home, share space with family and physically juggle childcare would hopefully influence the way men and women saw each other in the workplace.

“It will make workplaces more family friendly to everybody and that might play to gender balance. That’s my optimistic view,” she said.

Jodie Blackledge, chief financial officer and chief operating officer at Fitzpatricks Private Wealth, said: “I would say that our level of productivity has actually gone up in this phase of working from home, not down, and I think it gives a lot more confidence to people in business and I think that will benefit women. We are in this together and we’ll get through it.”

Welsh-Rose said the financial services sector, in particular, had a pronounced gender problem as its pay gap was one of the highest of all

07MM070520_17-31.indd 27

sectors. The financial services pay gap is 22.2% compared to a full-time national average of 13.9%.

However, the good sign was that gender-related conversations in the workplace were happening, even though there were still a lot of roadblocks standing in the way.

These included the lack of career advancement as women were still not getting promoted to the senior positions as often as men.

In 2014, some 15.7% of chief executive officers were female but in 2018, this was 16.8%, a rise of just 1.1%, according to the WGEA. “The issue has been identified but if we are not doing anything to remove these barriers then nothing will change,” Welsh-Rose said.

“I think one of the interesting conversations around diversity more broadly, as well as gender diversity, is the focus that we put on the discriminated against group to change their behaviour to succeed.

“The focus needs to be taken off women and put on men. Because the barriers are essentially around the lack of diversity, and the ones making decisions turn out to be the men,” she said.

When asked about how the industry could help promote women, Blackledge said that Fitzpatricks, where women constitute 20% of its adviser cohort, operated a number of peer groups to help advisers share their knowledge and intellectual properties. Among these was one dedicated to female advisers which aimed to help build communities that support the progress of women.

“I think when you can create that environment and encourage the women to take the next step or to build their practice further or to move towards more high-net-worth clients then you are sort of building that momentum within the culture of your business and to me it’s really important.”

JOB SECURITY Aside from the changes to working from home, the pandemic has also

“The issue has been identified but if we are not doing anything to remove these barriers then nothing will change.”

Danielle Welsh-Rose, ESG investment director – Asia Pacific at Aberdeen Standard Investments brought up issues surrounding job security. So far, hundreds of thousands of people have lost their jobs, been furloughed or had to work reduced hours.

According to the Australian Bureau of Statistics, there was an 8.9% reduction in total wages between 28 March and 4 April for workers in the financial services and insurance sector.

This was particularly important for women as they were more likely to have a lower volume of savings to fall back on in the worst-case scenario.

Research by Fidelity International, which was published in March as a part of the company’s value of advice study, found women were still more vulnerable when it comes to job security, with one-inthree saying they could only last up to a month in case of unexpected job loss. By comparison, only 24% of men could say the same.

On top of that, almost half (44.1%) of Australian women, compared to only 29.7% of men, said they would not be financially stable if their relationship or marriage came to an abrupt end.

For those who had lost their job, there was the option to access up to $10,000 of their superannuation. However, this was another problem for women as they usually had a much smaller super balance than men, meaning accessing it now could be detrimental to their future retirement.

Some 38.7% of women surveyed by Fidelity said they felt unprepared for retirement. The study further found that overall only 28.8% of women felt very or reasonably prepared for retirement, compared to 42.2% of men. Another 60.1% of women said they believed they may have

to keep working past retirement age to fund their retirement, compared to 50.1% of men.

“If you ask a man what he would need for his retirement the average answer that you get would be $1.5 million and the answer that you would get from a woman would be $1 million,” said Devoy.

“So already you’ve got women thinking they need one-third less in retirement despite the fact that they will probably live for seven years more on average versus men and that through their working lives they will probably need to take career breaks in order to have children.”

The lack of financial awareness was echoed by Marisa Broome, chair of the Financial Planning Association of Australia, who said financial literacy among Australians was low and that women lacked confidence about their finances. In crisis times like this, this meant the value provided by a trusted financial adviser became even more obvious “I think that generally in Australia, for a developed country with a really powerful superannuation system, our level of financial literacy is quite low.

“We are in a difficult time and this the perfect time to reassess – it’s a great time because people have a little bit more time on their hands. So if you are lucky to still have a job it’s the best time to get yourself organised for your life.

“One of the really important things about finding an adviser is understanding this is someone who is going to be in your corner for the long-term. The advice you receive will only make that positive difference in your life if you keep going back and seeing them. So having a relationship with someone you trust is critical.”

