Financial Standard Volume 18 Number 13

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6 July 2020 | Volume 18 Number 13

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ESG Forum

HESTA, UniSuper, Vanguard

Sustainability

Feature:

Profile:

Events:

12

Opinion: George Bishay Pendal

Executive appts:

Featurette:

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Platforms

Ashleigh Crittle JANA

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ESG Forum

HESTA, UniSuper, Vanguard

Sustainability

Feature:

Profile:

Events:

12

Opinion: George Bishay Pendal

Local fundies venture offshore Kanika Sood

nternational travel is grounded until at least Itralian 2021 but it is not getting in the way of Ausfund managers’ plans, who are increasingly looking to snag a global clientele.

Northern Trust polled 300 global asset managers’ operations heads on their strategic priorities for the next two years. Supporting expansion into overseas markets ranked second (85%), only next to controlling costs (87%).

Closer to home, the urge to tap international clients is more acute than ever, as the share of superannuation funds’ external mandates shrinks, the legislated increase to the superannuation guarantee is under question and the traditional adviser channels scatter into disjointed, independent firms.

Pinnacle Investment Management, which is a distribution partner and minority shareholder of 16 boutique firms, says looking overseas is a necessity and pegs it as a US$100 trillion opportunity – far surpassing the projections for growth in super assets.

“If you are looking for diversity of clients, there is obviously stronger operating margins outside of Australia. Then you diversify your revenues by geography, channel and currency, which makes it very appealing,” Pinnacle’s executive director and distribution head Andrew Chambers says, adding they’ve raised about $4 billion overseas so far.

Pinnacle’s distribution staff has flown in and out of overseas markets for over 10 years, as they were learning the opportunity set and barriers to entry. The key points were figuring out the manufacturing (such as domicile of funds), distribution and infrastructure.

And the firm also recently appointed a New York-based lead.

“We’ve moved to a distribution model that is time-zone based, so we can actually address a client in their market, on their business day,” Chambers says.

Pinnacle tried to tackle multiple markets at the same time but the first place it made inroads into was the United Kingdom, where Chambers says the firm found similarities in market structure and regulation, alongside a common business language.

Fidante Partners went down a similar path.

Fidante currently focuses on two main geographies, Europe and the UK. Its European business

accounted for about 11.5% of its total funds under management of $58.9 billion as at June 2019.

Challenger head of strategy and development John O’Keeffe says Fidante started to build out its European presence by buying a business similar to its own, leveraging its distribution and infrastructure capabilities.

Since then it has hired distribution staff in Sweden, Belgium, and Japan, where they also raise money for Challenger Investment Partners’ strategies.

One may think Australian equities strategies are the most obvious export for local funds management. However, this is not true, with demand leaning towards global strategies at both Pinnacle and Fidante.

“It [Australian equities] is seen as a bit too niche, they are a small part of broader [equities] offering…and every country like the US and the UK has a home bias,” O’Keeffe says.

Instead, O’Keeffe sees demand for yield-focused strategies and alternatives.

Among global managers, it is common to see executives from different geographies appointed to lead Australian businesses, but it seems the reverse for local managers going overseas.

“Typically, it makes sense to have people who are experts in that market. Our UK head of distribution comes from Sydney but the people on the ground are from the region,” O’Keeffe says.

Chambers adds hires for global offices must keep in mind local nuances. For example, Pinnacle hired a Japanese expat sales executive to lead sales in the region.

But, what if you don’t have the resources of an ASX-listed investor?

Bell Asset Management has about 36% of its clients across the $2.3 billion in total assets from overseas and recently scored a strategic partnership with a Swiss bank.

And it has run the push out of Melbourne.

Rob Sullivan, managing director for strategy and distribution, says the boutique started by getting institutional ratings with global and regional UK-based consultants and ratings houses, which are free of cost.

“My advice [to a small firm looking to raise overseas is] make sure it doesn’t lead to distraction for the investment team…and invest in senior distribution staff who have global networks and can get those conversations started – that is probably more than half the process,” Sullivan says. fs

6 July 2020 | Volume 18 Number 13 www.financialstandard.com.au 20 January 2020 | Volume 18 Number 01

Executive appts:

Featurette:

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Platforms

Ashleigh Crittle JANA

Trust in financial advisers wanes Jamie Williamson

Andrew Chambers

executive director and distribution head Pinnacle Investment Management

Just 37% of retail investors believe their financial adviser always acts in their best interests, leading CFA Societies Australia to call for a strengthening of the best interest duty.

A global investor survey, conducted at the back end of last year, shows Australia rank sixth out of 15 major markets when it comes to trust in financial services – just 24% of Aussie investors say they trust the industry. This is down 31% in 2018.

The average across all markets surveyed is 47%.

About 75% of investors believe their adviser is legally obligated to act in their best interests, however just 37% actually believe they do. This has dropped from 44% in 2018.

That said; there appears little risk of advisers losing their clients to robo-advice, with 81% of investors trusting advice from a human over that of a robo-adviser (6%). This is higher than the global average, which sits at 73%.

In part, this is down to a lack of trust in the security of personal information on online Continued on page 4

Industry super forks out $19.5bn Ally Selby

Industry super funds will invest $19.5 billion over the coming three years in construction and infrastructure projects; in a move that Industry Super Australia (ISA) chair Greg Combet says will help rebuild the Australian economy.

The multi-billion capital expenditure was identified by a survey of industry super funds, IFM Investors and the Industry Super Property Trust.

Since the beginning of the COVID-19 crisis, industry super funds have poured millions into Aussie businesses, helping them rebuild and expand at a time when they need it most, Combet said.

“We’re already big investors, but we’ve got much more planned that will not only grow our members’ balances but generate jobs and economic activity across Australia,” he said.

The investment pipeline will create more than 200,000 jobs, with projects in commercial construction, redevelopments, public infrastructure Continued on page 4

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News

www.financialstandard.com.au 6 July 2020 | Volume 18 Number 13

APRA heatmap sees members save on fees

Editorial

Jamie Williamson

Jamie Williamson

A

Editor

It’s been a common theme for some time now, but super consolidation has well and truly ramped up in recent months.

According to APRA’s recent MySuper heatmap update, the six months since the original heatmap was released saw nine MySuper offerings taken off the table.

Some were the result of successor fund transfers, others part of a wider business strategy to streamline product suites, like AMP. But nine is just the number of transfers or closures that were completed during the period; it doesn’t take into account the several mergers confirmed but not finalised by June 30, or the potential mergers announced either.

The biggest of the former is undoubtedly that of First State Super and VicSuper which was official July 1, while of the latter it’s the possible combination of Cbus and Media Super.

You’ve also got the likes of LESF Super - which encompasses Grow Super, Zuper and others – transferring to Smartsave, and Pitcher Retirement Plan merging into Equipsuper.

Now, the point of the heatmap was essentially to provide consumers with a very clear means of knowing whether they were getting value for money when it comes to their super fund. The by-product of this was that in doing so, APRA was also placing pressure on underperformers – when the returns are measured against the fees charged to members – to shape up or ship out.

And it appears to be working.

The aforementioned Pitcher Retirement Plan was bathed in crimson in the December heatmap, deemed one of the most expensive funds.

Meanwhile, APRA is tickled pink. Analysis shows fees were cut across MySuper products, sparing members about $110 million in charges since December and the regulator believes it all comes down to the heatmap.

And that may be so, but there are still a number of underperformers on the updated heatmap and that doesn’t even account for this year’s investment performance.

It’s left me wondering about the heatmap and ASIC’s product intervention powers, and whether the two shall ever meet.

While cognisant of the fact we never know exactly what’s going on behind the scenes at the regulators, I can’t help but feel that those providers that have been identified as charging exorbitant fees and refused to budge on them, particularly during an economic downturn, should be on the receiving end of more than a stern talking to.

If that doesn’t scream consumer detriment, I’m not sure what would.

APRA said some funds that received a crimson rating for a second time have claimed they’re offering a “premium service” as justification for the fees - but that’s not what is required of a MySuper product.

They’re supposed to be low cost and simple.

If it doesn’t do what it says it does on the tin, and hasn’t done for some time, why has nothing been done about it? fs

The quote

At an aggregate level, the MySuper products with the highest total fees in December 2019 have lowered their fees over the last six months.

PRA analysis shows a significant proportion of MySuper members have been spared more than $100 million in fees in the last six months thanks to the introduction of its heatmap.

Updating its MySuper heatmap to reflect changes in the fees charged, APRA said products with 6.1 million MySuper members - or 42% - have seen the total fees charged to them by their fund decrease by an average of $33 per annum since the release of the inaugural heatmap in December last year.

Now, the estimated weighted-average total fees and costs paid per member accounts across all balances is $518, down from $525 in December.

It represents an estimated net saving to members of $110 million, or 1.4% of estimated total MySuper fees and costs paid.

That said; 3.8 million members saw their funds increase fees over the period by an average of $24 per annum.

Those funds that were found to be charging relatively high fees, namely administration fees, in December 2019 continue to do so now and have more work to do, APRA said.

“At an aggregate level, the MySuper products with the highest total fees in December 2019 have lowered their fees over the last six months. However, for most of these the reduction was not sufficient to improve the position of the MySuper products relative to others, so they remain underperforming,” APRA said.

APRA said some trustees sought to justify the higher fees they charge on the basis that they offer a ‘premium’ service to members.

“APRA expects that trustees are able to demonstrate that services and fees and costs charged are consistent with the original intent of MySuper products - that they are simple, cost effective and well-designed products that contain basic features required by most members, and take appropriate action if not,” the report reads.

For account balances of $10,000, the proportion of MySuper products with no colour in this iteration increased to 61% from 59% six months ago, while the proportion of products considered to be above the threshold level for significant underperformance - and

therefore copping a crimson rating - has decreased from 9% to 7%.

According to the heatmap, Goldman Sachs and JBWere Superannuation has the highest fees, with admin fees for a $10,000 balance sitting at 3.79% and total fees at 4.37% - same as they were in December. Admin fees and total fees on a $50,000 balance also remain unchanged at 0.91% and 1.49% respectively.

Other funds deemed above the threshold level by APRA include First Super, IOOF, IAG & NRMA Superannuation and Pitcher Retirement Plan.

Meanwhile, Media Super - currently exploring the possibility of a merger with Cbus - fared well, as did the likes of Energy Super, AMIST Super, HESTA, NESS Super, Vision Super and MTAA Super. Despite increasing fees since December, VicSuper is also considered to be among the cheapest offerings.

Covering 90 MySuper products in total, the update does not include investment performance or sustainability as the regulator expects material changes in this area to take longer to manifest, and for COVID-19 to have an impact. It also doesn’t account for insurance premiums.

“Since publishing the heatmap last December, APRA has intensified its supervision of underperformers. It’s pleasing to see that millions of members are already paying less in total fees, especially given the additional challenges and operational costs funds have faced in relation to COVID-19. Furthermore, some funds and products have closed, and transferred their members to better performing products,” APRA deputy chair Helen Rowell said.

“At the same time, it’s clear we can’t be complacent. In particular, it’s disappointing to see so many funds still displayed on the Heatmap in shades of red and orange when it comes to fees and costs. Although member outcomes can’t be measured on one factor alone - and superior member services or investment performance may sometimes justify higher fees - trustees should remember that MySuper products are designed to be simple and cost-effective.”

Nine offerings have ceased since the first heatmap in December. fs

Cbus, Media Super explore merger Kanika Sood

After six months of auditioning potential merger partners, the Media Super has settled on the Cbus in a model that is expected to be similar to that of Equipsuper and Catholic Super joint venture.

The two funds haven’t yet signed a memorandum of agreement or completed any due diligence, but are understood to be exclusively committed.

The merger, which would result in a $62 billion fund, could be executed early next year.

Media Super has spoken to more than five funds in the past six months, and wanted to retain its brand.

“Cbus Super is actively exploring merger opportunities with a range of potential super fund partners. We do not comment on merger discussions,” the fund said.

Cbus’s outgoing chief executive David Atkins has previously served as chief executive of Media Super’s predecessor, Just Super.

On a three-year basis to April end, Cbus’s default option is the 11th best performer with 5% p.a. in returns while Media Super is the seventh best with 5.2% p.a., according to data from Rainmaker Information.

For comparison, the median default option returned 4% over the period.

In the last year, Media Super closed two investment options and saw executive changes including a new chief investment officer and the departure of its general manager, engagement.

In May last year, Equipsuper and Catholic Super signed a memorandum of understanding to create a $26 billion entity, with the view of combining their investment pools, administration and even offices – but while keeping individual branding. fs

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www.financialstandard.com.au 6 July 2020 | Volume 18 Number 13

01: Deanne Stewart

Trust in financial advisers wanes

chief executive First State Super

Continued from page 1 platforms, with more than one-third of investors saying they are less willing to hand over personal information online than they were three years ago.

And, investors still believe advisers add value, with 81% of advised investors believing they have an opportunity to profit by investing in capital markets, while just 57% of those without an adviser said the same.

The study also found that the findings of the Royal Commission and the associated press coverage did not change investors’ minds as to where and how they will seek advice. Further, 40% of investors believe professional standards will improve as a direct result of the Royal Commission.

“With interest rates at low or negative levels in many places in the world, finding new opportunities to invest will be important to investors meeting their financial objectives, and those with an adviser are better equipped to consider these options,” CFA Societies Australia chief executive Lisa Carroll said.

“Nearly two-thirds of retail investors with an adviser are interested in accessing new investment products, compared with only about one-third of retail investors without an adviser.”

Although there is a lack of trust in the system, most Australian retail investors still believe they have a fair opportunity to profit by investing in the capital markets, Carroll said. fs

Industry super forks out $19.5bn Continued from page 1 upgrades and developments to make assets more energy efficient.

Infrastructure investments, despite their illiquidity, are “critical to the good performance of the funds”, the ISA said, and can achieve strong returns for investors.

“Analysis shows that $100 invested in unlisted assets 15 years ago is now worth $510, in comparison $100 invested in international shares would be worth $351 now,” it said.

The survey also found that industry super funds were investing across multiple sectors, including aged care, affordable housing, and direct lending to business and agriculture.

The survey has also revealed the funds are venturing into new investment opportunities across many sectors – ploughing billions into aged care, affordable housing, direct lending to business and agriculture.

The ISA noted that super funds provided a significant portion of the $120 billion in capital raised by local businesses at the end of the Global Financial Crisis.

“Industry super funds hold a major stake in Australia’s economic life,” it said.

“They invest in Australian listed companies - holding 10% of the ASX – are active in debt markets, have significant infrastructure and property holdings and invest in the wider Australian financial system.”

To deliver returns for members, the super system needs a strong economy, just as much as the economy needs a strong super system to support its recovery, the ISA said. fs

Super consolidation heats up Jamie Williamson

C The quote

Together we will leverage our combined scale to invest in ways that strengthen our community and the economy while continuing to deliver strong, sustainable long-term returns for members.

onsolidation in the superannuation sector is ramping up, with several mergers finalised in recent weeks and a number of others announced.

The beginning of the new financial year saw the completion of First State Super and VicSuper’s merger, creating a $120 billion fund serving 1.1 million members.

First State Super chief executive Deanne Stewart 01 said the merger will deliver significant benefits to members of both funds.

“Both funds are top performing funds and believe deeply in the importance of investing in a responsible and sustainable way,” Stewart said.

“Together we will leverage our combined scale to invest in ways that strengthen our community and the economy while continuing to deliver strong, sustainable long-term returns for members.”

Meanwhile, Equipsuper – which is gearing up to merge with Catholic Super itself – completed a successor fund transfer in June. The $15 billion fund absorbed Pitcher Retirement Plan, the corporate super fund to wealth management group Pitcher Partners.

“As shared previously with members, the Pitcher Retirement Plan has merged with Equip as of 1 June 2020, in the interests of strengthening and enhancing the interests of members,” Pitcher Partners Melbourne client director, superannuation services Brad Twentyman said in a statement to Financial Standard.

As a result of the merger, Twentyman added that it’s anticipated members will benefit from

improved investment opportunities and continuation of favourable insurance arrangements.

Elsewhere, LESF Super confirmed it is pursuing a successor fund transfer with Smartsave.

This will see all LESF member accounts and all those attached to its sub-plans, including Grow Super and Zuper, transfer to Smartsave by July 16.

The trustee, Diversa, determined LESF could not reach sufficient scale to be viable, with OneVue executive general manager, superannuation administration Stephen Blood saying Smartsave was chosen as the apex fund for its significant adviser distribution base and reputation in the advice sector. Smartsave is also not aligned to any particular industry or profession.

Placing additional pressure on the sector, APRA released an updated version of its MySuper heatmap, reflecting changes to fees since the heatmap was introduced in December 2019.

In it, APRA specifically notes that several products that were highlighted as underperformers in December and were questioned over their significant fees have made no effort to reduce costs for members.

It also noted that seven MySuper products ceased in the six months to June 30, including several AMP offerings.

“APRA is writing to the trustees of more than a dozen MySuper products that continue to seriously underperform on fees,” she said.

The letter will put these trustees squarely on notice that APRA is seriously considering its response to their failure to swiftly address these issues. Any response may include formal enforcement action.” fs

Euroz, Hartleys to merge Euroz and Hartleys have made public plans to merge operations, creating a financial services powerhouse in Western Australia.

The two firms are set to join forces with Euroz issuing up to 33 million shares at a price of $0.915 each as consideration for 100% of Hartleys.

Hartleys shareholders will own about 17% of the combined entity.

Key Hartleys staff will be subject to staff retention measures, with two Hartleys nominees to be appointed to the Euroz board upon completion.

The merger is subject to a 90% minimum acceptance condition and while there is no certainty yet, Euroz said both parties are confident it will be successful with formal binding agreements anticipated to be signed before July 10.

The merger would see the coming together of mutual respect and similar cultures focused on delivering positive outcomes, Euroz executive chair Andrew McKenzie said.

“Hartleys has an excellent reputation as a leading stockbroker, corporate finance, institutional and wealth management business,” he said.

“Combining our firms will create a dominant Western Australian based financial services company with a strong balance sheet, critical scale, solid and sustainable revenue, with significant cost and operational synergies.”

Hartleys executive chair Ian Parker said all Hartleys staff are excited by the opportunity to join Euroz.

“We are confident in our ability to integrate the two firms and leverage the successful cultures of both to create a significant stockbroking and wealth management business with a bright and prosperous future,” he said.

Total funds under management for the combined business would be around $2.5 billion. fs

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by MLC Investments Limited (ABN 30 002 641 661, AFSL 230705). The information is a summary only and should not be relied on for decision making and is provided solely for the use of authorised financial advisers and is not intended for distribution to investors and potential clients. To find out more, please refer to the relevant Product Disclosure Statements and the Financial Services Guide at mlc.com.au. The information is correct as at 9 March 2020, but may change in the future.

A155560-0420

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News

www.financialstandard.com.au 6 July 2020 | Volume 18 Number 13

Members compensated More than 1200 smartMonday members have received about $2.6 million in compensation after two third-party authorised representatives failed to comply with legislation that required their super accounts to be transferred to Aon MySuper by 1 April 2017 unless they explicitly opted out.

