Financial Standard Volume 19 Number 04

International Women’s Day Special Edition

8 March 2021 | Volume 19 Number 04

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Q&A

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Opinion: Judith Beck

International Women’s Day:

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Dial tones: Bitcoin is here to stay

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Global macros

Mandy Mannix MLC AM

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International Women’s Day Special Edition

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Q&A

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Opinion: Judith Beck

BFID carves out retail fund loopholes Karren Vergara

oopholes in the new best financial interests L duties (BFID) regulation that will enable retail superannuation funds to continue to benefit from their parent company’s big advertising budget and fork out dividends from members’ savings are raising concerns from the not-forprofit sector.

The longstanding issue of whether retail super funds should be run at the behest of their parent company once again flares up as the passage of the Your Future, Your Super reforms inch one step closer to becoming law.

From 1 July 2021, the insertion of ‘financial’ in BFID will force trustees to prove they are in fact acting in the best financial interests of members.

Following conversations with Treasury, the Australian Council of Trade Unions assistant security Scott Connelly says department officials have confirmed that dividend payments are not included in the best financial interests test and are deemed to pass by default.

“To say that profit can be derived from workers’ retirement savings mandated by the state is not consistent with the position we take in what super should be,” he says.

“There is also the capacity for profit-making vehicles to leverage their corporate structures to the advantage of growing their market share in terms of advertising reach. Under this Bill, the capacity for big banks and institutions to own wealth management companies and to effectively corner the market is legitimised.

Two separate sittings of the Standing Committee on Economics into super hearing last year revealed the marketing budgets of numerous super funds.

OnePath spent $40 million over five years from 2015 on marketing its products. BT Su-

per spent $870,000 over January and June 2020.

Suncorp Super’s $80,000 budget on digital advertising over six months had no direct sponsorship outlay. The Suncorp Group, however, is a well-known sponsor of Suncorp Stadium.

AustralianSuper copped flak for not divulging details of its $11 million marketing expense and its effectiveness in acquiring new members, claiming other super funds might learn from it.

The new BFID law will make it harder to get away with this excuse as trustees will be subject to more stringent disclosure requirements.

Incidentally, how will the role of marketing departments change?

Hall & Wilcox partner Adrian Verdnik 01 believes they will have a greater role in the new environment, providing the justification, documentation and broader analysis around marketing spend.

“Super funds are no different to other organisations in that they want to see return on their investment from their marketing spend and they will need to use those tools to see if they are doing so,” he says.

Industry Super Australia confirmed that its approach to marketing and advertising will not change.

As the onus will be on trustees to prove they acted in the best financial interest of members, Verdnik predicts the difficulty in demonstrating this for every decision made.

“Trustees will face complex procedural issues, and record-keeping obligations will apply to all decisions. This will increase the administrative and compliance obligations of trustees,” he says.

Aware Super said it would be premature to comment on the potential impact of the BFID on marketing and other activities but anticipates the administrative challenges it poses. fs

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Aussie dividends slump 40% Karren Vergara

Adrian Verdnik

partner Hall & Wilcox

Three-in-five Australian publicly listed companies have either cut or withheld their dividends during 2020 as a result of COVID-19, a global dividend index shows.

Between April and December 2020, Aussie firms either cut or cancelled dividend payments nearly 40%, according to Janus Henderson Investors.

In the Asia Pacific, payouts fell 11.9%, which is roughly in line with the global average, and the lowest since mid-2016.

Australia was restricted in its dividend payouts

by APRA as a result of the pandemic, capping dividends at 50% of profits. From 1 January 2021, APRA lifted the restrictions.

Continued on page 4

Advice, super reforms passed Annabelle Dickson

Financial advisers will now need prior written consent each year from clients before deducting fees, while funds from Eligible Rollover Funds must now be reunited with members within 28 days.