30/04/2020 9:39:03 AM

28 | Money Management May 7, 2020

Equities

NEVER WASTE A CRISIS Winston Churchill proclaimed ‘never waste a good crisis’ and the COVID-19 pandemic has provided an unprecedented opportunity for the industry to test this theory, writes Nick Cregan.

THE COVID-19 PANDEMIC has created a state of extreme market volatility, with investors feeling significant anxiety and fear for their financial future.

With global markets experiencing the fastest bear market on record, with the S&P 500 falling 34% from February highs, investors are racing to sell stocks and flocking to safe havens. But for investors who can keep a level head and stay the course, the current market presents attractive opportunities, especially in the global small and mid-cap (SMID) sector.

07MM070520_17-31.indd 28

For almost 100 years in the US, SMID stocks have, on average, outperformed large caps.

Fairlight defines the SMID sector as companies with a market capitalisation of US$500 million ($774.5 million) to $20 billion.

Historically, the global SMID sector has outperformed large caps by approximately 3% per annum. However, the sector is currently experiencing a set-back, trading at a significant discount due to investors shunning risk and looking to mitigate the nearterm impact of the COVID-19 crisis. This has led to

indiscriminate selling in the small cap sector, with small companies the cheapest they have been in a decade. This has created fantastic opportunities for investors to acquire quality companies at a significant discount to their intrinsic value and build a more robust and diversified portfolio.

The global SMID sector can be a more volatile asset class for investors, and taking a defensive, long only, quality approach to investing can help to minimise this risk. Historically, size and quality have proven to blend beneficially.

There has not been a period over

the past 20 years that the small cap and quality factors have underperformed the MSCI Global ACWI index at the same time. For this reason, we suggest investors take a focussed, defensive approach for investing in the global SMID sector targeting quality companies with a proven track record. For example, the Fairlight portfolio consists of only 35 quality stocks and focuses exclusively on the healthcare, consumer staples, technology, and light industrials sectors.

Considering risk is crucial when investing. Taking a defensive

29/04/2020 2:37:01 PM

S

May 7, 2020 Money Management | 29

Equities approach to a riskier asset class means designing portfolios that are robust during difficult times and can weather unexpected crises, such as COVID-19.

To do this, we suggest investors avoid any companies or industries that are highly leveraged, such as banks and property, and to be wary of highly cyclical businesses such as oil and gas. Reviewing historical performance can also be a helpful indicator. We conducted a thorough analysis of the listed stocks held in the portfolio during the 2007-09 Global Financial Crisis (GFC), including share price performance, profit and loss analysis, capital raises, and dividend cuts. We found all the listed companies we are invested in performed well during the GFC, compared to the market, and there were no companies generating losses during that period. This defensive approach is once again proving successful, with Fairlight outperforming its index, the MSCI global small cap, and the MSCI large cap index by 450 basis points in March, the worst sell-off period during the COVID-19 crisis.

QUALITY AT THE RIGHT PRICE With so much market noise, it can be difficult for investors to spot an opportunity and understand where value lies in the market.

When looking for opportunities it can be tempting to react to significant share price drops – who doesn’t love a bargain? But just looking at price and buying what is cheap can be a serious trap for investors.

When evaluating stocks investors should avoid being reactionary and only invest in quality companies they know well.

We maintain a ‘bench’ of businesses that are not currently in the portfolio – we know them well, have met management, covered the business for some time and have full financial models established, but the price hasn’t been right. Maintaining ongoing valuations for businesses means investors are well placed

07MM070520_17-31.indd 29

to move quickly and take advantage of market dislocations to acquire quality companies at attractive prices.

But what if you are only just starting to look at stocks, where do you start? Understanding company fundamentals is crucial.

Thorough screening, such as geography, business sector, financial resilience, and governance, can help to identify quality businesses that are undervalued. Questions investors should consider when buying during this crisis are: • Does the business have a strong balance sheet? Will the company require a capital raising in the near term?

• Do you know what is on the balance sheet? Investors should be wary of banking stocks which can be thought of as leveraged black boxes that are often at the heart of financial crises.

• Are there recurring revenue streams, such as licensing fees, or is the business reliant on customers capex decisions that require approval from the board of directors or procurement team?

• How did the business perform during the GFC, or other crises?

Whilst the COVID-19 downturn differs markedly, there are some lessons to be gleaned from the previous downturn, especially regarding the strength of various business models.