As a result, the impacted members’ account balances were lower than they should have been, requiring compensation to be paid in order to equal the financial position they would have been in had the advisers complied.

In a statement to Financial Standard, Aon Australia said: “In March 2018, Aon Hewitt Financial Advice (AHFA) voluntarily notified ASIC of suspected breaches of the Corporations Act by two of its third party authorised representatives out of a network of 185 advisers.”

“The breaches were notified to ASIC after an audit undertaken by Aon Compliance which indicated that the subject advisers were unable to provide sufficient evidence of informed instructions to switch the clients out of MySuper.”

These breaches formed part of a Royal Commission case study, where Commissioner Hayne did not find any licensee breach on the evidence before Commission, Aon Australia said.

The remediation was paid for by AHFA, not smartMonday. Part of the business of AHFA has since been the subject of a management buyout, following Aon’s decision in April 2019 to exit advice. AHFA is committed to fulfilling the remediation program. fs

01: David Atkin

chief executive Cbus

Challenges abound as super poises for COVID-19 recovery Ally Selby

D

uring a QIC media roundtable, Cbus

The quote

For every dollar that is invested back into the building industry, it generates three more jobs in the industry.

New Vanguard SMSF solution Elizabeth McArthur

Vanguard has launched a self-managed super fund capability within its Personal Investor offering.

Through Vanguard Personal Investor, SMSFs will be able to trade the top ASX shares by market capitalisation at $19.95 or 0.15% per trade (whichever amount is greater will be charged).

SMSFs will also have access to an interest earning Vanguard cash account.

“As a global fund manager with a deeply rooted commitment to advocating for the end investor, Vanguard Personal Investor represents our pledge to challenging the status quo and providing Australian investors with more low-cost investment options,” a Vanguard spokesperson said.

“We decided to proceed with the launch of the Personal Investor offer amid the COVID-19 health pandemic and resulting share market volatility because we wanted to give Australian investors the ability to benefit from lower investment costs, irrespective of the prevailing market conditions.”

Vanguard previously announced that its Personal Investor offering would be rolled out progressively, with SMSFs being the second phase. Joint accounts and financial adviser accents will come next.

“Vanguard Personal Investor offers investors a differentiated focus compared to their current brokerage account,” the spokesperson said. fs

chief executive David Atkin 01 argued that the scheduled increase to the super guarantee would both benefit individual members as well as the economy.

“Notwithstanding the commentary that has come out from those backbenchers… [the increase to the super guarantee has been] legislated, and therefore it is known that these increases will be coming in a scheduled way,” he said.

“Frankly, given the buffeting the system has gone through, and the fact that we have seen so much money withdrawn from the system and members savings, we are going to need that increase to recover some of the lost super and lost lifestyle that will come from people accessing their super early.”

Similarly, Hostplus chief executive David Elia slammed questions that the super guarantee increase would come out of Australian wages.

“I don’t think that is factually true,” he said.

“I haven’t seen any evidence that statements on these trade-offs are real.”

He noted that over the course of the last five years there hasn’t been any real lift in wages, while productivity has lifted approximately 1.1% per annum.

The lift to the SG “is the only increase that people are really going to get,” Elia said.

QIC chief executive Damien Frawley agrees, arguing any steps to move away from the SG increase would only create issues “The system is working perfectly well and has worked perfectly well for a long time,” he said.

“It is also taking away a lot of pressure from government balance sheets. Moving away from the super system today and making any move

to wind it back will only create issues down the road for government P&L.” Further clarity over superannuation policy would allow super funds to better invest in the economic recovery to create risk adjusted returns for members and generate employment, Atkin said.

“For every dollar that is invested back into the building industry, it generates three more jobs in the industry,” he said.

“So the super guarantee increase is important to continue with, because it has a benefit to the individual in terms of a retirement outcome perspective, but it will also benefit the economy.”

Elia agreed, arguing the industry needed greater certainty to take advantage of investment opportunities in the COVID-19 recovery.

“COVID-19 has thrown out various challenges for us,” Elia said.

“Really we need clarity on the purpose and role of super, and we don’t have bipartisan support on that.

“Super funds need some element of certainty… from a regulatory perspective; certainty around superannuation policy is required to allow us to invest long term.”

Although he noted that the fund had plentiful liquidity, Elia argued that Hostplus, as well as its peers, would not be able to invest heavily in unlisted assets, such as infrastructure and commercial developments, thanks to the government’s early release scheme.

“We will continue to make allocations to the unlisted sector, but our ability to do more will be somewhat constrained,” he said.

“The early release scheme forces us to hold a lot of cash, to be much more liquid than we would presume to be or need to be.” fs

SG does wonders for households: Research Jamie Williamson

The latest report from the Association of Superannuation Funds of Australia (ASFA) estimates compulsory super has added $500 billion to Australian households’ savings that they would otherwise be without. Of this, about $35 billion can be attributed to those in the lowest income quintile.

“Although estimates of net saving vary, most point to a sizable positive effect. Broadly speaking, studies have found that for each dollar of saving via compulsory superannuation, net saving is likely to be no less than 60 cents, and possibly much higher,” the report reads.

“The most oft-cited study estimates a net effect of 62 cents in the dollar.”

This suggests Australian households are saving a much higher proportion of current household income than would otherwise be the case.

Therefore, ASFA says the superannuation guarantee is not

only doing its job but has benefitted the economy as a whole and will continue to do so, stabilising Age Pension expenditure.

Assuming the SG is raised to 12%, the amount spent on the Age Pension should drop to 2.6% of GDP over the period to 2054-55, ASFA predicts.

In contrast, OECD expenditure on public pensions averages 8.8% of GDP and is expected to increase to 9.4% in the next 30 years.

Further, ASFA anticipates that by 2050 half of all retirees will have achieved its Comfortable Retirement Standard, which is currently $44,200 per year for a single person or $62,400 for a couple.

Still, women will continue to be disadvantaged. As the SG increases, a man who enters the workforce today and earns a median wage is expected to reach a retirement balance of $545,000. A woman can expect to retire with about $100,000 less, according to the calculations. fs

News

www.financialstandard.com.au 6 July 2020 | Volume 18 Number 13

Fintech acquires advice licensee PictureWealth acquired NEO Financial Solutions, the licensee will now become a wholly owned subsidiary of PictureWealth.

NEO Financial Solutions managing director Mark Edman will move into the group chief operating officer role.

“This acquisition allows a unified and streamlined approach to provide consumers an accessible personalised service. The use of the fintech will assist in lifting the financial barrier many consumers may experience as the industry evolves,” Edman said.

“A great combination of real people with technology. At the same time, we will be releasing a range of value-added services to make the lives of financial advisers easier so they can spend more time helping their clients achieve financial happiness” PictureWealth also closed a $12 million lateseed funding round, comprising of private equity and debt.

PictureWealth co-founder and chief executive David Pettit said that NEO Financial Solutions is in alignment with his company’s culture.

“We found that the leadership team at NEO Financial Solutions shared our outlook on the future of financial advice and we wanted to align to take the companies forward together,” he said.

“Many financial advisers have spent their entire lives building a business that is now worth less than expected, or in some cases nothing at all. fs

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01: Deborah O’Neill

Senator

Calls to investigate treatment of AMP advisers Elizabeth McArthur

L The quote

This decision has drastically devalued the businesses of many financial advisers.

abor senator for NSW Deborah O’Neill01 has written to ASIC chair James Shipton, urging him to investigate the AMP BOLR changes.

Last year AMP made changes to its BOLR agreements, which guarantee the value of AMP Financial Planning client books, reducing them from four times annual revenue to two and a half times annual revenue.

“This decision has drastically devalued the businesses of many financial advisers,” O’Neill said in the letter.

“This was also applied retroactively to many planners who had purchased client books in good faith with this guarantee.”

O’Neill also took issue with the fact that AMP cut grandfathered commissions in January 2020, 12 months ahead of the legislated ban on grandfathered commissions.

“Furthermore, AMPFP has issued notices of termination to an estimated 250 planners that were assessed as being of ‘lower profitability’ , forcing many to sell their businesses for less than one tenth of what they were worth before these changes,” she said.

The Senator added that the Australian Small Business and Family Enterprise Ombudsman has received over a hundred complaints from the financial advisers affiliated with AMP over these issues.

O’Neill asked Shipton to commence an ASIC investigation into AMP’s actions.

“I ask that you immediately commence an investigation into this matter, as I understand the AMP banking arm has funded the operation, and to prepare a full report for the Joint Committee on Corporations and Financial Services oversight hearing on July 13,” she said. fs

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8

News

www.financialstandard.com.au 6 July 2020 | Volume 18 Number 13

Foundation gets COVID-19 funding

01: Marianne Perkovic

executive general manager Commonwealth Private

Elizabeth McArthur

The First Nations Foundation, an Indigenous-led notfor-profit that promotes financial literacy, has received funding to deliver COVID-19 support to women.

The foundation was one of only four recipients of this funding from the Department of Prime Minister and Cabinet.

It has designed an online educational series in collaboration with Indigenous financial experts and female community leaders.

The aim of the series is to create a culturally relevant and highly engaging form of financial literacy training.

“Storytelling and experiences shared by other Indigenous women will form the foundation of this series, underpinned by proven money management techniques such as setting goals, budgeting, reducing spending leaks and learning about financial products and services,” First Nations Foundation said.

While the series is in response to COVID-19, the foundation says it could have future applications.

Research conducted into the effectiveness of First Nations Foundation training found that for every one person trained 5.6 family members or community members benefit through the sharing of knowledge.

The other recipients of funding are Beam Australia, Inspiring Rare Birds, and Local Government Professionals Australia.

This year, First Nations Foundation’s Big Super Day Out was cancelled due to COVID-19.

The event, which has become well known, is a roadshow with the aim of connecting Indigenous people with their superannuation.

The event will continue from 2021 and further announcements about the online education tools are expected next month. fs

Marianne Perkovic departs Commonwealth Bank Ally Selby

T The quote

She has been instrumental in driving multiple improvements within the business to make it simpler and better for our private clients, and will leave it in a strong position when she leaves CBA later this year.

AMP Life finalised A trustee has been appointed to AMP Life’s superannuation funds, which hold more than $7 billion, following the sale of AMP Life to Resolution Life.

Equity Trustees will be trustee for the super funds, replacing current trustees N M Superannuation and AMP Superannuation.

AMP Life super funds are held by more than 340,000 Australians. AMP announced the completion of the sale of its life insurance business to Resolution Life on July 1.

“The appointment to AMP Life confirms Equity Trustees as the leading provider of independent superannuation trustee services in Australia,” Equity Trustees managing director Mick O’Brien said.

“It also marks another leading financial services firm choosing Equity Trustees to provide its specialist fund governance services.”

He added that there is an increasing trend to outsource the trustee role, both in Australia and overseas.

“The role of trustee has not been well understood, but its value is becoming more appreciated; it must balance technical expertise in the complexities of governance and regulation, with great judgement.

This is the essence of being a trustee,” O’Brien said.

Following this appointment, Equity Trustees is now responsible for over $20 billion in superannuation assets for more than 700,000 members overall. fs

he Commonwealth Bank has confirmed Marianne Perkovic 01 will depart Australia’s biggest bank, pointing to the recent transition of its private banking division as grounds for the exit.

CBA’s private banking business recently shifted to sit within the bank’s retail services division. Previously, it had sat within CBA’s business banking unit.

According to a CBA spokesperson, the move was designed to create a better service for the bank’s private clients, whose needs and demands focus predominantly on home buying and deposits, as well as investments and financial advice.

The spokesperson confirmed that the private banking boss would be departing its ranks, but will continue to serve in the role over the coming months as CBA looks for a replacement.

“We can confirm that Marianne Perkovic will be leaving her position as executive general manager of Commonwealth Private, and will finish up with CBA in October,” he said.

“She has been instrumental in driving multiple improvements within the business to make it simpler and better for our private clients, and will leave it in a strong position when she leaves CBA later this year.”

The spokesperson said Perkovic had helped lead the transition of the private banking business over the past two months, and confirmed that all of the bank’s private leadership team

would remain in their roles to ensure continuity for the division’s clients.

Perkovic spent more than a decade with the bank, and faced heated scrutiny when representing its wealth management arm during the Hayne Royal Commission.

Somewhat infamously at the time, she admitted the bank’s financial advice subsidiary, Count Financial (now a subsidiary of Count Plus), had charged ongoing service fees to deceased clients.

Perkovic has spent nearly four years as an executive general manager of CBA’s private banking business, however, previously served as an executive general manager of the bank’s wealth management advice division.

Prior to this role, she worked at CBA subsidiary Colonial First State as a general manager of distribution, before stepping into a role as the general manager of advice.

Before her tenure at the bank, Perkovic served as the managing director of Count Financial (which was sold by founder Barry Lambert to CBA in 2011 for a reported $373 million).

During her 11 years working at the advisory firm, Perkovic moved up the ranks as an executive manager of Count Financial’s adviser services team, before being promoted to general manager and subsequently chief operating officer. In 2006, after eight years with the firm, she was promoted to managing director and chief executive officer. fs

Prodigy boutique finds new strategic partner Kanika Sood

Flinders Investment Partners, which escaped multi-boutique Prodigy’s demise, has found a new strategic partner who is acquiring a 50% stake in the small caps equities boutique.

Warakirri Asset Management is the investor, and will also provide capital to support the expansion of the small caps boutique including administration, marketing and distribution.

Flinders, which was set up in 2015 by former Contango Asset Management investors Andrew Mouchacca, Richard Macdougall and Naheed Rahman, runs an Aussie small caps fund, holding 35-50 stocks aiming to beat the S&P/ASX Small Ords Accumulation Index.

The fund has had a good year, returning 2.7% in the 12 months to May end when its benchmark did -2.9%.

Warakirri’s move comes as it builds its presence outside of institutional investors, hires talent, and moves away from multi-manager portfolios towards a multi-boutique structure like Challenger’s Fidante Partners and Pinnacle Investment Management.

“We are excited to announce this partnership as we build out our multi boutique platform and importantly it provides Warakirri with a complimentary investment offering and

diverse client base,” Warakirri managing director Jim McKay said.

“Our investment will ensure Flinders’ ongoing success and importantly enable the investment team to continue to focus on delivering top quartile returns for small cap investors.”

It was advised on the transaction by Berkshire Global Advisors.

Flinders partner and portfolio manager Andrew Mouchacca said: “We are excited about our new partnership which provides us with a stable and solid foundation for our clients and together with the experience and successful track record of both teams, delivers a platform for success into the future.”

Prodigy Investment Partners was a multi-boutique set up as an 80/20 joint venture between former MLC chief and Koda Capital chair Steve Tucker and Euroz.

The venture attracted three boutique partners: Dalton Street Capital, Flinders and Equus Point Capital.

Euroz pulled out in March, taking the view that Prodigy had failed to reach sufficient scale, and industry headwinds and barriers to entry were strong.

At the time of the decision, Prodigy’s boutiques had about $80 to $90 million, with no institutional investors. It had two offices - in Sydney and Melbourne - with about a dozen staff. fs

10

Roundtable Events | ESG Forum

www.financialstandard.com.au 6 July 2020 | Volume 18 Number 13

Financial Standard 2020 Best Practice Forum on ESG

The inaugural Best Practice Forum on ESG is now available online, featuring some of the leading product providers and financial advisers in the space.

Financial Standard’s 2020 Best Practice Forum on ESG sees financial advisers explore the growing influence of ESG in their work, with several funds management experts also sharing their firms’ experiences.

Presenting via video on demand, Refinitiv executive Jamie Coombs01 says there is a place for ESG in helping portfolio managers avoid downside risk in the security selection process, in addition to helping align portfolio construction to investor values.

Coombs, Refinitiv head of market development ASEAN and Pacific, says that when it comes to ESG in distressed sectors, such as energy, sceptics have previously voiced an opinion that some fund managers with portfolios heavily weighted towards ESG metrics have “done okay this year” because ESG stock selection steered them away from the energy sector.

“Whilst that may be true for certain portfolio managers it’s generally not viable for institutional fund managers that are running sector neutral strategies or long-only with minimum/maximum sector constraints,” Coombs says.

Coombs says the firm tested the performance of top and bottom quintile considering returns ranked on the firm’s ESG overall score compared to the overall sector cumulative return over the past two years.

“The spread for the S&P 1200 Energy Sector was 31.12 percentage points, a real meaningful difference in returns,” he says.

“Additionally the top quintile of the index sector outperformed the equal weighted returns of the sector constituents and the bottom quintile underperformed. So, exactly what we would expect to see there.

“Maybe the magnitude of that difference in returns is even slightly surprising.”

When using a larger universe within a global index of stocks, Refinitiv again finds good results. When using a Refinitiv emissions score on a broad index,

the cumulative two year top bottom quintile difference was 30.91 percentage points, which generated an “attractive” risk adjust return, sharpe ratio and information co-efficient, according to Coombs.

“Meaning that it sorts stocks well across the entire range of score, not just at the top and bottom tails of what we’re doing,” he says.

“Besides helping align portfolio construction to the values that individual investors are increasingly demanding ESG may also aid portfolio managers in avoiding downside risk in the security selection process.

“From a risk mitigation perspective focusing on a sector specific scoring measures such as emissions for energy companies shows even greater promise.”

Coombs says that based on the firm’s study, it may be particularly effective when a sector undergoes a sudden market shock.

Attention soon turned to APRA’s SPG 530 guidance, with AXA Investment Managers Asia chief investment officer Europe Gideon Smith 02 saying there are compelling reasons to integrate sustainability considerations across all equity allocations.

Addressing the “classic” questions to do with ESG, Smith notes the lack of consistency between definitions, terminology, standards and objectives, agencies and ratings.

“There is a lack of consistency and ultimately it brings into question the quality of ESG information that we have,” Smith says.

“There are very reasonable questions to ask about the quality of that data.”

Smith says there is a fundamental trend towards sustainable investing, which he says is being driven by both a pull towards opportunities and a push regarding concerns and risks.

“When it comes to the risk, there are very real, material risks that we see out there that are driving people to take account of ESG and sustainable considerations,” Smith says.

It’s a great thing that we have this mainstream uptake, but now it’s about lifting and improving that baseline whilst also pushing the top end.

Simon O’Connor

Smith points out more than 80% of global assets are managed by signatories to the UN’s Principles of Responsible Investment (PRI), some $70 trillion, as at 2017.

“We don’t think integrating ESG is at odds with the broader risk return objectives of investors,” Smith says.

“And when APRA discuss in SPG530 the need to be mindful of that tension, we do think this provides a strong basis for suggesting that it is reasonable and sensible to include ESG considerations by default as a matter of course in your equity portfolios.”

Meanwhile, RARE Infrastructure co-founder and senior portfolio manager Nick Langley03 speaks about whether infrastructure would be the centrepiece by which governments stimulate their economies after COVID-19.

Langley, whose firm manages about $7 billion in infrastructure securities around the globe, says the short answer is yes - infrastructure will form the crux of governments’ response to the crisis, but says there will be subtleties involved.

“What’s less well understood is exactly how that gets implemented,” Langley says.

“And when you think about what the government’s objectives are, they’re about getting people to work, they’re about getting money and the multiplier of money into various smaller communities and regional centres within their country and within their economy.