Two key pieces of legislation were passed yesterday: the Financial Sector Reform (Hayne Royal Commission Response No. 2) Bill 2020 and passed the Treasury Laws Amendment (Reuniting More Superannuation) Act 2021.

The passage of Financial Sector Reform (Hayne Royal Commission Response No. 2) Bill 2020 will require advisers to send clients an annual summary of the fees and services that are to be billed that year.

Continued on page 4

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News

www.financialstandard.com.au 8 March 2021 | Volume 19 Number 04

Yarra Capital acquires Nikko AM Australian business

Editorial

Eliza Bavin

Jamie Williamson

Y

Editor

Having bought my first home in 2019, I’m now looking to refinance. Like many, when it comes to these sorts of life admin tasks my brain threatens to ooze out my ears.

And I hate to say it, but it is in large part a result of my past experiences as a consumer of financial services, and a female consumer at that.

In buying a home, a life event that should be exciting and empowering, I found nothing but anxiety and frustration.

In our first meeting, the mortgage broker directed every single question to my partner.

Then, when subsequent emails left me with more questions than answers, the broker suddenly had no time for a phone call - unless it was with my partner. At one stage, when I requested more information, I never received it. After requesting it twice more, I was told to ask my partner as they’d sent it to him.

All this, despite me being the one who had engaged the broker in the first place.

I was left isolated and disheartened, like all enthusiasm had been sucked out of me. When we finally got the call to say it was settled, after months of back and forth, I broke down in tears in the middle of our local Kmart.

And it made me wonder: if this is how a female client is treated, what kind of treatment do the women operating in this environment daily endure?

In celebrating International Women’s Day, we asked several women in the industry what their earliest memory of being treated differently to their male counterparts is. Responses included “I was always the one they asked to get the coffees” and “The older, all-male board wouldn’t take me seriously without a chaperone”.

Sadly, several of the more negative responses came from relatively young women; they were only stretching their minds back a decade or so.

While I’ve no doubt the industry has come a long way in its treatment of women, we only need to look back to last year with the likes of AMP and how it was handled to see that there’s still a way to go.

Too often the conversations around treatment of women or equality in the industry place the onus on women to speak up, put their hands up for opportunities, do more to further themselves.

But that’s treating the symptoms of the ailment and not the ailment itself.

As much as the industry may not like to admit, it still has a problem with women. Maybe not every woman has experienced it, which is great but it doesn’t mean it’s not there.

More can be done and more should be done.

I challenge anyone reading this to consider their most recent interactions with female colleagues and clients, and to compare them with those they have with men. The differences may be subtle, but they’ll be there.

And that’s a challenge for any women reading too – my mortgage broker was a woman. fs

The quote

This partnership will help us expand the global reach of our investment strategies, in particular in Japan where we have achieved significant growth in recent years.

arra Capital and Nikko Asset Management announced that they have entered into a binding agreement through which Yarra will acquire Nikko AM’s Australian business and bring back the Tyndall name.

Under the terms of the agreement, Yarra will assume ownership of Nikko AM’s Australian subsidiary, Nikko AM Limited, and its associated entities.

The combination will create one of Australia’s largest independently owned Australian equities and fixed income fund managers.

The transaction, which remains subject to certain regulatory approvals, is expected to close in April 2021.

At completion, Nikko AM’s Australian equities business will be rebranded as Tyndall, returning the business to its original foundations.

Established in the early 1990’s, Tyndall is a well-recognised name in the Australian equities landscape. In 2013, it became part of the Nikko AM group and was rebranded.

The Tyndall franchise will be led by Nikko AM head of Australian equities Brad Potter and will remain separate to Yarra’s Australian equities business.

Yarra said there will be no crossover in investment management activity and no change to its value investment philosophy, process or team.

Yarra’s managing director and head of Australian equities Dion Hershan will become executive chair and head of equities (Yarra).