There has been a lot of discussion about identifying the bottom of the market and finding the right time to buy. In my opinion, company fundamentals are the most important factor to identify quality at the right price. Where we have identified those ‘bench’ businesses trading at notable discounts, we have judiciously started to buy. As a risk mitigation tool, we typically start averaging into a stock at a 1% holding, with our full position scaling to 4% to 5%. We feel exercising a patient, measured approach to investing ensures a solid understanding of the company and provides confidence we are investing in quality stocks that will deliver

strong, sustainable returns.

Times like this call for a calm head and rational, informed decisions. Often investors can be overwhelmed by emotion, which causes some to panic sell at the worst time during a downturn.

While we don’t know when the market will bottom, taking a sensible, well-researched approach can help investors make the most of opportunities currently presenting themselves.

SPOTTING AN OPPORTUNITY Coming into this crisis, opportunities in the global SMID sector were limited and as a result the Fairlight fund was holding approximately 12% of its assets in cash. This meant we were well positioned to take advantage of the opportunities that arose due to the COVID-19 market sell-off.

A stock we have acquired during this crisis is Nemetschek, a German software business operating in the design, building management, and maintenance market. This company has been sitting on our ‘bench’ for two years while we waited for the right price. When the share price dropped 37%, we seized our opportunity.

Nemetschek has a 95% customer retention rate, strong pricing power, robust margins, and a disciplined management team, who we meet with regularly.

Like us, they are looking for quality acquisition opportunities within adjacent niche markets that they can help scale globally. The business has a net cash balance sheet which will be deployed as vendor expectations become more realistic over the next few months.

Another quality stock we have purchased during this downturn is AspenTech. While we avoid the oil and gas and heavy industrials industry, we have some exposure through AspenTech, which provides design and maintenance software for this sector. The technology is so good that AspenTech insists on a five-year non-breakable contract with yearly price escalators. While we

had a small exposure to this stock, we took the opportunity to increase our position when it traded down 46% from its peak.

We have also moved quickly to exit stocks we felt were at risk or overvalued. These exits have allowed us to redeploy capital to increase the quality of the portfolio.

Carmax, the largest used car dealership in the US was one example of this. It has an impressive, no-haggle pricing model and has been successfully taking market share over a sustained period of time. It has also moved to an omnichannel model, allowing digital transactions and delivery of vehicles to the purchaser’s doorstep. However, the business is dependent on the consumer finance market remaining open.

As credit tightened, we decided to liquidate our position and redeploy the capital.

Henry Schein, a steady distribution business serving the GP and dental market, was another stock we sold down. We believe that dentist practices will face a prolonged period of pressure on discretionary dental work, and with high fixed cost leverage due to distribution centres we felt the business would be disproportionately affected.

MAKING THE MOST OF THE CRISIS Through analysing company fundamentals and taking a patient, defensive approach to investing, investors can take advantage of the current market opportunities and acquire quality businesses trading at a discount. However, this can be an emotive time for investors, which is why using professional fund managers may make sense in this environment.

Churchill’s strategy is proving correct for opportunistic investors in the global SMID sector. It pays to be prepared for inevitable crises and act with courage and conviction so the opportunity does not go to waste.

Nicholas Cregan is portfolio manager and partner at Fairlight Asset Management.

29/04/2020 2:37:33 PM

30 | Money Management May 7, 2020

Health

MENTAL HEALTH IN THE WORKPLACE As people move to working from home for the foreseeable future, Glenn Baird discusses how you can best look after your wellbeing and that of your staff IN RECENT YEARS, we’ve seen a positive shift in the way people view and talk about mental health. As a society, we’ve come a long way in reducing stigma surrounding the topic and recognising that mental health is just as important as our physical health.

It is undoubtedly a complex topic, but one we cannot ignore, as more than half of Australia’s workers have experienced a mental health condition in their lifetime.

Mental health encompasses our psychological, emotional and social wellbeing and it is the main driver of how we feel, think or cope with stress and interact with other people.

Mental health is a term that is often misunderstood and used interchangeably with mental health conditions or mental health issues.

We need to understand that mental health is a state of wellbeing in which every individual realises his or her own potential, can cope with the normal stresses of life, can work productively and fruitfully, and is able to make a contribution to his or her community.

At TAL, we take a holistic approach to health. When we talk about promoting mental health, we look at the entire customer journey.