“And so what we expect is literally hundreds of smaller projects. Road widening, changes to traffic lights or roundabouts in the community…

It’s about contractors employing people, it’s about engineering firms - most of them are SMEs - it’s about aggregates companies, it’s about materials, it’s about labor.”

Langley says investors should be careful, noting the cyclical nature, and says the firm is more focused on the longer-term opportunity, which he says was the “bow-wave” of infrastructure

ESG Forum | Events

www.financialstandard.com.au 6 July 2020 | Volume 18 Number 13

01: Jamie Coombs

02: Gideon Smith

03: Nick Langley

04: Damian Cottier

07: Simon O’Connor

06: Mary Delahunty

08: Karen McLeod

09: Matt Christensen

11

05: Emilie O’Neill

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investment associated with climate change and ESG factors.

“It’s been quite interesting to see the development of investors’ focus of E, S and G elements within the investment chain,” he says.

He adds that Australia and Europe had been home to investment leaders in the ESG space, but noted that over the past 12-18 months, the US had done much to bridge the gap.

He says investors in the US were putting most of their focus into the environmental aspect.

“And our sense is this is part of the global momentum around climate change. So that’s an area to just keep an eye on,” he says.

“Our sense is as we come through COVID-19 and the response, you’ll see more emphasis on the S and the G coming through as well.

“And that’s not a bad thing. From RARE’s perspective, the way we think about ESG - and to be fair, our view is broadening to think of this more as a sustainable investment approach - is to attack it from two different perspectives.”

Langley says the cash flow impact of the longterm thematics had to be thought about to move valuations, and added that the firm is thinking about investments from a risk and discount rate perspective.

“Where you can’t price it in cash flows, you need to think about whether a better management team will be able to get better outcomes and manage the ESG risk better for shareholders, and therefore be better curators of their capital over time,” Langley says.

Perennial Value Management portfolio manager Damian Cottier04 and ESG and equities analyst Emilie O’Neill05 played mythbusters, taking the time to quash the oft-held misconception that ESG comes at the expense of returns.

Cottier says that when the firm speaks to financial advisers in the market who are focused on ESG and sustainability for their clients, they notice good growth in their practices.

“So it really is startling to gain some traction out there in the market, particularly in cohorts

of investors who are really focused on ESG, the young and some of the older generation as well,” Cottier says.

Cottier says that one of the things Perennial is keen to prove is that the returns of its funds are equal to or better than other funds which don’t take ESG into account, noting that has been his experience so far.

A study completed by Morgan Stanley, shows there is no trade-off in performance by investing in an ESG and sustainably focussed way, Cottier explains.

“The most interesting finding from that thought was that there was low volatility of the funds that took into account ESG and sustainability, which we think is a key and important factor in investing this way, and really improves risk-adjusted returns,” Cottier says.

O’Neill says the firm believes smaller companies are best positioned for ESG investing, pointing out there are many examples of smaller firms listed on the ASX which have been able to employ creative solutions to help solve global problems.

“Participating in the smaller companies space also allows us to provide capital and participate in IPOs, which are providing resources for companies to grow and scale up production,” O’Neill says.

“We also think it provides the perfect opportunity for engagement and the chance for us to provide ESG advice.

“Typically smaller companies don’t have the budgets for dedicated sustainability staff or the facilities to create large sustainability reports.

And we can really find benefit in talking to those companies and discussing ESG risks and opportunities.”

A final panel session wrapping up the forum, and sees HESTA head of impact Mary Delahunty06 speak about how the thinking in ESG has matured. Delahunty says that as ESG becomes operationalised, it becomes less of a catchphrase.

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Our sense is as we come through COVID-19 and the response, you’ll see more emphasis on the S and the G coming through as well.

Nick Langley

“Which I think is pleasing,” Delahunty says.

“It’s easy for us to say ‘it’s on a t-shirt’, which is lovely, but also they’re three different components.”

The HESTA executive says the maturing of the concept means that investors are better place to assess each aspect of ESG individually.

“As a fund we’re taking that approach. As in, what does E mean to us, what does S mean to us, what does the G mean?”

Chief executive officer at Responsible Investment Association Australasia, Simon O’Connor07, agrees that responsible investment is becoming more main stream, but says the industry needs to keep the pressure on.

“The strategy changes fundamentally from growing the AUM sitting under the responsible investment strategy or mandates to actually improving the quality of responsible investment practices,” O’Connor says.

“It’s a great thing that we have this mainstream uptake, but now it’s about lifting and improving that baseline whilst also pushing the top end.”

Ethical Investment Advisers principal adviser Karen McLeod 08 says that her firm has noticed a real change in what investors are seeking.

“We’ve risen to the challenge in finding investment solutions for what clients are looking for, and it’s really moved from a pure divestment or exclusion screen to really people seeking out the best investments that they can find to do good with the money,” McLeod says.

The debate about ESG may never die down, Matt Christensen 09, global head of responsible investment at AXA Investment Managers Asia says, but over the long term the signs are clearer.

“It really is about return and risk. When you look at volatility and risk/return combined that is when the ESG discussion becomes more resilient,” Christensen says.

“When people ask me about ESG performance it is all about that risk/return element that really makes it come to life over a long-term scenario.” fs

12

Opinion

www.financialstandard.com.au 6 July 2020 | Volume 18 Number 13

01: George Bishay

portfolio manager Pendal

Why impact bonds matter ixed income impact investment is a fastF growing but still relatively new segment of capital markets.

Each year, more and more sustainable bond investments become available, covering all aspects of the environmental and social spectrum.

There are bonds where companies in underlying projects reduce their carbon footprints and bonds that help finance companies with strong gender equality records.

Some bonds finance governments to build railroad and solar power plants, others help build affordable housing.

As the market rapidly grows, debate is intensifying about pricing and returns and how these bonds are trading in high-demand secondary markets.

More than US $465 billion of sustainable debt was issued globally in 2019 — a new record and up 78% from the previous year. More than US $1 trillion in sustainable debt has been issued since the market began.

This growth is driven by soaring demand as investors seek ways to “do good” with their investments amid growing concern about climate change and social issues.

At the same time, corporations and governments are becoming ever keener to behave responsibly and to be seen doing so.

Types of impact bonds There are two main types of impact bonds: • Environmental bonds which finance projects that benefit the environment • Social bonds which address a social need or improve an outcome for underprivileged people Issuers are usually certified by an independent organisation such as the International Capital Market Association or the Climate Bonds Initiative. Most of these bonds also adhere to the UN Sustainable Development Goals.

Why do companies issue impact bonds?

A key question we get asked is why corporations and governments issue impact bonds instead of traditional issuances. In our experience, they are issued for a number of reasons.

One reason is to signal confidence in the sustainability of a wider business.

Corporations issuing impact bonds are implicitly inviting scrutiny of their wider business practices and signalling they are confident in their sustainability credentials. This also leads to future benefits.

More and more traditional fund managers are incorporating environmental, social and governance (ESG) factors into their investment processes.

This is partly because ESG risks genuinely affect performance and partly at the behest of

end investors such as superannuation funds.

Companies that issue impact bonds are stamping their ESG credentials, which can ultimately be supportive of credit spreads they have to pay down the track.

A third reason is simply to cater for market demand.

Across the world investors are seeking access on behalf of clients to investments that are sustainable or make a positive change in the world.

Issuing impact bonds can also help diversify an issuer’s funding by attracting new types of investors. Research also shows green bonds get the tick of approval from equity holders.

They can trigger a positive stock price reaction as markets react to expectations the bonds will improve long-term shareholder value by lifting company performance.

Examples of impact bonds issued include a $400 million, five-year bond issued by supermarket giant Woolworths to improve carbon emissions from refrigeration and lighting in its stores.

NSW TCorp, the bond issuer for the NSW state public sector, issued a $1.8 billion bond to further public transport projects and fund a sustainable water project. Queensland’s QTC allocated bond proceeds to light and heavy rail projects, cycleways and a solar farm.

How do impact bonds perform?

It is true that impact bonds tend to perform well in the secondary market — but the reasons for this are nuanced.

We often say there is excellent secondary market liquidity for impact bonds if you’re looking to sell — but not so much if you’re looking to buy!

There should of course be no difference in pricing between impact bonds and their vanilla counterparts. This is true because the same credit risk applies to non-green bonds issued by the same issuer.

The credit risk is that of the issuer, not the underlying green or social projects.

This is most pronounced in bonds issued by supranationals such as the World Bank. The collapse of an underlying project has no effect on bond holders, who are assured by the tripleA rating of the World Bank itself.

Fundamentally, this also means investors are not penalised for investing in green bonds.

Investors in impact bonds get the same credit spread as if they invested in an equivalent vanilla bond from the same issuer.

Nevertheless, a “greenium” — a premium paid for green bonds — can be observed from time to time in the secondary market.

Often the explanation for the premium is simply an excess of demand over supply.

The quote

Some $6 billion of impact bonds were issued in Australia last year and the pure impact funds accounted for only a sliver of that supply.

When Woolworths issued its first green bond last year it found demand five times stronger than its issue size and priced better than initial guidance. It traded even more strongly in the secondary market.

Whether this was demand for the green aspects of the bond — or simply demand for exposure to Woolworths — is difficult to determine.

But this differential can be a benefit for dedicated sustainable fixed income funds buying in the primary market. They are often handed a better allocation than a competing vanilla fund, putting them in an advantaged position in the secondary market.

During increased volatility at the end of the March 2020 quarter we saw one of our impact holdings do very well relative to a similar nonimpact bond.

The bonds were issued by the National Housing Finance and Investment Corporation (NHFIC) — an independent Commonwealth entity that operates the Australian Affordable Housing Bond Aggregator.

This organisation provides cheap, longerterm secured finance for community housing providers by issuing bonds in Australia’s debt capital markets.

The funds raised by the bonds were loaned to community housing providers to help finance more than 2000 properties in Victoria, NSW, Queensland, Western Australia and South Australia.

This included supporting the supply of more than 360 new social and affordable dwellings.

The bonds, which typically trade in line with other supranationals and semi-government bonds, outperformed in March 2020.

Looking ahead The truly dedicated sustainable funds are not yet big enough to soak up all the impact bonds issued in Australia.

Some $6 billion of impact bonds were issued in Australia last year and the pure impact funds accounted for only a sliver of that supply.

This has the effect of keeping pricing in line with non-impact bonds.

Vanilla funds are required to fill the book and need to be offered at the same pricing as they would get in an equivalent non-impact bond.

Only when the dedicated sustainable sector is big enough to take out whole books will we start to see some difference in pricing.

Right now, that looks to be some way off. fs Disclaimer: This article is for general information purposes only, should not be considered as a comprehensive statement on any matter and should not be relied upon as such. It has been prepared without taking into account any recipient’s personal objectives, financial situation or needs.

Because of this, recipients should, before acting on this information, consider its appropriateness having regard to their individual objectives, financial situation and needs. This information is not to be regarded as a securities recommendation.

News

www.financialstandard.com.au 6 July 2020 | Volume 18 Number 13

13

Executive appointments 01: Stephanie Weston

HESTA names portfolio design lead The $52 billion super fund has announced a new senior appointment, with the newly created role being part of the funds new investment leadership team structure.

HESTA has named Stephanie Weston 01 as its first head of portfolio design.

Weston has held a range of significant roles in financial services and joins HESTA after 15 years at the Reserve Bank of Australia followed by chief investment officer positions with AMP Life and Genworth Australia.

Prior to joining HESTA, Weston was also a member of AustralianSuper’s Investment Committee for five years.

Chief investment officer Sonya Sawtell-Rickson said the appointment was a crucial step in the fund’s push to build new teams and capabilities for direct management of a growing, significant pool of assets.

“Our new investment leadership team structure is part of our ambitious and broad strategy to internalise asset management and continue delivering excellent performance for our members over the long term,” Sawtell-Rickson said.

“Stephanie joins us as a seasoned leader with more than 20 years’ experience in the Australian financial market, bringing a breadth of knowledge and expertise gained from an impressive career spanning central banking, investment consulting and senior financial services roles.”

Reporting directly to Sawtell-Rickson, Weston will focus on the ‘top down’ aspects of HESTA’s portfolios, including construction and risk analysis, economic and market research, and strategic tilting.

She will also work closely with the investment execution team to manage and minimise execution risks while ensuring portfolios are responsive to market conditions and opportunities.

The appointment is the first of the two new senior roles announced buy the fund in March, with the head of portfolio management yet to be announced.

HESTA chief executive Debby Blakey said she was delighted to have Weston join the team.

“Stephanie’s appointment will enhance an already innovative and leading investment team that has strong plans for growth,” Blakey said.

“We need the right blend of expertise, capability and seniority to foster the development and growth of the Investments function and keep delivering strong returns for our members, especially as our Fund size grows.”

“I am very excited to be joining Debby, Sonya and the team at HESTA. The current investment environment is challenging; so it is the right time to be focusing on overall portfolio design, and thinking about how to optimise risk-adjusted returns,” Weston said.

“The COVID-19 pandemic has made me even more aware of how critical nurses and other

Pinnacle hires Japan sales exec ASX-listed multi-boutique house Pinnacle Investment Management has hired Colonial First State Global Asset Management’s former Japanese sales lead, as it looks to build its presence in the region.

Hajime Kobayashi joined Pinnacle last month, as the managing director for Japan, based in Sydney.

In his most recent role, he was responsible for distribution of Colonial First State Global Asset Management’s institutional distribution to Japanese investors.

Prior to this, he worked with CBA and CFS’s Japanese business development.

The hire comes as Pinnacle builds its overseas distribution. Its distribution team of nine people reports to Andrew Chambers.

“He is a person who really understands the networks very well in Japan. The Japanese market has a lot of cultural nuances and having someone who understands those nuances is really important for us,” Chambers said.

service providers are to our communities. I am inspired to do the best I can to help HESTA’s members meet their retirement goals.”

Super fund names chief risk officer UniSuper, the fund for the higher education and research sector, today announced the appointment of Andrew Raftis 02 as its new chief risk officer.

Raftis leads UniSuper’s risk and assurance team, effective 29 June 2020.

Raftis joins the super fund following 20 years working internationally with AXA, AIG (American Insurance Group) and Zurich.

He has held a number of executive roles including chief risk officer, chief auditor and chief compliance officer.

Since returning to Melbourne in 2018, Raftis has been working on several boards and advisory committees, including the AMP Employer Sponsored Superannuation Plan Policy Committee.

UniSuper said Raftis has strong leadership experience delivering major projects and initiatives across complex operating environments with the ability to integrate disciplines and create innovative frameworks, models and processes.

UniSuper chief executive Kevin O’Sullivan said he is delighted to welcome Raftis to UniSuper.

“He brings with him a wealth of international and domestic risk management and assurance experience; and a track record for developing leading edge best practices in risk, compliance and control functions,” O’Sullivan said.

“He will be a valuable asset to the team.”

Speaking on his appointment Raftis said: “I am thrilled to be joining a fund with such a strong reputation for delivering excellent investment performance while also being member-focussed and a great place to work.”

The position has been vacant since Ruby Yadav stepped down in December last year.

Yadav left the super fund to join Mercer as chief risk and compliance officer.

L1 Capital hires distribution lead Mark Landau and Raphael Lamm’s boutique has hired a new head of distribution.

Chris Clayton joined L1 Capital in the newlycreated role last month and is responsible for managing business development, marketing and client services.

Clayton was most recently a partner at SeedPartnerships, which advises fund managers on listing LICs and LITs, with past clients including the KKR, Regal Funds Management, Tribeca Investment Partners, VGI Investment Partners, Plato Investment Management and Antipodes among others.

He is known to the L1 team from when Seed advised on the boutique’s billion-dollar listing of the L1 Long Short Fund on the ASX (LSF), which is still the largest LIC IPO in Australia.

02: Andrew Raftis

“We have known Chris for many years and have been impressed with his professionalism and leadership capabilities. We are excited to have Chris join us and lead our client business. Aman has demonstrated his ability to provide excellent customer service to consultants, advisors and clients. We look forward to him working with Chris and the rest of our team,” L1 Capital chief investment officer Mark Landau said.

Prior to this, Clayton headed sales and market at BT Investment Management for about three years, has served as NAB’s head of asset management and at Colonial First State as a manager for research relationships. He also led Acadian Asset Management.

L1 has also hired Aman Kashyap as an investment specialist, from Prodigy Investment Partners which shut earlier this year. Prior to that he held senior distribution roles with Ophir Asset Management, NAB Asset Management and ING Australia (OnePath).

L1 runs Australian and international equities strategies and has in recent years, added a UK residential property fund and a global opportunities fund that invests in structured opportunities. Across the group it manages over $3.5 billion.

Vanguard taps former industry fund boss Global funds management giant Vanguard is continuing its push into Australia’s superannuation sector, hiring a former industry fund chief executive to oversee the growth of its super offering.

Vanguard has appointed former AustSafe Super chief executive Craig Stevens as head of strategic growth, reporting in to the firm’s head of superannuation, Michael Lovett.

Stevens officially began his tenure with the firm in mid-June.

He led AustSafe, which was the industry super fund for regional and rural Australia, for more than 12 years, including during its merger with Sunsuper.

He stayed on for about 10 months as head of strategy and corporate development, before a short stint as a senior consultant at Pinnacle Investment Management.

His appointment is the latest in a string of additions to the global investment manager’s local team, after it set its sights on a superannuation offering late last year.

In April the firm created a new head of operations role, filling it with former CareSuper executive Rachel Reynolds.

Former Colonial First State and Mercer leader Garry Caldow joined the firm’s super efforts in January as its insurance product lead, just two months after Lovett was appointed to lead the super project.

At the time, the firm’s local managing director Frank Kolimago said Lovett’s experience – which includes running Vanguard’s US financial adviser services team - put him in a strong position to lead its superannuation undertaking. fs

14

Feature | Platforms

PLATFORMS IN THE NEW NORMAL Platforms are responding to adviser needs for a system built for ESG portfolios and the rise of younger investors. Ally Selby writes.

www.financialstandard.com.au 6 July 2020 | Volume 18 Number 13

Platforms | Feature

www.financialstandard.com.au 6 July 2020 | Volume 18 Number 13

01: Simone Du Chesne

02: Meaghan Victor

03: Michael Wright

financial adviser EQ Wealth

head of SPDR ETF Asia Pacific distribution State Street Global Advisors

chief executive Xplore Wealth

A

s the COVID-19 pandemic swept the globe and pushed global bourses off a cliff, Australia’s financial advisers turned to hightech platforms to protect their client’s wealth.

At the touch of their fingers, advisers were able to efficiently rebalance portfolios, generate instantaneous reports and use technology to unlock value for their clients when they needed it most.

Providing critical investment infrastructure and reporting functionality, the benefits of platforms are countless; freeing up the time of advisers to focus on client communication and relationship building - and leaving the administrative, reporting tasks to cloud-based data systems.

Yet, it’s a far cry from where it all began.

“We’ve been using platforms for a long time and they have changed a lot over that period,” EQ Wealth founder Simone Du Chesne 01 says.

“Now they’re a lot more user friendly, they have real-time reporting; you can cut, slice, dice or julienne your numbers any way you want these days.”

Since its inception in the late 1980s, the platforms industry has been relatively slow in its path towards modernisation.