A search for a new managing director to lead the combined business has commenced, with an appointment expected to be confirmed in the coming months. Until then, Garvin Louie

will serve as interim managing director. Louie is Yarra’s general counsel and currently leads the firm’s business operations function.

Nikko AM will become a 20% shareholder in the enlarged group and will appoint one director to its board, while Yarra non-executive director Michael Gordon will join Tyndall’s board as chair.

Hershan said the combination of the two franchises will create one of Australia’s largest independent fund managers, with approximately $20 billion of assets under management.

“The transaction will enable us to continue strengthening our partnerships with clients and will provide the additional scale to support greater investment in talent, technology and operational excellence,” Hershan said.

“Yarra was attracted to the quality of the people within Nikko AM’s Australian business and we are delighted to welcome them into the Yarra team. We are also extremely pleased to bring Nikko AM on board as a strategic investor alongside TA Associates.

“This partnership will help us expand the global reach of our investment strategies, in particular in Japan where we have achieved significant growth in recent years.”

Nikko AM president and co-chief executive Hideo Abe said the partnership takes Nikko’s commitment in Australia to the next stage.

“We are confident that our investment in Yarra will be the catalyst to enhance the capabilities that Australian investors are looking for, while sales, distribution and back and middle office functions will complement each other and thus continue to provide quality service to our clients,” Abe said. fs

ASIC takes action against Rest Jamie Williamson

The corporate regulator has commenced civil proceedings against the industry superannuation fund for misleading and deceiving members in relation to switching super funds.

ASIC has taken Federal Court action against Rest for false or misleading representations made about members’ ability to transfer their superannuation out of the fund.

The regulator alleges that between at least 2 March 2015 and 2 May 2018, Rest made representations orally, in writing, in publications and standard forms provided to members that discouraged, delayed or prevented members from transferring some or all of their retirement savings to other super funds.

Super funds are obligated to process rollovers within three days under legislation introduced in 2013.

ASIC claims Rest members were denied their lawful rights to super portability and choice of fund, which in turn caused financial loss. It also meant Rest retained greater funds under management than it otherwise would have. ASIC alleges Rest retained about $14.8 million from 1143 members whose rollover requests were refused or only allowed in part.

The fund also significantly increased its FUM from those and other members whose employers continued to make contributions on their behalf, and members who transferred from other super funds into their Rest account after being told they couldn’t leave Rest, ASIC said.

“The impact on some individuals was substantial, including emotional distress and confusion,” ASIC said.

ASIC alleges the fund made representations that members

who were considering transferring their super were required to keep a minimum balance of $5000 with Rest if they remained employed by the employer making contributions to Rest on their behalf. According to Federal Court documents, this representation was made in writing in the Rest Members Guide used between October 2014 and February 2017.

It also alleges Rest made representations that members needed a declaration from their employer - if the employer was willing to contribute to another fund - stating either the date they’d stop contributing or confirming the member’s ‘choice of fund rights’. This representation was apparently made in writing on no less than 31,882 times to Determination Members.

ASIC also alleges the fund led members to believe that if they were no longer employed by their Rest employer that they must provide a separation certificate or confirmation of terminated employment from the employer before they could transfer their full balance out.

In a statement the super fund said it is disappointed with ASIC’s decision to launch legal action over a matter that was self-reported by the fund and for which members are being remediated.

The fund said the proceedings relate to an internal business process that was in place until May 2018 that required some members to provide an employment termination date or separation certificate when attempting to transfer funds.

“As a profit-to-member fund, Rest has the best financial interests of members at our core,” the fund said.

The first case management hearing is yet to be scheduled. fs

News

www.financialstandard.com.au 8 March 2021 | Volume 19 Number 04

Iress to deliver DDO solution

01: Deanne Stewart

chief executive Aware Super

Annabelle Dickson

The financial services software company has announced its plans to launch a technological solution to meet the Design and Distribution Obligations (DDO), commencing 5 October 2021.