From supporting employees who may be experiencing mental health conditions to developing initiatives to enhance good mental health. This

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may include creating an open and accepting environment where employees can thrive and enjoy being at work on a day-to-day basis.

The fact is, most people spend the majority of their day at work and many studies have shown that workplaces play an important role in the mental health and wellbeing of their employees.

As an organisation, we understand the importance of a healthy environment and that investing in designing a workplace that supports individual mental health will lead to increased productivity, employee engagement and happiness. Studies have confirmed the importance of a healthy work environment on mental health. More than that, they also show the impact of unhealthy workplaces as a predictor of mental health conditions.

A recent survey by Superfriend found the most common barrier to achieving a thriving workplace is lack of appropriate skills in managers. As part of our efforts to create a supportive environment, we introduced our ‘Mental Health and Wellbeing Training Program’ to all of our people leaders in 2018.

The program was designed to equip our people leaders with the right skills and tools to support their direct reports and foster an environment where those direct reports feel comfortable in

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May 7, 2020 Money Management | 31

Strap Health

approaching their managers to discuss their individual mental health.

More topically, in the wake of the COVID-19 pandemic, TAL, like many businesses, has shifted to a remote working model where possible. Many of us are still grappling with the new normal and figuring out how to work from home in a sustainable way.

What this also means is when we talk about workplace mental health, it is not confined to the physical office space anymore.

With staff facing decreased interaction with people and spending less time outside of home, employers need to put more structure in place to ensure this significant disruption to our day-to-day lives will have minimal impact on our mental health as the COVID-19 situation continues.

And while social distancing will undoubtedly have an end date, the impact on our working structures including remote working and digital engagement will be changed forever.

Here are few tips that I would recommend for anyone working from home:

CREATE A DEDICATED WORKSPACE Creating a dedicated workspace at home should be the number one priority when it comes to working from home.

Once you have identified the space, you will need to ensure that you have everything you need to work effectively. Do you have an appropriate monitor? Do you have the right chair?

Think of entering this space as entering an office and it will put you in the right mindset and enhance your focus. It will also keep you from overworking and set you up for long-term productivity and success.

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STICK TO YOUR DAILY ROUTINE Some might think that working remotely means that we are always ‘on’ 24/7 and that you should squeeze in work whenever you can. However, if you don’t organise your day and treat it like a normal eight-hour workday, you risk burning out easily.

Stick to your daily work routine and get dressed every morning.

You will also need to be more selfdisciplined and make sure to organise your day against your list of to-dos so that you can mentally prepare yourself for what to expect during the day.

And lastly, don’t forget to set aside some time for mini breaks throughout the day, as you would in the office, to give your eyes, neck, shoulders and back a break, and have lunch at the same time as you normally would.

VIRTUAL MEETINGS The disconnectedness from your colleagues may make you feel lonely and isolated and loneliness is associated with higher rates of depression and anxiety.

I encourage TAL staff to use video calls over phone calls whenever possible. E-mails, instant messaging or phone calls do the job of communicating but they make it harder to build camaraderie with your colleagues in times like these.

Studies have also shown that teams that meet regularly are much more likely to come up with innovative solutions to problems than groups that did not meet regularly.

BUILDING A SUPPORT SYSTEM Working from home in isolation makes it harder to feel supported, even if your colleagues or leadership teams are there for you. There are many

ways to build a support group, whether it’s an individual daily check-in or scheduling regular team video meetings. These will help foster a good culture outside of work and make people feel supported and valued.

EXERCISE REGULARLY It is much easier for people to find an excuse to not exercise while working from home. However, exercise can lift our mood, reduce anxiety levels and assist in getting a better night’s sleep. It’s well known that doing exercise releases positive endorphins, so try to make a conscious effort to be active in some way.

There are plenty of ways we can get up and be active. While lockdown measures are in place across the country, people are still allowed to go out for exercise, under the condition that you stick to the rules. Go outside for a walk or a jog and get some fresh air; alternatively, you can check out the many free online fitness apps or YouTube channels to help you stay fit and healthy at home.

COMMUNICATE, COMMUNICATE, COMMUNICATE Communication is more important than ever and the key to success in remote work. Individuals must understand that everyone is feeling the same, so it is important that everyone makes an effort to interact with colleagues.

If in doubt, communicate more than you think you should, because it builds trust. This is especially important in the current environment as remote workers can feel lost without feedback they would normally receive in an office setting.