Hampered by a complex menagerie of legacy technology, the institutionally dominated market faced little competition to innovate, and relied instead on big household names and bigger budgets to push often vertical product books.

But over the last few years a new guard of providers has marched into the wealth management arena, battling the incumbents for market share and claiming it as their own.

These players, unlike their legacy platform peers, provided advisers and their clients with a more modern and agile customer-centric proposition, heralding a revolution of what was to come.

Since then, the incumbents have been quick to follow suit, embracing industry trends to remain competitive, while using their economies of scale to keep costs down (with these savings passed on to advisers and their clients).

And it shows, with Rainmaker data showing the likes of BT, AMP and Colonial First State still hold the lion’s share of funds under administration, despite the rapid rise of new players.

From strength to strength One key area of growth in the platforms arena is managed accounts, with recent research from Investments Trends and State Street Global Advisors finding that up to 7200 planners, or 40% of the wealth management industry, use managed accounts – up 14% since 2019 and 135% in the last decade.

“Over the last few years, the role of financial planners has shifted from ‘investment adviser’ to ‘wealth coach’,” State Street Global Advisors head of SPDR ETF Asia Pacific distribution, Meaghan Victor02 says.

“Managed accounts are attractive because they allow planners to focus on best interest by outsourcing aspects of their investment management allowing them to spend more time providing high-value client services.”

They can be particularly helpful in volatile and uncertain times, when investors are looking for solutions that are transparent with open architecture, Victor adds.

Managed accounts provide advisers with far greater control, enabling them to react to market events with improved transparency and flexibility.

“Advice businesses during the GFC experienced market stress and fear-based asset switching; they had less control, felt ‘disabled’ to act on behalf of clients and also experienced the surge of frustration and client fear as the value of portfolios fell,” Xplore Wealth chief executive Michael Wright 03 explains.

“This paved the way for the adoption of a more efficient investment structure to meet the need of investors seeking lower costs, transparency and greater flexibility.”

These vehicles allow investors to access model portfolios; a collection of assets whereby the underlying securities are owned by the client/ investor, but are managed by professional investment managers.

Owning the underlying assets of a portfolio, rather than just a unit of a managed fund, provides unique tax benefits to investors. This allows an adviser to make the most of various tax implications when they rebalance their client’s portfolio.

It’s these benefits; tax optimisation, transparency, lower buy sell spreads, reduced administration, and access to professional managers, that has seen managed accounts popularity soar in recent years.

“Managed accounts has been the fastest growing sector of the platform industry,” HUB24 chief executive Andrew Alcock04 says.

“Whenever you have market events when you have to adjust course, like COVID-19, a managed account comes into its own and proves its value in being able to efficiently rebalance client portfolios.”

And the numbers speak for themselves. BT saw a 13% lift in advisers using managed accounts over the last six months and added $2.8 billion in total new inflows in the three months to June 1. Meanwhile, Macquarie Wrap saw over $1 billion added to managed accounts in the last 12 months alone.

Interestingly, Netwealth experienced its largest trading day on record on March 19, with 42,000 transactions implemented on behalf of 4166 clients using managed accounts. Perhaps more fascinating, is that 70% of these transactions were buys.

“Managed accounts continue to grow rapidly in popularity and adoption as the benefits to advice firms and investors become increasingly well understood,” Netwealth joint managing director Matt Heine says.

We’ve been using platforms for a long time and they have changed a lot over that period...

Now they’re a lot more user friendly, they have real-time reporting; you can cut, slice, dice or julienne your numbers any way you want these days.

Simone Du Chesne

15

“The recent market volatility highlighted the many advantages as advice groups and investment managers were able to review and rebalance a broad range of client portfolio’s actively as market conditions rapidly changed.”

Similarly, Macquarie Group’s head of wealth product and technology Michelle Weber05 says recent market events have only served to further highlight the benefits of managed accounts.

“The structure of managed accounts means that advisers and clients have greater transparency and control when managing their portfolios,” she says.

This provides significant efficiency, scale, and functionality for advisers, as well as the potential to have higher value conversations with clients, Weber explains.

“The structural benefits of the product also allow advisers to take advantage of investment opportunities and respond to changing market volatility in a compliant and timely way,” she says.

The benefits to advice practices are plentiful; they allow advisers to focus their time on their client’s goals, commit more time and energy to regular communication and marketing, and allow advisers to service a larger client base.

New research out of Praemium, who in partnership with Merrill Lynch and BlackRock in 2005 launched the first SMA platform in Australia, found that advice firms with just 35% of their assets invested in managed accounts instead of wraps saw a dramatic increase in profit.

“Outsourcing frees up time for adviser to have better relationships with their clients and deal with the more strategic aspects of financial planning, as well as new client acquisition,” Praemium chief executive Michael Ohanessian06 says.

“As it happened 20 years ago in the US, there is no doubt in my mind that the next big shift in the market will see advisers go almost all the way to managed accounts; I think the whole idea of wrap platforms is finished.”

This may be further pushed by innvoations seen in managed accounts overseas, such as the introduction of artificial intelligence (AI) in trading bots.

Through a combination of efficient programming, trading bots are built with AI to offer real-time trading that imitates the thinking of a financial analyst who collects and processes data.

The bot learns about the market and its history, related news, social media, exchange indicators and more. This helps bots to understand the global market trends and adjust buy/sell orders following optimised and updated data. And it has the additional benefit of removing room for human error.

Super-charged benefits Ohanessian also believes APRA-regulated funds are poised for disruption, as consumers slowly wake up to the transparency and liquidity issues plaguing super fund giants.

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Feature | Platforms

“Putting aside the fact that industry funds are actually quite cost-effective, if you think about the ability of platforms now to deliver professional investment management, mass customisation, cost effective portfolios, and really good reporting - I think a shift away from industry super funds is something that we may see happen,” he says.

“Especially now with the technology that these newer platforms have; it just makes investing a much more interesting and engaging experience.”

Du Chesne agrees, pointing to real-time reporting and transparency as the key benefits of managing super on a platform.

“Certainly a lot of the super funds that aren’t on platforms don’t have that day by day reporting – that’s the critical difference for clients; they don’t have that performance visibility, or the transparency of underlying assets and fees,” she says.

Similarly, Heine believes that managing super on a platform gives members greater control and flexibility over their investments.

“The main benefit of using a super wrap or platform account over an industry fund is the access it offers to a broad range of insurance and investment options, including managed funds, a full range of domestic and international equities, managed accounts, cash and term deposits,” he says.

Platforms also have more sophisticated online tools, such as portfolio reporting, transaction capability and investment research, Heine adds.

Traditionally, managing a self-managed super fund (SMSF) was a very manual, paperheavy process, with investors steering clear from platforms in a bid to cut costs.

“SMSF advisers have experienced some clients having issue with having someone else ‘between them and their money’, which is why traditionally these SMSF clients have gone direct via a broker for listed and sometimes direct to a fund manager for unlisted assets instead of using a platform for their SMSF,” WealthO2 managing director Shannon Bernasconi explains.

“This historically created an issue for the adviser in being able to efficiently manage, report, and trade on a client’s portfolio; [they had to use] paper applications to gain access to unlisted funds, manage regular contributions and trades manually, while tax reporting was also quite manual.”

Running an SMSF on a platform is no longer an expensive proposition, and can provide investors with the same benefits that other platform users enjoy; including access to model portfolios, cash management tools, and managed accounts.

BT national manager of SMSF strategy Neil Sparks07 believes control and choice; two driving reasons why people set up SMSFs in the first place, are further amplified for investors using platforms.

“With your APRA-based funds you have very little visibility to investment decisions made by managers, whereas with SMSFs you have complete control over what you invest in,” he says.

www.financialstandard.com.au 6 July 2020 | Volume 18 Number 13

04: Andrew Alcock

05: Michelle Weber

06: Michael Ohanessian

chief executive HUB24

head of wealth product and technology Macquarie

chief executive Praemium

Platforms have evolved to be purpose-built technology to enable efficient management of portfolios.

Michael Wright

“Managing your SMSF on a platform - you get a cash hub, the ability to buy and sell term deposits, invest in managed funds as a wholesale investor, trade all ASX-listed securities with discounted brokerage, and then have all that information captured, recorded, and reported through capital gains, income, and contributions - everything there at your fingertips.”

Wright agrees, arguing the principles behind investing in a platform; a broad investment menu, consolidated reporting and online access, is equally relevant to SMSF investors.

“Platforms have evolved to be purpose-built technology to enable efficient management of portfolios,” he says.

“Specifically managed accounts - this technology creates efficiencies for trustees to reweight their portfolios to ensure they remain within their investment strategy.”

Even Australia’s largest super fund, AustralianSuper, offers members a direct investment option, Member Direct, allowing the industry fund’s members to have greater control over their investments. It currently has nearly 20,000 members with approximately $1.7 billion in SMSF savings.

“Many of these members have either considered setting up an SMSF at some point or done so and then found the process too onerous and opted to invest in Member Direct instead,” AustralianSuper investment choice product manager Nav Rewal08 says.

“These members are, on average, older and hold higher balances.”

Du Chesne says she would challenge her clients from managing their own SMSF these days unless they wanted to be self-directed, have property in their SMSF or have a direct equity portfolio.

“Platforms give investors the flexibility to have pretty much anything in your SMSF without the need for constant reporting and compliance,” she says.

Interestingly, data from the ATO reveals the number of SMSFs being set up over recent years is on the decline, with SMSF establishments falling 17.5% between 2018 and 2019.

Yet, there has been a 250% increase in SMSF clients on HUB24 over the past two years, while 55% of Netwealth’s members are SMSFs. Similarly, BT boasts more than 11,000 SMSF members, while CFS has almost $10 billion invested across its platforms by SMSF trustees.

“It’s a client segment we expect to continue to see grow, given the caps on superannuation and ongoing desire by SMSF trustees to access a broader range of investment capabilities and diversify their portfolios,” CFS general manager of advice relationships Bryce Quirk09 says.

Somewhat surprisingly, Sparks says the younger demographic is becoming more interested in the SMSF model.

“Last year 62% of SMSF establishments were set up by people under 50,” he says.

“This demographic is very interested in ESG

investing, and obviously different things that have occurred have even further piqued their desire to invest sustainably.”

Already building momentum over recent years, ESG has now been catapulted well and truly into the spotlight - pushed further into the mainstream by mounting climate concerns and a devastating bushfire season.

“ESG is about people being more engaged in the world around them - about wanting to invest in companies that are run well, have a sustainable future and are doing the right thing by their workers, the environment and the community...

Wedefinitely did see a shift towards sustainable investing following the bushfires,” Sparks says.

“The environmental impact was so extreme that it did make people sit back and think more about investment in a sustainable manner.”

Growth in interest around ESG investing has led to a significant increase in the availability of relevant data to investors, making it easier than ever for advisers to accommodate their preferences. Platforms are also responding to demand, introducing ESG screening tools and ESG ratings, such as those recently launched on BT Panorama’s mobile app.

The COVID-19 pandemic has also contributed to a growing recognition of the importance of ESG to investing, Wright argues.

“There has been a trend towards consideration of ESG for investment managers that has been accelerating since the GFC, and [this has grown] since the onset of the recent COVID-19 pandemic,” he says.

“We believe this will continue to be a focus, driven by client demand as awareness grows from the consumer and the availability of specialist managers to meet this demand.”

Meanwhile, Quirk says a longer-term trend towards superannuation engagement can be attributed to a push for ESG-friendly options.

“A great example of this increased engagement is the push by members for improved access to ESG and sustainable investment options,” he says.

“We are also seeing more mainstream fund managers including sustainability as part of their investment process and we expect to see this trend continue over time.”

Victor agrees, arguing the Australian market will mirror moves made in the US. “We wouldn’t be surprised if this investment need translates to innovative ESG managed account solutions in the coming years or broader enhancement of platform functionality to rate investment manager’s strategies from an ESG perspective,” she says.

And while AustralianSuper saw a spike in its socially aware option immediately after the bushfires, Rewal argues members would be better served by investing in an industry fund’s ‘balanced’ option.

“It is important to remember that people might be better off in a balanced option because

Platforms | Feature

www.financialstandard.com.au 6 July 2020 | Volume 18 Number 13

the ESG team within a fund actively votes at AGMs and engages with businesses on ESG issues,” he says.

This is not possible for an investor using a platform, SMSF or not, Rewal says.

Innovation and disruption During the height of the COVID-19 crisis, the country’s platforms stepped up to assist the advice community and their clients when they needed it most.

Digital signatures were broadly adopted, helping advisers to make timely and compliant transactions without having to wait for signed documents. Other initiatives like webinars and podcasts were also introduced, helping to deliver investment insights to both advisers and their clients. Fees for some providers and investment options were also lowered, reducing costs for clients during a testing time.

But perhaps most illuminating, has been the ease at which Australians have adapted to the new normal - supercharging an already developing trend towards a digital advice offering.

“There has been a shift in client expectations – where technology is pervasive at every touchpoint between an adviser and their client,” Heine says.

“Supporting this trend is the shift in demography, that is, over time the advice client will be more likely a digital native; more comfortable dealing in an interface-to-interface world than face-to-face.”

He also sees advisers move away from investment and insurance management to a more holistic offering.

“Maybe the most important thing we are seeing is the increase in the number of advice tech solutions a practice uses; on average they will use at least 12 different technologies,” Heine says.

“The role of the platform as a technology solution for advice practices is to grow with advice practices, to offer greater customer engagement features and to provide improved integration so that different technologies talk seamlessly to avoid double-handling and inefficiencies.”

Meanwhile, Alcock sees the platform of the future integrating data from multiple other providers, as well as being able to provide data to other systems.

07: Neil Sparks

08: Nav Rewal

09: Bryce Quirk

national manager, SMSF strategy BT

product manager, investment choice AustralianSuper

general manager of advice relationships Colonial First State

“Platforms will increasingly have to integrate with other front ends, whether it be a CRM for an adviser or whether it be with other product providers; like what we do with Challenger annuities and Macquarie bank accounts,” he says.

“It’s about integrating the universe of products into the platform and using multiple sources of data to do that.”

The future of the industry is using data to provide insight, Alcock says.

“We’ve gone through the Hayne Royal Commission with all these issues in businesses where they didn’t have their files; they couldn’t find out what had gone on,” he says.

“Our view is - if you collect the data and you interpret it properly - you can prevent these issues from occurring in the first place.”

In addition to greater digitisation of the platforms experience, Quirk sees platforms taking on a greater role in education.

“With the introduction of FASEA requirements, we believe education is a critical area where platforms can help advisers who are looking for support with tools and education materials to help them meet regulatory requirements, support clients and modernise their business model,” he says.

And that shift is already occurring, with BT having introduced a COVID-19 content hub on Panorama and conducting webinars to help advisers gain their CPD points while working from home. The webinars have covered the government stimulus policies, the FASEA Code of Ethics and end of financial year advice strategies, and have so far attracted over 2400 participants.

Quirk also sees a major shift in fee models for the future.

“We can expect to see fee models change over time as member preferences and advisers’ business models evolve,” Quirk says.

“For example, subscription models and other ways consumers are paying for things in other walks of life may make their way into platform fees in the future.”

As banks divest from wealth, and with the flight of advisers from once bank-aligned to non-vertically integrated dealer groups, platform choices have changed, Bernasconi says.

There has been a shift in client expectations – where technology is pervasive at every touchpoint between an adviser and their client.

Matt Heine

19

“The additional fees including per account, management expense ratio increases, cash, transaction and SMA model fees have not (in the most part) fallen, and in some cases they have increased,” she says.

The culling of grandfathered commissions, as well as Standard 3 of the FASEA Code of Ethics and the advent of new technology-led platform solutions will see a shift towards different models of pricing, Bernasconi says.

Similarly, Rewal believes major disruption is on the horizon.

“We see the major platforms coming under increased pressure to drive investment costs down,” he says.

“Zero, even negative, brokerage is not that far off. The rise of micro-investing and the introduction of open banking will completely upend the platforms market as it is today.”

Yet, one could argue there has already been major disruption in the platforms market, with the major banks shedding their wealth management businesses as they exit advice.

There has already been significant consolidation in the market this year alone, with private equity firm KKR buying into CBA’s Colonial First State, IOOF acquiring ANZ’s OnePath, IRESS surprising investors with an offer for OneVue, and Westpac placing its wealth platforms under strategic review.

Either way, Du Chesne says ultimately an adviser’s decision will be guided by fees and functionality.

“A platform has to be very competitive in the fee department and offer all the functions that allow individual clients to access all the information they need at the touch of their fingertips,” she says.

Platforms or no platforms; it’s about making clients’ lives easier, not just advisers’, Du Chesne says.

“It’s actually about making our client’s financial world easier to navigate and to provide them with the tools to achieve their financial goals,” she says.

“Whatever tools we can use to reach those goals, we will use. So, if something else comes along, and platforms are no longer that optimal tool, then we will most likely investigate that.” fs

Award-winning* technology that goes wherever you do.

With BT Panorama you can take your business with you. bt.com.au/panoramamobile * BT Panorama was named Winner of the Investment Trends 2018 & 2019 Platform Competitive Benchmarking and Analysis Report: Best Mobile Platform. © Westpac Banking Corporation.

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News

www.financialstandard.com.au 6 July 2020 | Volume 18 Number 13

Early release figures hit $17bn The latest round of APRA data has revealed that $17.1 billion in early release of super (ERS) applications have now been paid.

Billions are being withdrawn each week, despite COVID-19 restrictions easing in most Australian states. In the week to June 21, $1.2 billion more was paid out.

In total, 2.4 million applications have now been received and 2.3 million paid.

Funds are managing to make 95% of payments within the five business day timeline.

Over the week to June 21, superannuation funds made payments to 154,000 members.

AustralianSuper, the nation’s biggest super fund also has the biggest ERS bill. It has paid out almost $2.3 billion.

The industry fund for the construction sector, Cbus, saw its ERS payments creep towards $1 billion – hitting $982,426,436.

Hostplus has now paid out over $1.5 billion, with many of its members who work in the hospitality and travel industries impacted by travel bans and social distancing measures.

Rest also topped $1.5 billion in the latest round of data.

Sunsuper, meanwhile, had even more ERS applications – paying out $1.693 billion.

Meanwhile, the ATO has begun to crack down on ERS misuse, saying it will take enforcement action against those who have deliberately exploited the system.

The taxation office listed a number of behaviours it considers suspicious including applying for ERS when there has been no change in regular salary or wage, artificially arranging affairs to meet the criteria and making false statements or fraudulent attempts to meet the criteria.

The ATO said each false and misleading statement will carry a penalty of over $12,000. fs

MLC general manager departs The general manager of advice partnerships at MLC has departed.

MLC has confirmed Michael Downey left his role with the business in mid-June.

Taking to LinkedIn, Downey said heis confident the MLC advice business is set up for success in the years ahead.

“I’d like to think our teams have always advocated for advice, our advice licensees and for supporting our advisers and their teams who provide quality advice to their clients,” Downey said on LinkedIn. “I have said publicly many times, that advisers play an extremely important role in creating and protecting the wealth of many thousands of Australians and I do believe our industry will prosper in the years ahead and we will be viewed as a true profession and one we can continue to be proud to work in.”