ASIC’s RG 274 Product design and distribution obligations aims to help consumers obtain appropriate financial products by requiring issuers and distributors to have a “consumer-centric approach” to the design and distribution of products.

Product issuers must design financial products in a targeted manner and financial products must be designed according to the objectives, financial situation and needs of the consumers.

Iress chief commercial officer Michael Blomfield said the impact of the legislation is broad and there is no solution for the distribution, storage and management of target market determinations (TMD).

“We believe an industry-wide technologybased solution is required to materially reduce the complexity and cost of building and managing DDO obligations for the industry,” Blomfield said.

Iress’ DDO solution has three key features: TMD storage, a messaging solution to facilitate distributor and issuer contact and information for licensees and advisers by providing TMDs to them and their clients.

“The breadth and interconnectedness of this regulation requires almost every part of the industry to find a cost-effective and scalable way to forge connections in what is a relatively short space of time,” he said.

Iress will deliver its solution prior to the commencement of DDO. “Iress has significant experience in the collection and distribution of managed fund data.

We’ve also previously helped clients meet similar obligations in the United Kingdom and Europe through the MiFID II legislation,” Blomfield said. fs

Crypto chosen over bonds, metals Digital asset exchange BTC Markets latest survey of over 2000 investors revealed 12.6% of respondents have investments in cryptocurrency followed by precious metals (12.1%), fixed income (9.9%) and annuities (7.7%).

BTC Markets chief executive Caroline Bowler said the interest in investors aged over 60 years old has doubled and accounts for around 10% of its client base.

“Australian investors also followed international trends. We noted a five-fold increase in SMSF clients in 2020 and growing interest from corporate accounts,” Bowler said.

Over 83% of investors hold Bitcoin, followed by Ethereum (42.6%), Litecoin (18%) and one in five hold other cryptocurrencies that were not listed.

Of Bitcoin investors, a quarter hold it for three to six months while 25.8% hold the asset for one to three years and 23% hold it for more than three years.

“High-net-worth investors and family offices are making large-scale investments of over 1000 Bitcoin and holding it in their individual wallets,” Bowler said.

This has led to 77% of available Bitcoin being inactive on exchanges and drives the price further as demand increases. fs

3

Aware Super signs MoU for another merger Jamie Williamson

A

The quote

We have chosen to take a proactive approach by considering how we can attain the benefits that size and scale bring.

ware Super has signed a Memorandum of Understanding with the Victorian Independent Schools Superannuation Fund (VISSF), looking into whether a merger of the two funds is in the best interest of members.

VISSF chair Peter Sharples said increasing regulatory reform and rising costs of compliance is having an impact, with the fund recognising the benefits scale could provide to members.

“With this in mind, VISSF is committed to continually looking for ways to achieve even better outcomes for our members. So, we have chosen to take a proactive approach by considering how we can attain the benefits that size and scale bring, with the right merger partner,” he said.

“Aware Super is a growing national superannuation fund that already has a strong presence in Victoria. They understand the education industry and are committed to delivering our existing services, while looking to enhance advice and local services to our members.”

If approved and completed, VISSF’s 7000 members and about $855 million in funds under management would combine with Aware’s existing 1.1 million members, seeing the latter inch closer to a $120 billion fund.

According to Rainmaker analysis, VISSF which receives about $40 million in contributions each year - has grown by about 5% per annum over the last five years. In 2020, it grew

by 10%. Its average member balance sits at a healthy $122,000.

“VISSF and Aware Super have the important fundamentals of a successful merger, with extensive histories in superannuation, strong values and cultural alignment, as well as a similar member demographic,” the funds said.

VISSF is the default superannuation fund for employees of independent schools in Victoria and 75% of its members are female. Similarly, more than two-thirds of Aware’s members are women.

Aware Super chief executive Deanne Stewart 01 said she is delighted with the possibility of a merger.

“We see such a strong values and cultural alignment between our two funds - elements that are critical to any successful merger,” she said.