For TAL, some of our existing initiatives have put us in a strong position in challenging times like

GLENN BAIRD

these. For example, our aforementioned ‘Mental Health and Wellbeing Training Program’ has made sure that our leaders are confident to lead their teams and continue to support them to function to the best of their abilities, both as individuals and as a collective. We continually strive for excellence in the mental health space and the program is a good starting point for our organisation, and we will continue to coach and upskill our people leaders to ensure we are building their skills and capability.

As we navigate through uncharted waters, it is important to note that there is no ‘one size fits all’ approach when it comes to looking after employees’ mental health. We need to constantly monitor and identify their needs and adapt our ways of working in order to offer them the best support.

This is a challenging time for everyone, and employers need to recognise the need to provide additional guidance and support to their employees in the coming months so that we all come out of this stronger than before.

It is not only a legal responsibility for employers to provide a safe and healthy workplace, but also a moral one.

Glenn Baird is head of mental health at TAL.

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Toolbox

UNSTEADY MARKET FUELS FLIGHT TO LONG/SHORT FUNDS As the impacts from the COVID-19 pandemic rattle the nerves of investors, writes Jun-Bei Liu, many are turning their attention to long/short equity strategies in a bid to capture the benefits of a falling market.

THE VORACITY OF COVID-19 has unequivocally spread into every corner and pocket of the globe, with the speed of the infection causing ongoing and widespread global consumer panic. The comparison with SARS in 2003 is now even less relevant as SARS was much more regionalised despite the higher mortality rate.

Investors’ initial apathy towards COVID-19 was astounding, as in the space of

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three weeks, the Australian Securities Exchange (ASX) and global equity markets collapsed – plummeting from all-time highs to entering into a bear market – with more than 20% wiped out.

The correction has since been cited as one of the fastest drops in the local equity market since 1987.

The speed and the severity of the current equity market correction however will have ramifications for many companies, particularly those

with higher leverage and discretionary revenue sources.

Yet even further weakness is still to be exposed, namely in the travel sector, and particularly for those with high operating leverage, and with consumers practically hiding in bunkers, the downgrade will be much more broad-based.

The crash that was March, 2020 happened so swiftly and decisively that many investors remain in a state of shock, and

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May 7, 2020 Money Management | 33

Toolbox

given the protracted nature of uncertainty, it’s likely that over the next six to 12 months more attention will be paid to long/ short managers.

And for good reason.

The philosophy of long/short managers serves them well in market conditions currently being experienced – not only are they positioned for falling markets, but also rising markets at the same time. Over a 10 to 15-year period, long/short managers are consistently in the top-performing quartile, largely due to their ability to manage risk more effectively.

Utilising tools such as long stocks and shorting companies means a manager will borrow a stock and then short sell them; the combination benefitting from both directions of the market while staving off many of the inherent risks associated with trading equities.

Long/short equity strategies are less constrained than some others, and are not beholden to an index.

Because of this, long/short strategies have the advantage over long-only strategies such as traditional equity funds and equity exchange traded funds (ETFs).

Market drawdowns and gains needed to recoup losses Loss

Gain needed to recoup loss

10%

11%

20%

25%

30%

43%

40%

67%

50%

100%

With the recent market volatility, the advantage of having the ability to short in a fund is clear. With the market falling 20% to 30% during a single month, shorting helps a long/short

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manager take advantage of cheaper prices without taking on an excessive amount of risk.

Often when an investor is researching whether or not to buy a stock, the fundamentals of the decision making are straightforward – company management and governance, performance, dividend history, price to earnings ratio etc. The focus is on whether the stock will rise in value. But, with the flexibility of shorting, should the share price fall, an investor can still generate a return so long as the funding stock has fallen more.

SECTOR SENSITIVITIES In a portfolio construction sense, for sectors that are susceptible to high volatility, a long/short strategy can work especially well.

The technology sector is a good example. It’s a sector that delivers high growth for investors, but is also highly expensive and very volatile (with movements of 5% to 10% in a day not uncommon). Many long-only managers find it difficult to invest in this sector because they are unable to manage the volatility. In this case, a long/short manager would take advantage of the ability to short to neutralise sector exposure while still buying quality growth companies.

Resources would be another sector where investors could pick up large, diversified names on the back of sharp price corrections as forward cashflow projections remain strong, and they will be the first to move when the recovery does arrive, while at the same time taking out risks by shorting lower-quality mining businesses that would struggle with cashflow as commodity prices fall.