Downey’s move comes after MLC revealed its new advice brand, TenFifty Financial Group, last month. TenFifty is home to all advisers previously aligned to Garvan, Apogee and Meritum.

Meanwhile, all salaried advisers now sit under the MLC Advice brand. fs

01: Anne Brown

chair Life Code Compliance Committee

Life insurers disregard Code of Practice Elizabeth McArthur

T The quote

The under-reporting of breaches relating to claims decision timeframes indicates that subscribers lack sufficient processes for recording and reporting such breaches.

he Life Code Compliance Committee has said that life insurers appear not to be taking their obligations under the Life Insurance Code of Practice seriously.

The code came into effect in 2017, with the independent committee now publishing its second annual report on how life insurers are complying.

The committee did not hide its disappointment, not only with life insurers but with the quality of data.

“The committee’s intention was to publish a report that would provide meaningful insights into how subscribers have improved their code compliance since the code came into formal operation in 2017,” chair Anne Brown01 said “Unfortunately, inconsistencies in the content and quality of last year’s data and its collation has not enabled this to happen.”

While smaller life companies that subscribe to the code managed to supply high quality data, the larger insurers left much to be desired.

“Larger subscribers need to improve their data quality assurance and reporting,” the committee said.

“The under-reporting of breaches relating to claims decision timeframes indicates that subscribers lack sufficient processes for recording and reporting such breaches.”

The committee’s criticisms didn’t stop there, with the report adding that the corporate culture of many subscribers appears not to be in alignment with the Code of Practice.

It also questioned how life insurance companies are training and monitoring staff, as a large volume of breaches of the code were caused by human error.

The code found an increase in claims related complaints and claims handling timeframes.

There were 19,483 complaints reported to life companies that subscribe to the code. That number was 29% higher than last year.

On income claims, 17% took longer than the required two months. This was a worst result than last year when 11% took longer than two months.

“Self-regulation is a privilege,” Brown said.

“With that privilege comes an obligation to ensure that appropriate mechanisms are in place to comply with the Code and report, via complete and accurate quantitative data, both internally and externally.” fs

ESG continues to outperform: Research Eliza Bavin

Sustainable companies are performing better and responsible investment funds are largely continuing to outperform the general market, according to a new report from the Responsible Investment Association Australasia (RIAA).

The report, COVID-19 and the performance of responsible investments, said in a time of massive market disruption, responsible investment funds that integrate ESG factors have outperformed the rest of the market.

“In recent years there’s been a significant rising tide of interest and engagement in responsible investment: assets managed in accordance with responsible investment principles now represent 44% of Australia’s total $2.25 trillion assets under management (AUM) and 72% of New Zealand’s total NZ$261.4 billion AUM,” RIAA said.

“The bulk of our financial institutions have made visible and public commitments to responsible investment, and at a minimum, integrate the consideration of environmental, social and governance (ESG) factors into investment decisionmaking.”

Companies ignore ESG at their own peril, the report reads, saying companies or assets are unlikely to thrive in this case.

It said responsible investing, including the consideration of ESG factors, helps investors identify a broad array of themes that are influencing markets and returns, and provides an important means for investors to navigate turbulent times; to avoid the most significant risks and to capture more opportunities.

“In addition to its devastating death toll, the COVID-19 pandemic has resulted in significant economic turmoil, having wide-ranging and severe impacts on many people’s livelihoods and financial markets globally. These include substantial stock market declines and many countries entering into a recession,” RIAA said.

“Yet while there has been widespread market downturn, the various analysis by commentators including investment managers, research houses and ratings agencies is consistently showing that more sustainable companies are performing better and responsible investment funds are outperforming the general market during this time.”

The report is in line with recent findings from research houses and firms who have compared ESG funds with that of their ordinary market counterparts.

MSCI conducted a comparison of its ESG indexes compared to its parent indexes for the first quarter of 2020 finding that the ESG indexes comprehensively outperformed their parents MSCI index.

AXA Investment Managers undertook an analysis of how leading ESG companies had performed in the first quarter of 2020 compared to laggards, applying their research across equities and bond markets.

AXA IM said: “Companies with the highest ESG ratings have proven more resilient in the coronavirus market crash than those with the lowest.”

RIAA said the thesis that responsible investing supports stronger outcomes for society and the environment, alongside delivering superior financial returns, has been put to one of its toughest market tests with the COVID-19 pandemic. fs

Products

www.financialstandard.com.au 6 July 2020 | Volume 18 Number 13

21

Products 01: Michael Blayney

Pendal adds SRI lense to multi-asset fund Pendal has increased the consideration of sustainability factors in its multi-asset target return fund, in what it claims is an Australian first.

The global investment manager has introduced a new set of screens to its $189 million multi-asset target return fund, which will see it steer clear of companies and issuers directly involved in tobacco production and controversial weapons manufacture.

Led by Pendal multi-asset head Michael Blayney01 , the move saw the investment manager work with its recently acquired in-house ESG researcher Regnan to examine the impact of a stronger focus on sustainability and ESG on riskadjusted returns.

“This is a first for a real return Multi-Asset fund in Australia and provides investors with more diverse options that factor in social and environmental outcomes over long term time horizons,” Blayney said.

The fund will also exclude companies or issuers directly involved in a range of activities which account for 10% or more of total revenue. These include the production of alcohol, the manufacture or provision of gaming facilities, non-controversial weapons or armaments, and pornography (including the distribution of pornography), the direct mining of uranium for weapons manufacturing, the extraction of thermal coal and the production of oil sands.

Blayney said that through a “powerful combination” of changes in consumer behaviour, stakeholder expectations and regulatory intervention, the firm believes earnings and asset prices across all asset classes will shift over the next decade and beyond.

“Of course, we have already seen ample research that indicates outperformance of stocks with stronger ESG credentials. A landmark research report identified a positive correlation between sustainability and good financial performance in 80% of studies analysed,” Blayney pointed out.

“Our analysis found that negatively screened companies are in sectors more susceptible to adverse regulatory changes or the loss of a social license to operate.

“Furthermore, we will favour sustainable implementation with positive impacts where possible.”

Pendal chief executive Richard Brandweiner said the firm sees the move as part of the “new way” of investing, “where you can target positive returns plus achieve better outcomes for society”.

New fund launches on ASX A newly established managed investment scheme has launched on the Australian Securities Exchange, aiming to achieve long-term capital growth.

The Montaka Global Extension Fund (Quoted Managed Hedge Fund) has been launched to help investors gain access to opportunities to make attractive, multi-generational investments.

The funds chief investment officer Andrew Macken said he believes investors will be forced to refocus and adjust to succeed in the post-COVID-19 world.

“We believe Montaka Global Investments brings the benefits of expert, deep sector and

Franklin Templeton cuts fees Franklin Templeton has dropped the fees on eight funds from 2bps to 23bps per year, effective July 1.

The steepest fee cut is on the $443 million Franklin Global Growth Fund which will go from charging 1.13% per year in management costs to 0.90%.

Two other global equities funds will also lower their fees, with the Templeton Global Equity Fund going from 1.13% to 0.95% per year. The Templeton Global Trust Fund will go from charging 0.96% to 0.75%.

The manager is also dropping fees on five fixed income funds.

The biggest cut in the category is for its Australian absolute return bond fund, which is going from 0.65% per year in management costs to 0.50%.

The Australian Core Plus Bond Fund will go from charging drop 8bps to 0.35% per year.

Two other funds will make smaller fee cuts: Franklin Templeton Global Aggregate Bond Fund (from 0.59% p.a. to 0.54%) and the Franklin Diversified Fixed Income Fund (0.64% to 0.61%).

Several fixed income managers, including Nikko, Schroders and Aberdeen Standard dropped fees on fixed income funds last year on back of lower yield expectations, increasing competition and ahead of ASX listings.

market research to identify attractive investment opportunities, including both medium-sized businesses with multi-decade compounding potential and ongoing mega-cap winners,” Macken said.

“Montaka Global Investments has significant permanent capital and its principals are committed to very long-term investment alongside our investors in our own strategies.”

The fund’s PDS was lodged with ASIC mid-May this year and initial offers closed at the start of June.

The fund aims to provide investors with long term capital growth, with a focus on managing downside risk, with an investment period of at least five years.

Investors will pay a 1.25% per annum management fee, and a performance fee of 20% of the outperformance in any performance fee calculation period.

The fund is seeking to deliver a target distribution of at least 5% per annum, net of fees and costs, paid semi-annually.

It said where there is insufficient income the responsible entity, Perpetual Trust Services, intends to distribute capital out of the fund with the objection of trying to meet its target.

Montaka said the fund aims to raise a minimum of $10 million in its initial offering.

Montaka Global Investments was established in 2015 and is led by Macken, who co-founded the company with Christopher Demasi who works as the portfolio manager.

Chi-X releases viral TraCRs stocks Stock exchange Chi-X has added five new US listed companies through its investment vehicle TraCRs, which it says reflect the societal and behavioural trends kick-started by the COVID-19 pandemic.

This includes video conferencing service Zoom, protective healthcare equipment provider 3M, payments giant Mastercard, supermarket conglomerate Walmart and anti-viral pharmaceutical company Gilead Sciences.

Following today’s announcement, there are now 35 US listed companies available to Australian investors via Chi-X’s TraCRs. Chi-X Australia chief executive Vic Jokovic 02 said the new TraCRs additions provide investors with exposure to the latest thematic opportunities presented by the pandemic.

“COVID-19 has changed the way we live and work, so it is only natural that it is also informing the way Australians invest and the types of stocks they want,” Jokovic said.

“Our latest tranche of TraCRs allow Australian investors to gain single-stock exposure to the US companies that are at the forefront of shaping our ‘new normal’ environment.”

In particular, he believes Zoom TraCRs are likely to be popular among Australian investors, with the company’s share price surging more than 255% since the beginning of the year.

“While it remains unclear whether the impact of COVID-19 will create long-term changes to the way we work and communicate, some exciting

02: Vic Jokovic

investment opportunities have attracted the attention of Australian investors,” Jokovic said.

“The latest tranche of Chi-X TraCRs complements a growing list of US names that cover the technology sector, industrials, financials and consumer staples.

As more Australians attempt to take advantage of market dislocation by opening trading accounts and entering the market, Jokovic said it’s essential for service providers to offer their clients a broad range of investment options.

“TraCRs are one of many original solutions we offer Australian investors in addition to Australian shares, warrants, indices and funds,” he said.

“With strong demand from investors and the continued support of the broking and funds management industry, we are continuing to build on our position as an integral marketplace.”

Chi-X TraCRs are available through more than 20 Australian brokerage firms and are issued by Deutsche Access Investments, including CommSec, Morgans Financial, Westpac Online Investing, ANZ Share Investing, CMC Markets, Bell Potter and more.

SSGA model portfolios land on HUB24 Advisers using HUB24 will soon be able to invest in four State Street Global Advisors ETF model portfolios on behalf of their clients.

HUB24 has added a suite of SSGA ETF model portfolios to its Invest and Super offerings, as investors seek transparent, open architecture solutions to deal with today’s market volatility.

SSGA has introduced one target income and three risk-based ETF model portfolios to the platform, recognising HUB24’s quickly growing legion of fans.

SSGA head of SPDR ETF Asia Pacific distribution Meaghan Victor said the addition of the firm’s ETF model portfolios to HUB24 reflected advisers’ shift from investment professionals to wealth coaches, which requires advisers to reallocate their time to the client.

By outsourcing some of their investment management tasks, allocating to model portfolios can help advisers redistribute their expertise appropriately.

“Investment professionals are recommending these structures for a variety of reasons, including to save time in their practices, but also to meet client best interest obligations, and offer investors transparency via access to direct shares or ETFs,” Victor said.

“In times of volatility, investors may also be looking for solutions that are more transparent, with open architecture.

“Our ETF model portfolios offer opportunities for growth while maintaining the same level of risk as traditional allocations. With changing market conditions, it has never been more important to provide advisers and their clients with a broader choice of quality and low-cost investment options to meet their needs.”

In addition to HUB24, SSGA’s ETF model portfolios are also available on Praemium and BT Panorama. fs

22

Roundtable| Sustainability Featurette

www.financialstandard.com.au 6 July 2020 | Volume 18 Number 13

Let’s not waste the crisis Australia’s business leaders are facing a mountain of challenges as the world adapts to the new normal, but it doesn’t have to be a bad thing.

Ally Selby writes.

As the nation’s states and territories gradually reopen for business and Australians sheepishly return to the office, the country’s champions of change have called on business leaders to harness the learnings of the crisis as we move into the next stage of recovery.

Flexible working, reduced business travel, worker’s rights, board diversity, executive remuneration, and long term sustainability are now well and truly in the spotlight – and will likely remain so over the months and years to come.

And although the crisis has left death and destruction in its wake – it has also exposed the collective capabilities of the global economy, the benefits of clear communication, and the power of rapid digitisation.

Australian Ethical chief executive John McMurdo 01 explained that while much of the focus over recent years has been on the E of ‘ESG’, the crisis has revealed the true value of the S and G in corporate governance.

“In many ways, the crisis has fast tracked the discussion around the role of business and shown that companies are just as responsible for the way they treat their employees, society and the environment as they are for their financial performance,” he told Financial Standard.

“Those that ignore their social and governance responsibilities during these uncertain times may

benefit in the short term – but at what long-term cost?”

Investors now have a new reason to pay close attention to how companies treat their employees and stakeholders, he said.

“This presents companies with an opportunity to deepen relationships and trust with their stakeholders,” McMurdo said.

“Those that embrace this opportunity can benefit in the long-term, winning stakeholder support and loyalty. Those that perform poorly, on the other hand, are likely to find that people have long memories.”

VFMC head of investment stewardship Talieh Williams said several systemic workforce issues had come to the fore over the last few months, with the economic implications of the pandemic hitting poorer, vulnerable workers harder than most.

“It was initially surmised that COVID-19 did not discriminate based on socio-economic factors,” she said.

“However, what has become clear is that it is people in lower paid jobs that are most heavily impacted.

“They have jobs that cannot be done from home, often live in high density share housing and the nature of their jobs increases their exposure to the risks – e.g. workers in abattoirs, horticulture and aged care as well as cleaners – it is not possible to physically distance.”

The crisis has caused a sudden awareness of the vulnerabilities of global, low inventory supply chains and distributed operating models.

Kim Farrant

The COVID-19 crisis has highlighted the need for greater health and safety entitlements for those in casual and contracted work, Williams said, including the need for a universal living wage.

Simultaneously, the virus has stressed the importance of supply chain resilience – and the potential for the nationalisation and on-shoring of manufacturing.

“The crisis has caused a sudden awareness of the vulnerabilities of global, low inventory supply chains and distributed operating models,” Hostplus head of ESG Kim Farrant said.

“While we have already seen some companies on-shoring previously offshored call centres and moving to secure alternate supply chains, it is unclear whether there will be a wider trend toward deglobalisation.”

The majority of companies had so far responded responsibly to the crisis through measures including freezes on price rises and extensive hardship programs, she said.

“However, the challenge for companies will be in continuing to support these initiatives for as long as they are needed, particularly as government support winds down,” Farrant said.

Credit Suisse head of ESG research Phineas Glover agrees, arguing that government stimulus had so far soften the blow on the nation’s corporates.

“Some of the existential risks and reputational

Sustainability | Featurette

www.financialstandard.com.au 6 July 2020 | Volume 18 Number 13

criticism that we previously expected have almost been taken out of companies’ hands by government stimulus, giving them quite a bit of leeway,” he said.

However, the virus has also emerged as somewhat of a curtain, behind which, companies have laid off countless staff and closed no longer viable operations.

“There have been lots of layoffs –whether they abide by the Fair Work Act is the test and I would expect some focus on that, particularly where those workers may be rehired,” Glover said.

So too has the crisis shone a light on the issues related to working from home, Governance Institute of Australia chief executive Megan Motto 02 said.

“These range from mental health and other safety issues associated with isolation, challenges for our digital infrastructure, and even gender equality,” she said.

“For example results from a recent survey showed that for those families with children, an extra six hours of supervision and care has been created each day as a result of school closures and isolation-related factors – with four of those extra six hours of supervision and care being carried out by women.”

With heightened scrutiny on both public and private companies during the pandemic, the global community has become even more accustomed to expecting more from business leaders, Glover said.

“Irrespective of pandemic, companies were already subject to a completely changed level of transparency and accountability as a result of technological transformation in the way we communicate and access information,” he said.

“Really, the pandemic is a test of whether what these companies said they would do from a multistakeholder perspective is actually ringing true.”

And expectations have been running high, Motto said.

1.6% 1.6%

Performance Performancedata dataasasatat3030April April2020, 2020,workplace workplaceinvestment investmentoptions, options,performance performancenet netofofallallfees. fees.

Outperformance of ESG options Outperformance of ESG options

1.4% 1.4% 1.2% 1.2% 1.0% 1.0% 0.8% 0.8% 0.6% 0.6% 0.4% 0.4% 0.2% 0.2% 0.0% 0.0% -0.2% -0.2% -0.4% -0.4%

Source: Rainmaker Source: Rainmaker

Diversified Equities Diversified Equities 3-months 3-months

02: Megan Motto

chief executive Australian Ethical

chief executive Governance Institute of Australia

“Expectations of leaders have evolved significantly during the crisis. We expect leaders to be visible, honest, transparent – and available,” she said.

“We also expect our leaders and companies to be more agile and resilient in their approach, thinking about the implications for a broad range of stakeholders and society at large.”

In a step towards better practice, many companies have already cut executive remuneration, Farrant said, particularly in companies heavily affected by the COVID-19 crisis.

“While many executives are working harder than ever, it will be important as we head into reporting season that performance objectives are not relaxed and that executive pay doesn’t get out of step with the experience of a company’s employees and shareholders,” she said.

McMurdo believes the crisis has revealed the importance of empathy in leadership.

“Leaders must listen more to employees’ concerns - which of course are everyone’s concerns right now – and build trusting relationships so teams can work in new and collaborative ways,” he said.

“Empathetic leaders need to provide emotional support as well as professional support; to listen and lead in equal measure.

This is an opportunity for positive, permanent change, he argued.

“The crisis has been sudden, profound and life-changing. Companies have been forced to make major changes, and many are seeing the workplace and the world differently,” McMurdo said.

“As the world recovers from the pandemic, it is still racing against the clock to avoid the environmental crisis around the corner because while there will be a vaccine for COVID-19, there is no vaccine for climate change.”

The financial decisions we make now will shape the global economy for the next decade, he said.

“We must not let the solution to one problem fuel the other,” McMurdo said.

Figure Figure1:1:The TheCOVID-19 COVID-19ESG ESGeffect effect 1.8% 1.8%

01: John McMurdo

Diversified Equities Diversified Equities 12-months 12-months

The crisis has been sudden, profound and life-changing.

Companies have been forced to make major changes, and many are seeing the workplace and the world differently.

John McMurdo

23

“Recovery plans must avoid rolling back existing environmental standards and building new carbonintensive infrastructure and capital assets that will only undermine long-term climate goals.”

Farrant agrees, arguing that climate change will continue to be one of the biggest challenges we will face the world over.