“VISSF was founded by a group of strong, passionate female teachers who wanted to ensure they had the same opportunity as their male counterparts to achieve a comfortable retirement.

This ambition is as relevant now as it was more than 60 years ago when VISSF was formed.”

The due diligence process is underway and expected to be completed in the coming weeks, the funds said.

This is just the latest in a long line of mergers for Aware Super. In December 2020 it finalised a merger with WA Super, having also completed its merger with VicSuper just six months previous. fs

Vanguard finds dirty assets in ESG fund Kanika Sood

Vanguard has changed the descriptions of an ethically conscious bond fund, after a review turned up holdings that investors were told were excluded.

Vanguard Ethically Conscious Global Aggregate Bond Index invests in about 4500 fixed income instruments and is based on a joint benchmark from Bloomberg Barclays and MSCI. MSCI filters the holdings for ties to fossil fuels, nuclear power, alcohol, tobacco, gambling, weapons and adult entertainment as well as conduct related screens based on severe controversies.

Or so investors were told.

Vanguard informed them that that MSCI was not screening all holdings in the fund, but just the public companies. This means governments or unlisted companies were left out.

“Vanguard consistently reviews our funds and ETFs and the indexes they are managed against including the ongoing appropriateness of the benchmark methodologies used by our ethically conscious range to screen securities,” a spokesperson for the company said.

“It was during this routine process it came to our attention that some company structures, including non-listed

companies may not be excluded by the screens applied by the index provider. The investor always comes first at Vanguard, so we are investigating further to ensure our Vanguard Ethically Conscious Global Aggregate Bond Index Fund and ETF (the fund) continues to align with our investors’ expectations.

“In the interim, we have amended the PDS and issued a unitholder notice to accurately reflect a description of the methodology used by the fund,” it said.

Vanguard and MSCI both declined to comment on what percentage of the total assets in the fund were in industries that investors were previously told were excluded.

They also did not comment on how many of the 4500 holdings are actually screened. Neither firm commented on who was responsible for the occurrence.

Last year, ASIC has stepped up its scrutiny of advertising in managed funds. This triggered a wave of name changes in “cash plus” or “enhanced cash” funds.

In June 2020, it asked 13 managed funds to fix their advertising, and threatened the wider sector with enforcement action for misleading claims.

Vanguard did not reply to the query if the PDS changes came after ASIC intervention. fs

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News

www.financialstandard.com.au 8 March 2021 | Volume 19 Number 04

01: Scott Cameron

Aussie dividends slump 40%

chief executive Catholic Super and Equipsuper

Continued from page 1 “While APRA will no longer hold banks to a minimum level of earnings retention, the onus will be on boards to carefully consider the sustainable rate for dividends, taking into account the outlook for profitability, capital and the economic environment,” the regulator said.

Dividend cuts were most severe in Australia, the UK and Europe, Janus Henderson found, which all together accounted for over half the total reduction in payouts globally, owing to the forced curtailment on banking dividends by regulators.

Banks accounted for one third of global dividend reductions by value, more than three times as much as oil producers, the second worsthit sector.

Globally, dividend cuts and cancellations reached US$220bn ($285bn). Conversely, shareholders were rewarded US$965 billion ($1.25tn) in dividends for the period.

Janus Henderson head of Australia Matt Gaden said while the disruption in some countries and sectors has been extreme, a global approach to income investing meant the benefits of diversification have helped mitigate some of these effects.

“Crucially, the world’s banks (which usually pay the largest share of the world’s dividends) mostly entered the crisis with healthy balance sheets. Bank dividends may have been restricted by regulators in some parts of the world, but the banking system has continued to function, underpinned by robust capital levels, which is vital for the smooth operation of economies,” he said. fs

Advice, super reforms passed Continued from page 1 As a result of the summary, advisers will need to obtain written consent prior to deducting fees for their services. The legislation also bans the deduction of ongoing advice fees from MySuper products.