There are also sectors where there will be strong price mean reversion, such as property

trusts, for example. Long/short managers are able to play the spread without adding additional risks nor capital to the portfolio.

Most sectors, however, work well using a long/short strategy as, at any time, most will have companies trading at extremes valuations, or mispriced earnings.

RISK AND RETURN Shorting has been a controversial topic in Australia and has often been unfairly blamed for creating excessive volatility in markets.

However, short selling doesn’t change the underlying fundamentals of a business; in fact, it creates opportunities for investors with differing views, aids in price discovery and provides greater market depth.

The main risk associated with long/short investing is it amplifies the investor’s exposure to a fund manager’s investment skill. If the manager selects stocks poorly, the outcome could be worse than it might be for a long-only fund.

There is some additional risk in short selling. If the borrowed stock is recalled, it may force a repurchase of the stock at the same time. This is quite a rare occurrence, but can happen. Risk can be managed by ensuring that short positions are primarily held in liquid securities rather than the small, low liquidity assets whose price will move further in the event of a short squeeze.

SUITABLE INVESTORS Long/short investment strategies can complement a core holding of a cheap market index option, by providing the opportunity for alpha at the edges of the investor’s portfolio.

It is often considered to be an appropriate strategy for those who are younger and firmly in the accumulation phase of their

Continued on page 34

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34 | Money Management May 7, 2020

Toolbox

CPD QUIZ This activity has been pre-accredited by the Financial Planning Association for 0.25 CPD credit, which may be used by financial planners as supporting evidence of ongoing professional development.

Continued from page 33 investment life. Recognising time is on their side, they can take on the added risk that comes with equity exposures and growth assets. A good active manager that can generate returns above the index over time will make a significant difference in boosting the superannuation balances of younger investors, and over the long term – with the magic of compounding – show a marked appreciation in the value of their assets.

However, there is also an opportunity for people who are older, and even moving to the retirement phase, to look at long-short fund managers for some of their retirement savings. Longevity risk is a real concern for these investors. Life expectancy keeps extending and one of the greatest risks is that people will start to run out of money before they run out of life.

Increasingly, investors are realising that opting for a completely conservative investment allocation is not a viable solution. They recognise that there should be some allocation towards growth assets, and a long/short Australian equity fund may meet that criteria.

LONG-TERM HORIZON There is no getting away from the fact that a long/short fund is at the upper end of active managers in terms of risk and the active risk taken relative to the benchmark. However, this strategy offers the potential to achieve higher levels of return compared to the benchmark than those funds that focus on long-only positions.

As well, the incremental risk and return trade-off can be more attractive than those on offer from long-only funds.

Nevertheless, this option isn’t for those investors who will be worrying about where the fund is on a day-to-day basis, as it may experience more short-term volatility. However, for investors that can be patient over several years, this volatility tends to wash out over time.

The ideal time horizon for any equity fund is a three-to-five year minimum – and potentially even longer. This is a high growth, high volatility asset class. It is very liquid, but equity markets and even individual active funds can move around a lot over time. And very short periods of returns – particularly over one or two years – aren’t necessarily indicative of what the fund or the market will deliver over a longer period.

In summary, investment portfolios should in many respects be chartered with caution at the current time but, having said that, market conditions are ripe for active management. A portfolio that has the opportunity to thrive in all market conditions and that has the flexibility to take advantage of price volatilities is a sound strategy to pursue.

Long/short equity strategies offer an investment style that takes advantage of the precarious nature of the equity market because the equity market is such an emotional instrument, moving from greed to fear, the mispricing opportunities are many and varied.

The equity market rarely prices a stock accurately – it’s always too much or too little, and as a long/short manager, you can consistently capture that mispricing. It’s a complete instrument in generating an equity return that can capture equity market exuberance.

Jun-Bei Liu is lead portfolio manager at Tribeca Investment Partners.