“Similar to the current crisis, climate change is a complex issue requiring widespread behavioral change and an economic transition that emphasises human and long-term impacts over nearer term disruption,” she said.

“As we move toward the post-pandemic recovery, targeted stimulus should support the transition to a lower carbon economy, capitilising on the current willingness to embrace change and [realising] that there are benefits to addressing both issues concurrently.”

If anything, the crisis has proven the true strength of global coordination, Glover said.

“Does the crisis instill greater willingness, ability to tackle big systemic issues front on, and actually not be completely scared out of your wits of the potential ramifications and the ability of society to adapt? Absolutely, I think it does,” he said.

“And as an optimist I would say now governments realize if you do take action on a multilateral basis we can move on a pathway to something that is more sustainable and will avoid some of the economic disasters of inaction on climate change.”

And the economic implications are huge – amounting to losing at least 5% of GDP each year now, and forever, he said.

Enormous economic ramifications aside – social isolation has vastly magnified the wonder of simple beauty in nature; clear blue skies, crystal clean beaches, flourishing wildlife – a reminder of all that could be lost if nothing is done to combat climate change.

“The economic shut down associated with the COVID-19 crisis has resulted in an approximately 5-7% reduction in greenhouse gas emissions for 2020,” Williams said.

“To ensure climate change is abated, scientists estimate that we need to see emissions reduction of this scale, every year. The magnitude of the challenge has been highlighted in very real terms.”

However, the ability for effective public and private sector collaboration on a global scale has now been demonstrated, she said.

“We need to harness these learnings in the context of climate change and other collective sustainability challenges (waste, plastics, water, and natural habitat protection) - Let’s not waste the crisis,” Williams said.

Similarly, McMurdo sees a real opportunity for the wealth management industry to help rebuild a better future.

“Ethical investing can be a solution for climate change and a long-term recovery strategy for COVID-19,” he said.

“It offers an integrated solution to both crises that can put the global economy on a path of sustainable growth and increased resilience.” fs

24

Between the lines

www.financialstandard.com.au 6 July 2020 | Volume 18 Number 13

Public super fund rejigs offering The superannuation fund for Australian Defence Force employees will now allow departing staff to stay with the fund and consequently, has added an insurance offering.

ADF Super currently allows only serving employees of the defence force to be with the fund, which is managed and administered by the Commonwealth Superannuation Corporation.

The fund does not have insurance. Serving defence personnel use ADF’s automatic cover for death and invalidity benefits.

Starting July 6, the fund will allow veterans who are discharged from the defence force to continue being members of the fund, provided they served for at least 12 continuous months.

As a result, the fund has added default insurance cover for death and total permanent disability (TPD) cover for members who meet four conditions: discharged from service on or after July 6 (including 12 continuous months of service), have a super balance of $6000 and 25 years or older, and don’t receive an ADF Cover Invalidity class A or B benefit.

The new product, called the lifePLUS Protect, will charge members an insurance fee of $1.50 per month (or $18 a year) plus the cost of the cover.

“The cost of your cover will be based on your level of cover and current age…For Death and TPD, premiums are expressed as annual rates per $1000 of amount insured. (Number of days in the month/365.25) x (Amount Insured/1000 x Premium Rate),” the fund said in a notice to members. fs

01: Ned Bell

chief investment officer Bell Asset Management

Melbourne boutique partners with Swiss bank Kanika Sood

The quote

We have no doubt this will enable Bell AM to forge long-term relationships with the very important and growing client base across Asia, Europe and the Middle East. We look forward to working with a like-minded.

U

nion Bancaire Privee will market Bell Asset Management’s global small and mid cap strategies to its clients in Europe, Asia and Middle East, in line with a traditional sub-advisory, fee share agreement.

In turn, Bell will help UBP with market intelligence on Aussie institutionals, as the Swiss bank sends down a distribution lead from its Geneva office to Australia to establish relationships for its existing funds. Bell will not receive any fees for this.

The relationship started when UBP cast its net for a global small/mid cap manager to add to its lineup.

“We are very pleased to be entering into this mutually beneficial strategic partnership with UBP. We have no doubt this will enable Bell AM to forge long-term relationships with the very important and growing client base across

Rainmaker Mandate Top 20

Asia, Europe and the Middle East. We look forward to working with a like-minded progressive partner like UBP to grow in the years to come,” Bell Asset Management chief investment officer Ned Bell01 said.

Bell Asset Management’s funds have been among top performers in its category.

About 90% of its funds under management at September end, when it partnered with Channel for retail and wholesale, was from institutional investors, about 40% of whom were overseas clients that it attracted through eVestment. Its institutional team is led by former NAB Asset Management global head of distribution Rob Sullivan.

With the UBP deal, Bell’s strategies will be offered to the Swiss bank’s private and institutional clients.

UBP is currently growing its presence in Asia Pacific, with offices in place Hong Kong, Shanghai, Taipei and Tokyo. fs

Note: Latest bonds and property investment mandate appointments

Appointed by

Asset consultant

Investment manager

Mandate type

Australian Catholic Superannuation and Retirement Fund

Frontier Advisors

IFM Investors Pty Ltd

Cash

Australian Catholic Superannuation and Retirement Fund

Frontier Advisors

PGIM, Inc.

International Fixed Interest Emerging Markets

28

Australian Catholic Superannuation and Retirement Fund

Frontier Advisors

Ashmore Investment Management Limited

Emerging Markets Fixed Interest

26

Australian Catholic Superannuation and Retirement Fund

Frontier Advisors

IFM Investors Pty Ltd

International Fixed Interest

13

AustralianSuper

Frontier Advisors; JANA Investment Advisers

IFM Investors Pty Ltd

Cash

Christian Super

JANA Investment Advisers

Other

Property

Construction & Building Unions Superannuation

Frontier Advisors

Self

Australian Fixed Interest

First State Superannuation Scheme

Willis Towers Watson

Dexus Funds Management Limited

Property

847

First State Superannuation Scheme

Willis Towers Watson

Oaktree Capital Management, LLC

International Fixed Interest

313

Health Employees Superannuation Trust Australia

Frontier Advisors

Other

Cash

Hostplus Superannuation Fund

JANA Investment Advisers

Kayne Anderson Capital Advisors, L.P.

Property

Hostplus Superannuation Fund

JANA Investment Advisers

JANA Implemented Consulting

Global Fixed Interest Diversified

38

Hostplus Superannuation Fund

JANA Investment Advisers

Bentham Asset Management Pty Limited

Global Fixed Interest

36

Hostplus Superannuation Fund

JANA Investment Advisers

QIC Limited

Property

20

Hostplus Superannuation Fund

JANA Investment Advisers

Macquarie Investment Management Australia Limited

Global Fixed Interest Diversified

Maritime Super

JANA Investment Advisers; Quentin Ayers

IFM Investors Pty Ltd

Australian Fixed Interest

69

Maritime Super

JANA Investment Advisers; Quentin Ayers

IFM Investors Pty Ltd

Cash

48

Maritime Super

JANA Investment Advisers; Quentin Ayers

Other

Fixed Interest

Sunsuper Superannuation Fund

Aksia, JANA, Mercer, StepStone

Ardea Investment Management Pty Limited

Cash

WA Local Government Superannuation Plan

Willis Towers Watson

Putnam Investments Australia Pty Limited

Fixed Interest

Amount ($m) 361

127 1 39

29 103

8

3 200 26 Source: Rainmaker Information

International

www.financialstandard.com.au 6 July 2020 | Volume 18 Number 13

Amazon launches climate VC fund

01: Jessica Ground

global head of ESG Capital Group

Ally Selby

Amazon said its newly launched Climate Pledge Fund would help the tech giant and other companies meet The Climate Pledge, a commitment to be net zero carbon by 2040.

Amazon launched The Climate Pledge alongside podcast producer Global Optimism last year, a commitment to meet the Paris Climate Agreement 10 years early.

Telecommunications company Verizon, hygiene and health product manufacturer Reckitt Benckiser (RB), and IT consulting company Infosys have recently joined the pledge.

“The Climate Pledge Fund will look to invest in the visionary entrepreneurs and innovators who are building products and services to help companies reduce their carbon impact and operate more sustainably,” Amazon founder and chief executive Jeff Bezos said.

“Companies from around the world of all sizes and stages will be considered, from pre-product startups to well-established enterprises.

“Each prospective investment will be judged on its potential to accelerate the path to zero carbon and help protect the planet for future generations.”

The venture capital fund will invest in multiple industries, including transportation and logistics, energy, storage and utilisation, manufacturing, circular economy, and food and agriculture.

Amazon believes it is on the path to run 100% on renewable energy by 2025, five years ahead of schedule.

It has announced 91 renewable energy products around the world, set to deliver more than 7.6 million MWh of renewable energy annually; enough to power 680,000 homes in the US. fs

FCA names chief executive Jamie Williamson

London Stock Exchange chief executive Nikhil Rathi will now lead the UK’s Financial Conduct Authority.

Rathi will replace Christopher Woolard who has acted in the role since Andrew Bailey stepped down in March.

In addition to the LSE, Rathi has also previously held the role of director, financial services group at HM Treasury.

Appointed for a five-year term, Rathi’s appointment follows a global search by HM Treasury.

“I warmly welcome Nikhil to the FCA. I look forward to working with him as he leads the FCA to deliver the next phase of its mission,” FCA chair Charles Randell said.

“Nikhil has been closely involved in guiding the FCA’s development through his roles on our Practitioner Panel and Markets Practitioner Panel, and brings both private sector management skills and experience of domestic and international regulatory policymaking.”

Rathi will be paid an annual salary of £455,000 and 12% pension, and must sell out of all shares in LSE Group before joining the regulator. fs

25

Capital Group appoints global ESG head Kanika Sood

T The quote

ESG is an area of great strategic importance for us and our clients, and we will continue to invest resources to it.

he US$1.7 trillion manager has hired Schroders’ global head of stewardship as its global head of ESG. Jessica Ground 01 will start in the new role in September and will be based in London.

At Capital Group, she will be responsible for incorporating the firm’s ESG approach into its investment process globally, working with investment, distribution, marketing and technology teams.

She will also represent Capital Group as an active participant in organisations promoting ESG issues across the business landscape.

“We’re delighted to appoint someone of Jessica’s calibre and experience to work with our teams to further integrate ESG at Capital Group.

ESG is an area of great strategic importance for us and our clients, and we will continue to invest resources to it,” Capital Group vice chair Rob Lovelace said.

Ground said she was thrilled to join a com-

pany with a distinct investment process, strong track record and longevity.

“Investors increasingly place ESG considerations as a top priority to inform their investment decisions.

I look forward to working alongside the experienced Capital Group team to further integrate ESG factors into the firm’s investment process and deliver services that align with clients’ growing expectations,” Ground said.

She has more than 20 years of experience, all with Schroders.

She initially joined the firm as a research analyst covering financials and utilities in 1997 and has worked as a fund manager on the UK equity team.

In her last role, she led a team of ESG analysts and corporate governance specialists integrating ESG across geographies and asset classes, as Schroders’ global head of stewardship.

She also currently sits on the Takeovers Panel in London as a part-time member. She was appointed in May of this year. fs

German fintech goes bust, $2.9bn in cash gone with it Eliza Bavin

German fintech Wirecard, has filed for insolvency after revealing over $2.9 billion in cash missing from its balance sheet didn’t exist.

The company’s former chief executive Markus Braun was arrested days after stepping down over allegations of inflating Wirecard’s sales volume with fake income.

German prosecutors said he is also being investigated on suspicion of making the company look more attractive to investors.

Braun has been released on €5 million bail, and has denied any wrongdoing.

The company’s auditor, Ernst & Young GMBH, claims it was given false statements related to trust accounts while completing its 2019 audit.

“There are clear indications that this was an elaborate and sophisticated fraud, involving multiple parties around the world in different institutions, with a deliberate aim of deception,” Ernst & Young said.

In an announcement to shareholders, Wirecard said there is a “prevailing likelihood” that the bank trust account balances, in the amount of €1.9 billion, do not exist.

“The company previously assumed that these trust accounts have been established for the

benefit of the company in connection with the so called Third Party Acquiring business and has reported them as an asset in its financial accounts,” Wirecard said.

“The foregoing also causes the company to question the previous assumptions regarding the reliability of the trustee relationships.”

The board said it assessed previous descriptions of the so called Third Party Acquiring business by the company are not correct.

“The company continues to examine, whether, in which manner and to what extent such business has actually been conducted for the benefit of the company,” it said.

“Wirecard continues to be in constructive discussions with its lending banks with regard to the continuation of credit lines and the further business relationship, including the continuation of the current drawing coming due at the end of June.

Wirecard said it is examining a broad range of possible further measures to ensure continuation of its business operations, including cost reductions as well as restructuring, disposal or termination of business units and products segments.

Wirecard is the first company on the German DAX 30 to ever file for bankruptcy. fs

26

Managed funds

www.financialstandard.com.au 6 July 2020 | Volume 18 Number 13 PERIOD ENDING – 30 APRIL 2020

Size 1 year 3 years 5 years

Size 1 year 3 years 5 years

Fund name

Fund name

Managed Funds

$m

% p.a. Rank

% p.a. Rank

% p.a. Rank

AUSTRALIAN EQUITIES

$m

% p.a. Rank

% p.a. Rank

% p.a. Rank

COMBINED PROPERTY

Australian Unity Platypus Aust Equities

119

3.4

2

12.0

1

10.3

2

Investa Commercial Property Fund

Bennelong Australian Equities Fund

457

0.7

6

9.2

2

9.2

6

Australian Unity Diversified Property Fund

Bennelong Concentrated Aust Equities

6,012

12.5

2

14.5

1

14.5

2

290

11.0

3

14.5

2

16.4

1 3

692

3.2

3

9.1

3

13.1

1

Lend Lease Aust Prime Property Commercial

5,188

9.6

4

13.0

3

13.6

1,033

10.2

1

8.7

4

9.2

5

Lend Lease Aust Prime Property Industrial

1,094

13.1

1

12.6

4

11.9

4

Greencape Broadcap Fund

562

0.7

5

7.7

5

8.2

7

DEXUS Property Fund

10,790

2.9

5

9.4

5

11.7

5

Greencape High Conviction Fund

503

0.0

8

7.2

6

7.2

10

AB Managed Volatility Equities Fund

823

0.6

7

7.2

7

8.2

8

Alphinity Sustainable Share Fund

101

-3.9

17

7.1

8

6.8

12

8

-2.7

13

6.1

9

10.1

3

46

-1.9

10

6.0

Hyperion Australian Growth Companies Fund

SGH Australia Plus Fund Chester High Conviction Fund Sector average

10

Resolution Capital Global Prop Securities Fund (Unh)

311

-0.5

8

7.5

6

7.2

10

15,836

0.9

6

7.4

7

9.9

6

Quay Global Real Estate Fund

160

-6.6

10

6.7

8

7.7

8

Cromwell Direct Property Fund

347

0.2

7

5.9

9

7.7

9

Australian Unity Property Income Fund

254

-4.6

9

5.7

10

8.9

7

ISPT Core Fund

363

-9.4

1.7

3.9

Sector average

1,234

-14.0

0.9

4.2

S&P ASX 200 Accum Index

-9.1

1.9

3.5

S&P ASX200 A-REIT Index

-20.3

-1.8

3.0

INTERNATIONAL EQUITIES

FIXED INTEREST

Zurich Concentrated Global Growth Loftus Peak Global Disruption Fund BetaShares Global Sustainability Leaders ETF T. Rowe Price Global Equity Fund Franklin Global Growth Fund Nikko AM Global Share Fund

24

16.4

4

20.6

1

Macquarie True Index Sovereign Bond Fund

333

11

6.3

1

4.8

7

89

16.9

2

20.2

2

Pendal Government Bond Fund

966

7.8

10

6.1

2

4.8

9

613

19.9

1

18.5

3

Principal Global Credit Opportunities Fund

143

11.9

2

6.1

3

5.7

1

3,260

11.3

11

17.3

4

13.9

3

Macquarie Enhanced Global Bond Fund

215

12.5

1

6.1

4

5.1

2

268

16.5

3

16.9

5

14.5

1

Macquarie Australian Fixed Interest Fund

205

7.0

14

5.9

5

5.0

3

Nikko AM Australian Bond Fund

87

8.9

21

15.9

6

12.6

6

Apostle Dundas Global Equity Fund

938

13.5

9

15.6

7

11.2

14

Zurich Unhedged Global Growth Share Fund

358

9.6

18

15.2

8

12.1

Evans and Partners International Fund

7.3

143

6.7

19

5.8

6

4.8

8

Pendal Fixed Interest Fund

1,041

8.6

8

5.8

7

4.4

30

9

Macquarie Enhanced Australian Fixed Interest

1,583

6.8

17

5.8

8

4.7

11

58

9.8

14

15.1

9

14.0

2

Vanguard Australian Gov Bond Index Fund

C WorldWide Global Equity Trust

355

14.7

7

15.1

10

12.5

7

QIC Australian Fixed Interest Fund

Sector average

644

3.0

9.6

8.9

Sector average

900

MSCI AC World ex AU Index

3.0

10.0

9.0

Bloomberg Ausbond Composite

Note: The performance figures for diversified funds are net of fees, performance figures for sector specific funds are adjusted for fees.

570

7.1

12

5.8

9

4.6

17

1,635

6.7

18

5.6

10

4.7

15

3.5

3.6

3.6

9.0

6.0

4.4

Source: Rainmaker Information

OPINION

APRA CPS 234: One year on uly 1 marked one year since APRA’s Prudential Standard CPS 234 came into effect.

JThe aim of the Information Security Pru-

01: Terry Burgess

vice president Asia Pacific and Japan Sailpoint

dential Standard is to ensure regulated entities shore up their resilience against information security incidents “by maintaining an information security capability commensurate with information security vulnerabilities and threats”.

However, as we’ve heard recently, the threat landscape is constantly evolving, in part accelerated by COVID-19, which begs the question: how effective has CPS 234 been?

Identity and data governance is now key.

Maintaining visibility over who has access to what applications (and whether that access is appropriate) and where sensitive data or files are being stored, is a constant and complex challenge for businesses. Adding to the complexity, under CPS 234, APRA-regulated entities must also ensure the integrity of information assets managed and accessed by third party business partners and contractors.

As such, one of the immediate concerns that arose was that if an organisation did not have a complete view of all identities (employees and third parties) and what applications were being accessed, it made it difficult to apply CPS 234 automatically.

Consequently, CPS 234 has seen a rise in

identity and data governance programs to gain visibility.

And boards must now be more knowledgeable of risks.

CPS 234 stipulated that boards are ultimately responsible for ensuring their organisations maintain information security. This has unarguably had a positive impact.

Enhanced security--particularly in times of disruption--has moved higher up the agenda for business leaders. Organisations are now taking a top-down approach to information security, ensuring stakeholders are well-versed in the risks. In addition, boards are now ensuring their senior management teams are fully supported (financially and resource-wise) to manage information security risks effectively.

Smart organisations are taking this a step further, viewing regulatory and compliance changes such as CPS 234 as an opportunity to improve their overall security posture and support business operations. These organisations are baking information security into digital transformation projects from day one, realising its critical role in success.

But it’s not all blue skies.