Treasurer Josh Frydenberg and minister for superannuation, financial services and the digital economy Jane Hume said the changes are an “important step in restoring trust and confidence in the financial system”.

CHOICE’s finance policy adviser Patrick Veyret agreed and welcomed the legislation, saying it should improve consumer outcomes in the financial advice industry.

“This reform adds much needed transparency to the deduction of advice fees. Customers will now be much better positioned to assess value for money,” Veyret said.

Further to this, the government passed the Treasury Laws Amendment (Reuniting More Superannuation) Act 2021 which will require funds from ERFs that are sent to the ATO to be proactively reunited with a member within 28 days.

The reform will result in the removal of duplicate accounts therefore reducing duplicate fees and improving outcomes for members.

“ERFs were intended to act as a temporary measure for the benefit of members who had lost their superannuation accounts.

“However, in practice, members’ money languished in ERFs for years,” Frydenberg and Hume said. fs

More mergers at Equipsuper Karren Vergara

E

The quote

We strongly believe this merger will contain costs and improve efficiency, bringing real benefits to BOC Super members.

quipsuper has kicked off another successor fund transfer with an 83-year-old corporate superannuation fund, just days after announcing a merger with Toyota Super.

The $680 million BOC Super will merge into the $16 billion superannuation fund after its trustee determined that the decline in member numbers made it challenging to operate in an increasingly complex regulatory environment.

It comes hot on the heels of the fund’s merger with Toyota Super’s 5000 members.

BOC Super said it recognised the need for greater scale to deliver long term security to members, adding that Equipsuper will “be better placed to continue delivery of a high level of choice and services to BOC Super members in the future, given the pace of change in the superannuation environment”.

BOC is a supplier of gases, chemicals and safety equipment based in the UK. The super fund was established in 1937 to cater to current and former employees and their partners.

About 3000 members will move to Equipsuper and current contributions of up to 13% will continue post-merger.

Equipsuper chief executive Scott Cameron 01 welcomed BOC Super members.

“We strongly believe this merger will contain costs and improve efficiency, bringing real benefits to BOC Super members. We are ideally positioned for future growth that will benefit all our members and can drive stronger performance through efficiencies and scale of investments,” he said.

BOC Super chair Frederick Lee said he was pleased with the terms of the proposed merger and the opportunities for members.

“The proposed merger will ensure that members continue to enjoy the best of BOC Super but with enhanced benefits that Equip can offer, such as greater investment choice and likely lower fees,” Lee said.

On Toyota Super, its chair Rob Purcell said: “Toyota Super has served members’ interests very well. However, the requirements for running a stand-alone corporate superannuation fund are becoming increasingly difficult, largely due to complex and changing superannuation regulations. We are confident this move can provide even better member outcomes.”

Cameron said Catholic Super and Equipsuper are aiming to hit $50 billion in funds in the next five years and double its membership. fs

Best global equities funds Kanika Sood

BetaShares and Fidelity’s funds topped Rainmaker rankings for risk-adjusted returns for global equities funds for the three years ending December 2020.

The report, RMetrics, measures over 1100 products. The international equities rankings included both active and passive strategies in international equities. They were divided into three groups: active core, high performance and emerging markets.

It ranked strategies by headline returns (over a three-year period ending December 2020), and also by their combined risk score.

The latter took into account various measures of risk including: standard deviation (measure of volatility in monthly returns) and semi-standard deviation or downside deviation (measure of the volatility of returns that fall below a return target), Sharpe ratio (a popular return per unit of risk measure), Omega ratio (probability-weighted ratio of gains over losses for a given level of expected returns), skewness (measure of symmetry in distribution of returns) and kurtosis (measures of the fatness or skinniness of returns distribution).

The top-performers in international equities active core were BetaShares Global Sustainability Leaders, Intermede Global Equities Fund and Apostle Dundas Global Equity Fund.