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1. The decline is equity markets across March is the fastest drop in value since which other point in history? a) 1929 Great Depression b) 1987 Black Monday crash c) 1991 Australian recession d) 2008/09 Global Financial Crisis 2. Long/short equity managers fundamentally structure their portfolios to utilise which type of market? a) A rising market b) A falling market c) Both a rising and falling market d) Both a) or b) but not simultaneously 3. Over a 10 to 15-year period, long/short managers are consistently in the top-performing quartile, largely due to their ability to…? a) Manage risk more effectively b) Gain exposure to a wider range of sectors c) Retain a more robust investment philosophy d) Capitalise on fluctuating interest rates 4. What type of investor is best suited to long/short equity strategies? a) Accumulation phase investors b) Members of self-managed superannuation funds c) Those investors at or nearing retirement d) All of the above, for different reasons 5. Which of the stockmarket’s sectors are more likely to attract trades from long/short equity managers? a) Technology b) Energy c) Real estate d) Most, if not all, sectors can have companies trading at extremes therefore a long/short strategy can be applied to all sectors

TO SUBMIT YOUR ANSWERS VISIT https://www.moneymanagement.com.au/ features/tools-guides/ unsteady-market-fuels-flight-longshort-funds For more information about the CPD Quiz, please email education@moneymanagement.com.au

30/04/2020 9:10:04 AM

May 7, 2020 Money Management | 35

Send your appointments to chris.dastoor@moneymanagement.com.au

Appointments

Move of the WEEK Ainslie van Onselen Chief executive officer CA ANZ

Chartered Accountants Australia and New Zealand (CA ANZ) has appointed Ainslie van Onselen as its new chief executive officer (CEO), replacing interim CEO Simon Hann on 18 May, 2020.

Based in Sydney, van Onselen spent six years at Westpac Group and was managing director of RAMS. She had a background in financial services and as a

US-based fund manager GQG Partners has appointed Jane Wang in the newly-created role of client service and operations associate, continuing its expansion into the Australian market.

Wang’s appointment followed that of Jeremy Crowley as director of institutional markets in January this year and Daniel Bullock as director of wholesale markets in July, 2019.

Laird Abernathy, managing director for GQG Partners’ Australian subsidiary, said Wang’s appointment reflected the growth of the Australian business that was established 18 months ago.

“Jane has over 16 years’ experience in banking and financial services, and her appointment is a reflection of our goal to deliver the highest quality service experience to our existing clients and to ensure we are resourced appropriately for further expansion,” Abernathy said.

GQG Partners was co-founded in 2016 by Rajiv Jain and opened its Australian office in 2018.

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non-executive director.

John Palermo, CA ANZ chair, said van Onselen had a strong record of strategic thinking with proven ability to be agile and a visible advocate for change for a public benefit.

“Her membership body mindset, future focus and digital acumen will be invaluable to make a difference for the profession of Chartered Accountants

across Australia and New Zealand,” Palermo said.

She had also practiced as a litigation lawyer, including as a partner in a specialist corporate and commercial practice in Western Australia.

Palermo thanked Hann for leading CA ANZ through adjustments required to support members and continue to operate effectively during COVID-19.

It had $47.8 billion in funds under management (FUM) as of 31 March, 2020, while the local subsidiary has $3.6 billion FUM.

performance and leading member service standards even in today’s highly challenging superannuation environment,” he said.

SAS Trustee Corporation board (State Super) has appointed State Super’s ex-chief investment officer (CIO), Lisbeth Rasmussen, as its newest director.

Rasmussen commenced her four-year term in March and was CIO for the fund before she retired in 2016, State Super said.

Rasmussen had over 30 years of experience in managing large, complex funds and is currently CIO for the Coal Mining Industry (Long Service Leave Funding) Corporation, and was former director of Equipsuper and Togethr Trustees.

State Super chair, Nicholas Johnson, said Rasmussen was appointed after an extensive search and competitive selection process.

“I am confident that her proven skills will help State Super maintain its superior investment

Wealth management software firm Bravura Solutions has appointed Kylie Bryant in a newly-created role as country manager for its New Zealand division.

She joined from ASB Bank where she held various leadership roles in customer experience, corporate strategy, business development and transformation.

She had 20 years’ experience in the financial services sector and spent the last seven years working in London at several global investment banks.

In 2018, she was awarded the Prime Minister’s Business Scholarship and attended the Stanford University Graduate School of Business.

Dr Joe Fernandes has been appointed by legal community industry superannuation

fund legalsuper to the role of independent investment expert.

Fernandes had 24 years’ experience in senior investment management, executive and advisory roles.

He was most recently managing director of First State Investments in Asia and a member of the global leadership team of Colonial First State Global Asset Management (CFSGAM), now known as First Sentier Investors (FSI).

At CFSGAM, he was responsible for the strategic assessment and development of its suite of investment offers globally.

Fernandes had a PhD in mathematical physics from Monash University and a Graduate Diploma in Applied Finance and Investments from the Securities Institute of Australia.