When CPS 234 was introduced last year, APRA-regulated entities were slow off the blocks.

By November 2019, the financial regulator had received 36 data breach notifications and around 70% of APRA-regulated entities reported gaps in their CPS 234 compliance.

One of the areas organisations struggled to come to terms with was third parties falling under CPS 234. Most organisations didn’t have a single identity and data governance program for internal users and data, let alone third parties such as brokers and agents. While a grey area to start, the application of the standard to information assets managed by a third party has resulted in a domino effect downstream, with many regulated entities requesting their supply chain to also comply with CPS 234.

CPS 234 also exposed the poor cyber hygiene of some institutions, including the use of legacy systems, poor patching regimes and a lack of visibility, which some organisations have been slow to remedy. The other unfortunate reality is many haven’t prioritised information security until a major event has required them to do so-whether a cyber incident, audit warning, penalty fine or COVID-19.

Ultimately, APRA CPS 234 has brought information security into focus for financial institutions; however there’s a way to go before it is truly valued and prioritised across organisations. fs

Super funds

www.financialstandard.com.au 6 July 2020 | Volume 18 Number 13 PERIOD ENDING – 30 APRIL 2020

Workplace Super Products

1 year % p.a. Rank

3 years

5 years

SS

% p.a. Rank % p.a. Rank Quality*

MYSUPER / DEFAULT INVESTMENT OPTIONS

27

* SelectingSuper [SS] quality assessment

1 year % p.a. Rank

3 years

5 years

SS

% p.a. Rank % p.a. Rank Quality*

PROPERTY INVESTMENT OPTIONS

Australian Ethical Super Employer - Balanced (accumulation)

0.7

1

5.8

1

5.2

22

AAA

Prime Super (Prime Division) - Property

1.6

1

12.9

1

17.6

1

AAA

UniSuper - Balanced

0.1

3

5.7

2

6.0

2

AAA

CareSuper - Direct Property

0.7

3

7.1

2

9.3

2

AAA

QSuper Accumulation - Lifetime Aspire 1

0.0

6

5.6

3

6.0

4

AAA

Telstra Super Corporate Plus - Property

1.4

2

7.0

3

9.2

3

AAA

State Super (NSW) SASS - Growth

0.5

2

5.5

4

5.7

7

-

Rest Super - Property

-0.8

6

6.6

4

8.1

4

AAA

AustralianSuper - Balanced

-1.0

15

5.5

5

6.2

1

AAA

TASPLAN - Property

0.6

4

6.3

5

AAA

0.1

4

5.2

6

5.2

23

AAA

Acumen - Property

-1.4

9

6.0

6

7.5

5

AAA

Media Super - Balanced

-0.7

12

5.2

7

5.8

6

AAA

Intrust Core Super - Property

-8.0

18

5.5

7

7.2

6

AAA

First State Super Employer - Growth

-0.4

8

5.2

8

5.4

16

AAA

Australian Catholic Super Employer - Property

-1.0

7

5.3

8

5.7

13

AAA

TASPLAN - OnTrack Build

-0.6

11

5.1

9

AAA

Catholic Super - Property

-3.3

11

4.9

9

6.9

7

AAA

Mercy Super - MySuper Balanced

-1.7

23

5.0

AAA

NGS Super - Property

-1.3

8

4.6

10

6.1

11

AAA

SelectingSuper MySuper/Default Option Index

-2.5

SelectingSuper Property Index

-11.3

VicSuper FutureSaver - Growth (MySuper)

10

3.9

5.6

9

4.6

AUSTRALIAN EQUITIES INVESTMENT OPTIONS

1.1

3.6

FIXED INTEREST INVESTMENT OPTIONS

Media Super - Australian Small Companies

-5.2

3

5.5

1

4.8

5

AAA

Australian Catholic Super Employer - Bonds

6.8

1

5.3

1

4.3

2

AAA

ESSSuper Beneficiary Account - Shares Only

-2.5

1

5.5

2

5.4

1

AAA

GESB West State Super - Mix Your Plan Fixed Interest

6.0

2

4.9

2

3.9

3

-

UniSuper - Australian Shares

-5.4

6

5.3

3

4.7

6

AAA

UniSuper - Australian Bond

5.8

3

4.7

3

3.7

4

AAA

FirstChoice Employer - Colonial First State Imputation

-5.3

5

4.5

4

3.6

35

AAA

First State Super Employer - Australian Fixed Interest

5.4

8

4.5

4

3.6

6

AAA

FirstChoice Employer - FirstChoice Australian Small Companies

-9.6

63

4.1

5

5.4

2

AAA

Mine Super - Bonds

5.0

12

4.3

5

3.4

7

AAA

Intrust Core Super - Australian Shares

-5.2

4

3.6

6

5.3

3

AAA

AMG Corporate Super - AMG Australian Fixed Interest

4.8

15

4.3

6

3.3

12

AAA

Media Super - Australian Shares

-6.8

10

3.2

7

4.1

19

AAA

Vision Super Saver - Diversified Bonds

5.7

5

4.1

7

3.4

8

AAA

StatewideSuper - Australian Shares

-7.7

34

3.2

8

5.2

4

AAA

GESB Super - Mix Your Plan Fixed Interest

5.1

10

4.0

8

3.1

16

AAA

AustralianSuper - Australian Shares

-7.2

22

3.2

9

4.6

8

AAA

Sunsuper Super Savings - Diversified Bonds Index

5.6

6

3.9

9

3.6

5

AAA

Prime Super (Prime Division) - Australian Shares

-6.7

9

3.1

10

4.5

10

AAA

AMP Flexible Super Emp - Super Easy Australian Fixed Interest

4.7

16

3.8

10

2.9

24

-

SelectingSuper Australian Equities Index

-8.6

1.8

3.2

SelectingSuper Australian Fixed Interest Index

INTERNATIONAL EQUITIES INVESTMENT OPTIONS Integra Super CD - OnePath Global Shares

2.1

3.2

3.7

AUSTRALIAN CASH INVESTMENT OPTIONS

6.9

1

10.7

1

10.3

1

-

AMG Corporate Super - Vanguard Cash Plus Fund

1.5

1

1.8

1

1.9

3

AAA

AustralianSuper - International Shares

6.8

2

10.5

2

9.2

2

First State Super Employer - International Equities

3.2

7

9.6

3

8.0

7

AAA

GESB West State Super - Cash

1.4

4

1.8

2

2.0

1

-

AAA

GESB West State Super - Mix Your Plan Cash

1.4

4

1.8

2

2.0

1

-

Media Super - Passive International Shares

3.6

3

9.6

4

8.0

6

AAA

Intrust Core Super - Cash

1.5

2

1.7

4

1.9

4

AAA

Virgin Money SED - Indexed Overseas Shares

3.2

6

9.3

5

AAA

NGS Super - Cash & Term Deposits

1.4

3

1.7

5

1.8

6

AAA

WA Super - Global Shares

1.1

21

9.0

6

8.5

3

AAA

AMG Corporate Super - AMG Cash

1.3

7

1.6

6

1.8

5

AAA

Mercer CS - Mercer Passive International Shares

2.6

10

8.6

7

7.8

8

AAA

Virgin Money SED - Cash Option

1.1

18

1.6

7

AAA

Sunsuper Super Savings - International Shares Index (unhedged)

1.4

18

8.5

8

8.1

5

AAA

State Super (NSW) SASS - Cash

1.0

25

1.6

8

1.7

9

-

AMP Flexible Super Emp - Super Easy International Share

2.6

11

8.5

9

7.6

9

-

Energy Super - Cash Enhanced

1.1

15

1.6

9

1.7

11

AAA

LUCRF Super - International Shares

3.4

4

8.4

10

6.5

29

AAA

Sunsuper Super Savings - Cash

1.2

10

1.5

10

1.7

8

AAA

SelectingSuper International Equities Index

-2.2

5.7

5.7

SelectingSuper Cash Index

Notes: Investment options are sorted by their three year net performance results. All performance figures are net of maximum fees.

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0.8

1.2

1.4 Source: SelectingSuper www.selectingsuper.com.au

28

Economics

www.financialstandard.com.au 6 July 2020 | Volume 18 Number 13

Victoria’s Cinderella moment Ben Ong

V

ictoria was primed and pumped for the second stage of looser coronavirus restrictions on June 22.

It would have seen 50 people (increased from 20) will be allowed inside cafes, restaurants, cinemas, theatres, auditoriums, stadiums, libraries, among others. So much so, that some gyms (those who offered 24/7 services) have stringed welcome banners to its first fitness patrons. Before that, a number of restaurants had posted signs informing customers that they’d be reopening.

Instead, it turned into a reversed Cinderella story.

Instead, the planned easing of restrictions for restaurants and pubs, and limits on household and public gathering were suspended (some even tightened) for another month – until midnight July 12.

The Andrews government was forced into this after 19 new cases were reported on the eve of the planned reopening. The 19 new infections followed reported infections of 25, 13, 18 and 21 over the previous four days.

For sure and for certain, the Victorian government – and other Australian state governments; as well as other world governments – have the welfare of their respective economies and constituents in mind.

Much more than central banks trying to strike a balance between unemployment and inflation – their dual mandate, the coronavirus present policymakers a chicken and egg dilemma.

Health before wealth or vice-versa.

Wealth before health. This is underscored by Australian Industry Group’s (AiG) chief executive Innes Wilcox statement that: “It is crucial that nationally our economy is able to open as far as possible to drive business and consumer confidence … We can’t afford to again shut down an already deeply struggling national

economy because of localised COVID-19 outbreaks.”

Health before wealth. Australian Medical Association (AMA) president Tony Bartone warned that: “Any continued uptick from here and the risk of a second wave is absolutely a live possibility. The virus is still prevalent in the community, it still wants to spread. It needs to be treated with absolute respect.”

“Whether it’s restriction fatigue, whether it’s something else but clearly people have started to disregard those messages and we’re seeing the results in the number of case reports.”

Both have valid points. And so has other states – particularly, Western Australia and South Australia – to keep their borders closed despite the Federal government’s coaxing.

The coronavirus doesn’t and won’t respect state borders. There may not have been any reported virus infections in the Australian Capital Territory, the Northern Territory, South Australia and Queensland, but the one reported case in Western Australia, five cases in New South Wales and more specifically, the 19 in Victoria could easily multiply if allowed to cross borders.

So much so, that the NSW government is now considering putting up restrictions at the NSW-VIC border (which has remained open since the pandemic began).

At the same time, NSW premier Gladys Berejiklian urged Sydneysiders not to travel to Melbourne “unless they have to” while indicating that Victorians not welcome north of the border.

One state giving all it’s got to control the virus (health before wealth), while its neighbouring state relaxes restrictions in the interest of business interests (wealth before health), provides a toxic recipe of fresh infections for both states. fs

Monthly Indicators

May-20

Apr-20

Mar-20

Feb-20

Jan-20

Consumption Retail Sales (%m/m)

16.29

-17.67

8.47

0.60

Retail Sales (%y/y)

5.27

-9.18

10.07

1.83

1.95

-35.29

-48.48

-17.85

-8.22

-12.52

Sales of New Motor Vehicles (%y/y)

-0.41

Employment Employed, Persons (Chg, 000’s, sa)

-227.71

-607.40

-3.14

19.30

11.58

Job Advertisements (%m/m, sa)

0.50

-53.35

-10.23

1.00

-2.79

Unemployment Rate (sa)

7.09

6.37

5.23

5.09

5.27

Housing & Construction Dwellings approved, Tot, (%m/m, sa)

-

2.68

-0.66

1.26

-0.46

Dwellings approved, Private Sector, (%m/m, sa)

-

-1.82

-2.63

20.26

-14.31

Housing Finance Commitments, Number (%m/m, sa) - Housing Finance Commitments, Value (%m/m, sa)

-

Survey Data Consumer Sentiment Index

88.10

75.64

91.94

95.52

93.38

AiG Manufacturing PMI Index

41.60

35.80

41.60

44.30

45.40

NAB Business Conditions Index

-23.76

-33.65

-21.99

0.16

-0.09

NAB Business Confidence Index

-19.97

-45.48

-65.19

-2.15

0.74

Trade Trade Balance (Mil. AUD)

-

8800.00

10446.00

4176.00

Exports (%y/y)

-

-6.48

7.44

-8.00

-2.03

Imports (%y/y)

-

-19.32

-8.56

-6.68

-2.25

Mar-20

Dec-19

Sep-19

Jun-19

Quarterly Indicators

5054.00

Mar-19

Balance of Payments Current Account Balance (Bil. AUD, sa)

8.40

1.72

7.26

4.87

-2.76

% of GDP

1.66

0.34

1.44

0.98

-0.56

Corporate Profits Company Gross Operating Profits (%q/q)

1.11

-3.47

-1.15

5.20

1.97

Employment Average Weekly Earnings (%y/y)

-

3.24

-

3.02

-

Wages Total All Industries (%q/q, sa)

0.53

0.53

0.53

0.54

0.54

Wages Total Private Industries (%q/q, sa)

0.38

0.45

0.92

0.38

0.39

Wages Total Public Industries (%q/q, sa)

0.45

0.45

0.83

0.46

0.46

Inflation CPI (%y/y) headline

2.19

1.84

1.67

1.59

1.33

CPI (%y/y) trimmed mean

1.80

1.60

1.60

1.60

1.50

CPI (%y/y) weighted median

1.70

1.30

1.30

1.30

1.40

Output

News bites

Australia PMI The relaxation of social restrictions and business lockdowns sent Australian private sector activity back into expansion territory. Preliminary estimates show the Commonwealth Bank Composite PMI rebounding to a reading of 52.6 points in June from the final estimates of 28.1 in May and 21.7 in April. This is due mainly to the sharp jump in the flash services PMI to 53.2 in June from 26.9 in May and 19.5 in April.

While the flash manufacturing PMI improved to a preliminary reading of 49.8 in June from May’s final reading of 44.0 (44.1 in April), it remains in contraction.

The report noted that optimism over the 12-month outlook rose to a nine month high over the survey period. However, this was before recent reports of the increased rate of coronavirus infection in Victoria that prompted the state government to suspend further easing of restrictions.

US retail sales US retail spending surged by 17.7% in the month of May following April’s sharp 14.7% fall. This is better than market expectations for an 8% gain and is the fastest rate of monthly increase or record as a number of stores started reopening and workers were allowed back at work. The increase in retail sales had also been supported by ultra-accommodative monetary and fiscal policies — cheaper borrowing costs and money printing from the Fed and trillions of dollars provided under the CARES Act – one time cheques and increased unemployment insurance. Year-on-year, retail sales growth has improved to a contraction of 6.1% in May following the 19.9% plunge in the previous month.

Australia employment Business closures and lockdowns due to COVID-19 sent Australia’s unemployment rate to its highest level since October 2001 – up to 7.1% in May from 6.4% in the previous month. It would have been worse had, according to the ABS: “The increase in the number of people who were not in the labour force between April and May (142,000) … (that is, if they had been actively looking for work and been available to work) then the number of unemployed people would have increased to around 1.1 million people (and an unemployment rate of around (8.1%).” fs

Real GDP Growth (%q/q, sa)

-0.31

0.52

0.55

0.61

0.45

Real GDP Growth (%y/y, sa)

1.39

2.16

1.80

1.56

1.73

Industrial Production (%q/q, sa)

-0.09

1.25

0.39

1.07

0.59

Survey Data Private New Capex, Total, Chain, Vol, (%q/q, sa)

Financial Indicators

-1.65

19-Jun

-2.58

-0.55

-1.43

-1.46

Mth ago 3 mths ago 1Yr Ago 3 Yrs ago

Interest rates RBA Cash Rate

0.25

0.25

0.75

1.50

1.50

Australian 10Y Government Bond Yield

0.86

0.98

1.48

1.34

2.41

Australian 10Y Corporate Bond Yield

1.81

2.02

2.27

2.20

3.10

Stockmarket All Ordinaries Index

6061.6

7.12%

26.04%

-9.91%

3.87%

S&P/ASX 300 Index

5911.0

6.93%

24.79%

-10.39%

2.84%

S&P/ASX 200 Index

5942.6

6.89%

24.25%

-10.61%

2.37%

S&P/ASX 100 Index

4903.0

6.94%

23.37%

-10.86%

1.79%

Small Ordinaries

2682.2

6.82%

37.19%

-6.64%

12.66%

Exchange rates A$ trade weighted index

58.80

A$/US$

0.6862 0.6569 0.5864 0.6869 0.7602

57.80

57.00

60.00

63.80

A$/Euro

0.6135 0.6000 0.5480 0.6125 0.6807

A$/Yen

73.40 70.90 64.54 74.46 84.59

Commodity Prices S&P GSCI - commodity index

327.64

296.49

269.53

408.49

361.38

Iron ore

103.04

90.65

89.97

106.20

54.70

Gold

1734.75 1737.95 1474.25 1344.05 1248.15

WTI oil

39.74

32.30

25.09

53.74

Source: Rainmaker /

44.24

Sector reviews

www.financialstandard.com.au 6 July 2020 | Volume 18 Number 13

Australian equities

Figure 1: Unemployment Rate

Figure 2: Employment & Job ads

7.4

6 PERCENT

CPD Program Instructions 60 ANNUAL CHANGE %

ANNUAL CHANGE %

40

4

6.9

20

2

6.4

0 0 -20

5.9 -2

5.4

Prepared by: Rainmaker Information Source: Thompson Reuters /

-4

4.9

Employment

-40

ANZ job ads (lagged 3 months) - RHS

-60 -80

-6

2016

2017

2018

2019

2020

2004

2006

2008

2010

2012

2014

2016

2018

2020

Coronavirus handing pink slips Ben Ong

W

ith most of us, Australians all, under home detention and businesses in lockdown, the rising rate of unemployment – from 5.2% in March to 6.4% in April to 7.1% in May – doesn’t surprise.

In fact, according to the Australian Bureau of Statistics (ABS): “Had the increase in the number of people who were not in the labour force between April and May (142,000) been a further increase in unemployment (that is, if they had been actively looking for work and been available to work) then the number of unemployed people would have increased to around 1.1 million people (and an unemployment rate of around 8.1%).

Looking at the cumulative change between March and May, had the increase in the number of people who were not in the labour force (623,600) been a further increase in unemployment, then the number of unemployed people would have in-

International equities

creased to around 1.55 million people (and an unemployment rate of around 11.3%).”

As at June 19, 807,400 Australians had been given pink slips - 286,500 full-time and 520,900 part-time.

It would have been much worse had it not been for the Morrison government’s JobKeeper and JobSeeker initiatives.

The Reserve Bank of Australia (RBA) forecast the unemployment rate to reach 10% in June before settling at 9.0% by end-2020. The latest OECD (June report) was kinder, predicting the country’s jobless rate to rise to 7.4% this year (under a single covid hit scenario) or 7.6% (under a double-hit).

The gradual relaxation of social interaction and loosening of lockdown restrictions should improve demand for labour going forward.

However, this is counter-balanced by the real and present danger posed by a second wave of infections.

Figure 1: US stock market indices 110

ANNUAL CHANGE %

0

90

1. What was Australia’s unemployment rate in May? a) 5.0% b) 5.2% c) 6.4% d) 7.1% 2. According to ABS estimates, what would have been Australia’s May unemployment rate had it not been for people leaving the labour force between April and May? a) 6.4% b) 7.1% c) 8.1% d) 11.3%

60

International equities

-5

Nasdaq

-10

CPD Questions 4–6

Overall

-15

DJIA

Ex-autos

-20

Russell 2000

-25

50 JAN-20

FEB-20

MAR-20

APR-20

MAY-20

JUN-20

JUL-20

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

Wall Street blames the Fed, thanks the Fed F

CPD Questions 1–3

100

S&P 500

inancial markets were quick to blame the Fed – Fed’s gloomy outlook for the US economy (declared at the conclusion of its 9-10 June FOMC meeting) – and the likelihood of a second wave in America on Wall Street’s dive on June 11.

On that day, US benchmark equity indices plunged: Dow (6.9%), S&P 500 (5. 9%), Nasdaq (5.3%), Russell 2000 (7.6%).

Don’t blame the Fed… Sure, the Fed has painted a dark picture of the US economy in 2020 – predicting GDP growth to contract by 6.5% this year – but which world government and central bank isn’t? But grim as the Fed’s projections may be, this is better than the World Bank’s current revised forecast for a 7.0% drop in US economic growth or the OECD’s prediction for a 7.3% decline (assuming no second wave).

Besides, Fed chair Jerome Powell and his

Australian equities

3. The RBA forecast the unemployment rate to peak at 10% in June. a) True b) False

Figure 2: US retail sales

70

Ben Ong

The Financial Standard CPD Program has been developed for professionals governed by the Corporations Act 2001 and hold an AFS Licence which provides an obligation to undertake continuous professional development (CPD). Test your knowledge with the following questions.

[See next page for instructions on how to submit your answers].

5

80

Prepared by: FSIU Sources: Factset Prepared by: Rainmaker Information Source:

One that’s underscored by the resurgence of coronavirus infections in Beijing and Iran recently, and one that’s brought closer to home by rising cases (mostly) in Victoria and New South Wales.

As at June 29, COVID-19 cases have grown rapidly - particularly in Victoria. Premier Daniel Andrews has reminded everyone the pandemic is “far from over”.

The good news is that both the RBA (it’s prepared to scale-up its government purchases and will do whatever is necessary to ensure bond markets remain functional) and the Federal government are on the ball (it’s set to increase the dole payment).

“We will not rest. We are working with some of the biggest economic challenges this country has ever faced and our government is working day and night to get the balance right, to get the right supports in place,” Prime Minister Scott Morrison said. fs

10

INDEX (JAN 2020 = 100)

29

merry men and women of the FOMC pledged to keep monetary policy accommodative “until it is confident that the economy has weathered recent events and is on track to achieve its maximum employment and price stability goals” and to “use its tools and act as appropriate to support the economy”. … blame the fall on Wall Street on the increased potential for a second wave of coronavirus infections, recently made more probable by reports that the coronavirus has resurfaced in Beijing and, with it, the re-imposition of lockdowns.

Wall Street resumed its upward trek a day after June 11’s big fall.

The latest US retail sales report – up 17.7% in May from April – underscores the power of money. Cheaper borrowing costs and money printing from the Fed and trillions of dollars provided under the CARES Act – one time cheques and increased unemployment insurance – and of course, the re-opening of commerce.

On June 15, the Fed announced the Secondary Market Corporate Credit Facility (SMCCF) – buying corporate bonds (up to US$250 billion) from eligible issuers.

In addition, Bloomberg reports that Trump is preparing funding worth around US$1 trillion for infrastructure projects and 5G wireless developments and rural broadband.

Better, the world is getting closer to a coronavirus cure.

As Factset notes: “BBC reported that UK experts said the low-dose of steroid treatment cut the risk of death by a third for patients on ventilators and by 1/5th of those on oxygen. The Recovery Trial was led by a team from Oxford University where ~2,000 hospital patients were given dexamethasone compared to more than 4,000 who did not receive dexamethasone. For those on ventilators, the death risk was cut to 28% from 40%.

For those on oxygen, the risk of death declined to 20% from 25%...” fs

4. What was/were the reason/s for Wall Street’s sharp fall on June 11? a) The US Federal Reserve’s gloomy outlook on the economy b) Concerns over a second wave c) Both a and b d) Neither a nor b 5. What factor/s supported the 17.7% surge in retail spending in May? a) Monetary policy b) Fiscal policy c) Reopening of the businesses d) All of the above 6. Dexamethasone has reportedly been proved to cure 100% of coronavirus infections. a) True b) False

30

Sector reviews

Fixed interest CPD Questions 7–9

7. What happened after the Brexit vote on June 2016? a) Sterling effective exchange rate dropped b) T he FTSE-100 index fell sharply c) UK GDP growth slowed d) All of the above 8. What was the UK’s annual GDP growth rate in the year to April? a) -10.4% b) -2.0% c) +2.0% d) -10.4% 9. The BOE expects the UK unemployment rate to rise to 10.4% in 2020. a) True b) False Alternatives CPD Questions 10–12

10. Which Chinese city has been reported to be experiencing a second wave of covid infections? a) Beijing b) Shanghai c) Shenzen d) Wuhan

www.financialstandard.com.au 6 July 2020 | Volume 18 Number 13

Fixed interest

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COVID-19 nightmare makes Brexit a dream Ben Ong

J

une 23 marks the fourth year anniversary of Brexit – the day a referendum was held (and Britons voted in favour of) the United Kingdom leaving the European Union (EU).

The uncertainty (horror) of it all sent Sterling’s effective exchange rate diving from its 2008 high of 94.7 to 73.8 – its lowest since 2009. At the same time, the FTSE-100 index cratered from a high of 7104.0 points preBrexit to 5534.0 points after then UK Prime Minister David Cameron announced the Brexit referendum in February 2015.

It had been a rough ride heading into Brexit. As well as claiming the scalps of two Prime Ministers – David Cameron and Teresa May – the uncertainty borne of Brexit slowed the UK’s economic growth rate from an average annual growth rate of 2.4% in 2015 to a mere 0.5% by 2019.

Then the coronavirus our way came, turn-

Alternatives

ing Brexit into dream instead of the nightmare it previously once was and brought closer to home when now sitting Prime Minister Boris Johnson, himself, became infected with the virus.

The Bank of England went to work. After keeping the Bank Rate steady at 0.75% since 2018, it chopped 50 basis points to it in an emergency meeting in early March and by another 40 basis points to 0.1% later that month – as well as increasing its government and corporate bond purchases by £200 billion to £645 billion.

Similarly, the Johnson government worked from home – implementing support measures amounting to around 5% of GDP. Still, latest data show that the UK economy is heading for an even deeper dive.

UK GDP growth plunged by 10.4% in the three months to April following a 2.0% contraction in the previous month.

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Worse, despite the government’s recent pandemic initiatives (which limited the deterioration in the unemployment rate – 3.9% in April from a half-century low of 3.8% in November 2019), those claiming unemployment insurance more than doubled from 1.2 million in January 2020 to 2.8 million in May. Those that were fortunate enough to retain their jobs saw their pay packets eroded. The annual growth in average weekly earnings (excluding bonuses) slowed from an 11-year high of 4.0% in July 2020 to 1.7% by April this year.

Forecasts of rising unemployment – between 8% this year (BOE) to 9.1% (single coronavirus hit) and 10.4% (double hit) from the OECD – suggest further slowdown wages growth and, by extension, domestic consumption.

Not surprisingly, the BOE announced another £100 billion increase in its bond purchases at its June monetary policy council meeting. fs

Figure 2: Caixin China PMI

Figure 1: Retail sales, FAI & IP

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COVID-19 takes a second crack at China J

All answers can be submitted to our website.

3 AWE - excluding bonuses

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Ben Ong

Submit

2 RATE %

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12.0

11. Which activity indicator/s improved in May from April? a) Industrial production b) Fixed Asset Investment c) Retail sales d) All of the above 12. The Caixin China composite PMI shows a V-shaped rebound in activity. a) True b) False

Figure 2: Unemployment rate & wages

15.0

ust when we thought that life was slowly returning to normal, reports out of Beijing turned into reality what many feared – a second wave.

While all our uncles and their dogs blamed China for the “bother” the world finds itself in, its policy responses – lockdowns, social isolation, quarantine, aggressive fiscal and monetary policies — also became the roadmap other nations on the planet followed.

China quarantined and locked down activity of about 60 million inhabitants of Wuhan in Hubei province in early February.

This is at the same time that the Chinese government and the People’s Bank of China (PBOC) were rolling out stimulus measures (and continue to do so).

China’s draconian measures enabled the Politburo to contain the spread of coronavirus infections and end Wuhan’s lockdown in

less than two months. This, in turn, supported by central command and the People’s Bank of China’s (PBOC) policy largesseenabled a rebound in domestic economic activity.

So much so, that had it not been for the “second wave”, latest releases out of China would have provided further confirmation of its success against COVID-19.

Activity indicators continued to improve: industrial production growth accelerated to 4.4% in the year to May from 3.9% in April and minus 1.1% in March; the year-on-year contraction in fixed asset investment has eased to minus 6.3% by May from as steep as minus 24.5% in February.

Further, annual growth in retail sales has also improved to minus 2.8% in May from minus 7.5% in April and minus 15.8% in March.

These improvements are underscored by the V-shaped rebound in the Caixin China composite PMI – up to a reading of 54.5 in May

from a record low of 27.5 in February – as both the manufacturing (up to 50.8 from 40.3 in February) and services sectors (up to 55.0 from 26.5 in Feb) rebounded.

However, recent news that Beijing has recorded more than 300new cases of coronavirus infections brings home the point that it’s not over until a vaccine is found or you, I and Irene develop immunity.

The second wave has prompted the government to reimposed tough restriction measures.

Here goes social isolation, lockdowns of schools, sports venues and businesses again, dashing China’s early return to growth.

But just as China paved the way for easing lockdowns and social interaction restrictions, its relapse into the second wave also provides a cautionary lesson to countries now engaged in relaxing the same.

The cumulative number of confirmed cases in mainland China was 83,500 as at June 28. fs

Sector reviews

www.financialstandard.com.au 6 July 2020 | Volume 18 Number 13

31

Property

Property

CPD Questions 13–15

Prepared by: Rainmaker Information Source: REIA, PIPA & PICA

he latest edition of the Real Estate Institute of T Australia’s Real Estate Market Facts shows house prices increased in the March quarter.

According to REIA, the weighted average median price for houses for Australia’s eight capital cities increased to $786,923. Sydney, Melbourne, Hobart and Darwin all saw increases.

Meanwhile, the weighted average median price for other dwellings increased to $602,293 over the quarter. Here, prices increased in Sydney, Melbourne and Adelaide but decreased in Brisbane, Perth, Canberra, Hobart and Darwin.

REIA president Adrian Kelly said this marks the largest March quarter increase since 2017 which was the beginning of the 2017/18 housing boom.

“Over the quarter, the median rent for threebedroom houses increased in all capital cities except for Brisbane and Perth, which remained steady and Darwin, which decreased,” Kelly said.

“The median rent for two-bedroom other dwellings increased in all capital cities except Darwin, which had a 2.4% decrease.”

At the same time, the weighted average vacancy rate for the eight capital cities decreased

Prices rise pre-COVID-19, sentiment positive Jamie Williamson

to 2.5%, which shows a tightening in the market compared to last quarter, REIA said.

New lending to household data released by the Australian Bureau of Statistics also shows lending to households for investment in dwellings decreased 16.3% over the quarter and decreased 13.1% for owner occupiers.

“The decrease is usual for the March quarter and has been occurring for the past 10 years,” Kelly said.

However, these figures do not reflect the impact COVID-19 has had and is further expected to have on the market. Still, consumer sentiment remains optimistic, with more than 70% of property investors believing now is a good time to buy.

New research conducted in May by the Property Investment Professionals of Australia (PIPA) and the Property Investors Council of Australia (PICA) shows 72% of investors are confident in the property market’s short-term prospects, having dropped just 10% since September 2019.

It also revealed that COVID-19 had not changed the investment plans of 80% of respondents over the next six to 12 months.

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PIPA chair Peter Koulizos said the results confirm investors remain positive on the property market despite the economic fallout of the coronavirus.

“Nearly 60% of respondents indicated that the pandemic had not made them change their investment plans over the next six months, with a further 18% saying the crisis had actually made it more likely they would purchase a property over that timeframe,” Koulizos said.

“The survey results also showed about 30% of investors were more likely to buy a property in the next six to 12 months because of the pandemic.”

Interestingly, 36% of those surveyed had lost income during the COVID-19 crisis; however the majority (91%) had not applied to defer their mortgage repayments with their lender.

Only a small percentage (5%) of respondents indicated the pandemic had forced them to consider selling their property in the next six to 12 months, PICA chair Ben Kingsley said.

“What’s more telling is that more than 30% said they were less likely to sell over the same period because of the pandemic, with 63% indicating no change at all to their plans,” Kingsley said. fs

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14. REIA’s March quarter figures indicate which of the following? a) The average median price for dwellings fell in Sydney, Melbourne, Adelaide b) The weighted average median house price increased in the eight capital cities c) The average median house price decreased in the eight capital cities d) The average vacancy rate for the eight capital cities increased 15. REIA’s house price data marks the largest March quarter increase since 2017. a) True b) False

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13. PIPA/PICA’s May survey indicated which of the following? a) The economic fallout of COVID-19 is harming investor confidence b) 50% of respondents feel forced to consider selling in the next 6 to 12 months c) Over 70% of investors are confident in the property market’s short-term prospects d) COVID-19 has changed the investment plans of 80% of respondents

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Profile

www.financialstandard.com.au 6 July 2020 | Volume 18 Number 13

TAKING CENTRE COURT For JANA chief operating officer Ashleigh Crittle COVID-19 has thrown new challenges her way while also revealing what is most important.

Elizabeth McArthur writes.

chief operating officer Ashleigh Crittle JKingANA started her career as a lawyer at what is now and Wood Mallesons, one of Australia’s biggest law firms.

She found herself working in the managed funds area and the corporate team at the firm, sparking her passion for investing.

After several years, she felt a pull to move into a more commercial role.

Joining MLC, Crittle found herself yearning to understand what really makes a company successful.

In her 20s, as she started to think about moving away from law, she found her sporting life mirroring her career. Crittle is a keen sportswoman and has played netball all her life.

“I always played defence, I was always goal defence,” Crittle says.

“And at about the same time in my 20s when I pivoted away from law in my career I started playing centre court, I started playing centre and wing attack.”

It was around this time, Crittle was introduced to JANA through her work as a lawyer; the consultancy was actually one of her clients.

“I was so impressed by the people. They were so sharp but they also had a sense of fun,” she says.

Former Sunsuper chief executive and deputy chair of JANA Scott Hartley and former JANA chair Ken Marshman would become influential mentors to Crittle. She cites their influence and encouragement as a big part of why she made the leap from law to operations and why she came to JANA. Once she’d made the move, Crittle’s career was destined to be anything but dull.

Joining in 2007, Crittle was appointed special counsel and head of operations. She held the role for seven years before jumping back to MLC for a brief stint overseeing investment governance.

Then, in 2017, JANA carried out a management buyout separating from the National Australia Bank Group and Crittle returned to take on the role of chief operating officer.

“It was my job to set up JANA’s operations so that we could run it ourselves and it would no longer be run by the bank,” Crittle says.

“It was a really exciting time but it was at pace.

We had a deadline when the transaction had to be completed. So we knew we had to be able to pay people, do our accounts, have a risk and compliance framework established and so on.”

Crittle looks back on this period fondly, saying the high pressure environment saw JANA’s people and culture shine.

“Everyone was really energised. Everyone was excited to create a company they were a part owner of,” she says.

“My key take away from that was that when you work with a group of like-minded people what you can achieve is amazing. My most abiding memories of that time are the team work, the ways people stepped up to get everything done.”

Now, with the COVID-19 pandemic shifting the

way we work and shaking up the investment and superannuation worlds – Crittle is finding herself in the middle of a high pressure situation once again.

When it became apparent that Australia would not dodge COVID-19 without changing our way of living and working, Crittle was faced with a series of challenges.

Fortunately, JANA had invested heavily in its technology infrastructure so the technical aspect of moving to a work from home protocol was less challenging for the business than it was for some others.

“We made a series of progressive decisions about pausing international travel, pausing domestic travel and encouraging people in vulnerable health positions to work from home. Then we finally made the decision to ask everyone to work from home,” Crittle explains.

“This environment has affected people differently. The working from home environment raises different stresses depending on the situation people are in.”

JANA also rolled out a series of extra training sessions for managers to help them with the unique circumstances themselves and their teams were facing.

Crittle’s role was always about looking out for the welfare of staff, but COVID-19 saw that heightened and JANA – like big companies all around the world – had to start thinking about the wellbeing of its people in a more holistic way.

She says COVID-19 could have a silver lining for workplace cultures, the experience of adapting to working from home and to new ways of doing things might make organisations respect the people who work for them on a new level.

“Suddenly all firms are seeing the whole of people. In video meetings in the home environment you’re seeing they’ve got the children walking in, or the dog or the aged parent,” Crittle says.

“And I think that’s been a nice aspect of the environment we find ourselves in. People are bringing their whole selves to work.”

JANA, like many organisations, is starting to think about what aspects of the new COVIDfriendly way of working are actually enhancements that the organisation should take forward.

For example, Crittle says some aspects of investment research could be streamlined by technology.

JANA has a huge global travel operation, with someone overseas every week normally.

But, with international travel paused, investment research had to be done differently – face to face meetings with investment managers and financial institutions overseas could no longer continue.

The JANA team adapted to this by blocking out two weeks on their calendar as they would if they were on a routine research trip – but, instead they were carrying out meetings through video calls.

“What we’ve seen is it’s far more efficient because you don’t have the time delays from traveling. But secondly, they can actually include more of their colleagues,” Crittle says.

The office though, Crittle says, is

We have two masters: our clients and our people. Managing the balance between them is the key to success.

Ashleigh Crittle

far from dead, saying she believes JANA will always have a physical space.

“For people who live alone, the social side of coming in to an office is really important,” Crittle says.

“Others might have flatmates or might not have a nice place to sit and work.”

However, an increase in flexibility can’t be a bad thing. JANA and Crittle herself have been progressive on workplace flexibility. Crittle actually works part-time, and credits chief executive Jim Lamborn with being fully supportive of that.

In fact, one quarter of JANA staff work parttime and when the company conducts engagement surveys to assess how happy and engaged employees are at work it has been found that the part time workers are among the most engaged.

JANA’s latest enterprise agreement has doubled the paid parental leave for secondary carers. Crittle cautions that this agreement isn’t just about men; while women are more likely to be primary carers there are certainly plenty of cases where they are the secondary carer.

It all goes back to a focus on fostering a workplace culture that is good for people and good for business. Through her career, Crittle has observed one key element that she thinks makes or breaks workplace culture: purpose.

A clear and common goal that can unite a team is the key, Crittle says.

“A big part of why JANA has been successful is because it has always been very focussed on its purpose and that is simply to deliver superior investment outcomes for clients,” she says.

“We have two masters: our clients and our people.

Managing the balance between them is the key to success.” fs

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