Andrew Proebstl, legalsuper chief executive, said Fernandes exhibited strong alignment with legalsuper’s strategic positioning, ambition and organisational values.

30/04/2020 12:01:32 PM

OUTSIDER OUT

ManagementMay April7,2,2020 2015 36 | Money Management

A light-hearted look at the other side of making money

Sharing the pain a matter of degrees Outsider wants a seat on the board, OUTSIDER was absolutely outraged to learn that some of the denizens of major consultancies such as Deloitte, KPMG and EY had been obliged to absorb pay cuts of up to 20% to help their firms navigate the vicissitudes of the COVID-19 pandemic.

No, seriously, Outsider genuinely feels for some of the lower orders of those firms whose sub-$80,000 salaries have been diminished by 20% and doubtless they have been assured that it is for the greater good.

However, Outsider is far less sympathetic with respect to partners and managing partners within those firms because he is only too well aware of the

stellar six and sometimes seven figure incomes they take home.

So, by Outsider’s calculation 20% of $80,000 equals $16,000 which is a substantial amount if you’re someone trying to pay the rent and buy the food while climbing the lower rungs of the slippery corporate ladder while the $150,000 being foregone by the partner on $750,000 a year doesn’t sound all that much at all, really, when you consider that they can perhaps forego the 2020 model BMW. Yes, the big consultancies apparently want everyone to suffer equally except some people started off far more equal than others.

any board so long as it pays OUTSIDER is the first to admit that he suffers from the green-eyed monster of envy when it comes to remuneration but he thought he had put that all to one side when he heard news that the partners of the big four consulting firms such as Deloitte, KPMG and EY had taken pay cuts of up to 20% in the face of COVID-19.

Yes, Outsider was feeling the warm glow of schadenfreude as he thought of how few new BMW, Mercedes and Audis would be infesting the carpark of his favourite golf club until he saw the results of a survey detailing just how much certain people were being paid to sit on the boards of some of this nation’s publicly-listed companies.

According to the data put together

by Apollo Communications, the best paid non-executive director with earnings of $1.8 million is Gordon Cairns with directorships on Woolworths, Origin Energy and Macquarie, followed

by Lindsay Maxsted ($1.6 million) from his service with Westpac, Transurban and BHP. Although Mike Wilkins

earned $2 million through his directorships with AMP, QBE and Medibank, this was distorted by his short-term tenure as acting AMP CEO. However, if you want to see where the real money is, the three highest paid single board directorships are Rio Tinto (Simon Thompson $1,601,760), AMP (Mike Wilkins at $1,516,000) and BHP (Ken MacKenzie at $1,331,520).

Apollo noted that, “ironically, while BHP is Australia’s third-largest company in Australia, neither AMP or Rio ranks in the top 10, raising questions about why their chairmanships are so lucrative compared to larger companies”.

Outsider reckons that given the performance of some of these companies with big-paying boards they could do worse than offer him a directorship.

After all, while Outsider is not entirely of unblemished character, he does know how to read a balance sheet, is a past master at suppressing yawns, knows how to look the other way and is available for rounds of golf almost anytime, anywhere.

Social distancing-induced Freudian slip on Twitter AS a man of a certain age, Outsider wouldn’t say he enjoys using modern technology. He also understands that weeks of Government-enforced social distancing rules can drive a man to drink.

So, he was amused that even a Nobel prize couldn’t stop Professor Peter Morgan from accidentally searching his local bottle-o opening times on Twitter.

The Melbourne-based professor, who specialises in immunology and won a Nobel prize for medicine in 1996, was caught out by tweeting out to his 32,000 followers “Dan Murphy opening times” rather than searching for them on Google.

The tweet went viral, receiving over 10,000 likes, with

OUT OF CONTEXT www.moneymanagement.com.au

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followers commenting that his inadvertent message summed up the nation’s feelings over social distancing..

The good professor later explained his error as “too much time in front of a screen” and said he’d gained 1,100 new followers in the aftermath.

“The days just run into each other…day on day…tweet on tweet…this way lies madness. Wires got crossed, too much time in front of a screen,” he tweeted.

For Outsider, he would never think to make this mistake. Not only does he have millennial colleagues to type his tweets for him, he also has a delivery subscription for the finest malt whisky, negating the need for any trips to the bottle shop.

"It was an unexpected and invisible mugger."

"Watching those mashups, too, on TikTok can help."

– BoJo on getting COVID-19

– ScoMo's COVID-19 advice

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