The median manager in active core had threeyear annualised returns of 10%, standard deviation of 11.9%, semi standard deviation of 8.8%, Sharpe ratio of 0.78, Sortino ratio of 1.1 and Omega Ratio of 1.95.

If only headline returns had been considered, the BetaShares sustainable fund would have still topped the rankings with its 22.6% p.a. over the period. The Capital Group fund would have risen to second spot, while the Dundas fund would have slipped to the seventh spot.

In international equities high performance, the top three performers were: BetaShares NASDAQ 100 ETFM Zurich Concentrated Global Growth and Legg Mason Martin Currie Unconstrainted.

The median fund in the high-performance sub-category had 7% p.a. in three-year returns, 13% in standard deviation, 9.7% in semi standard deviation, Sharpe ratio of 0.47, Sortino ratio of 0.60 and Omega Ratio of 1.60.

In the emerging markets sub-category, Fidelity Global EM Fund, Capital Group New World Fund and Legg Mason Martin Curries EM Fund were the best performers.

The median EM fund had 5.6% p.a. in three-year returns, 12.2% in standard deviation, 11.8% in semi standard deviation, Sharpe ratio of 0.37, Sortino ratio of 0.40 and Omega Ratio of 1.51. fs

News

www.financialstandard.com.au 8 March 2021 | Volume 19 Number 04

Latest pay gap stats revealed

01: Kylie Willment

chief investment officer, Pacific Mercer

Elizabeth McArthur

Workplace Gender Equality Agency (WGEA) reported that the national gender pay gap has dropped to 13.4% for full-time employees, a difference in average of $242.20 per week between men and women.

Libby Lyons, director of WGEA, said that the lower gap may be as a direct result of COVID-19.

“I understand that this result is, in part, due to an increase in the number of men in lower-paid full-time employment. After all the economic shocks and uncertainties, we lived through in 2020, it is very welcome news to have more people in full-time jobs. It is also a very positive sign that our economic recovery is underway,” she said.

“It does not, however, reflect any underlying structural changes to women’s overall position in the workforce. I expect to see more labour market volatility over the next 12-24 months as the nation settles into a new post-COVID-19 employment environment. As the nation’s recovery progresses, we may well see male wages increase with little or no positive improvement in the wages of women. If this happens, it is feasible that the gender pay gap will increase.”

Only a tiny 0.4% of boards had no male directors, but 30.2% of boards had no female directors.

Women hold 14.6% of chair positions, 28.1% of directorships and represent 18.3% of chief executives and 32.5% of key management personnel.

Among ASX 200 companies, 32.6% of directors are women and in 2020 women comprised 45.5% of new appointments to ASX 200 boards.

The research also found that median superannuation balances for women at retirement are 21.6% lower than those for men. fs

Statewide reviews DB payments Karren Vergara

The $10 billion industry fund is reviewing salary and superannuation benefit payments within its defined benefit fund that were potentially paid incorrectly.

Statewide Super’s Salarylink, a defined benefit fund for local government workers, is investigating the accuracy of salary data provided by councils.

A joint statement provided by Local Government Association of South Australia chief executive Matt Pinnegar, and Statewide Super chief executive Tony D’Alessandro said: “Statewide Super as the administrator relies on councils to provide the fund with correct salary data for each employee.”

“Any potentially incorrect data provided to Statewide Super is currently being reviewed.

Statewide Super will work directly with councils and the briefing with chief executives on 15 February 2021 was the first step in this process,” they said.

Statewide declined to comment on how many accounts are affected and the total amount under review.

South Australia’s The Advertiser that the probe involves 180 accounts totaling $1.9 million.

D’Alessandro and Pinnegar confirmed that there have been “no incorrect payments to members of the Salarylink Fund, the incorrect data was identified before any payments were made”. fs

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Mercer joins net-zero club Eliza Bavin

M

The quote

The demand from members and clients for a rigorous and measurable approach to climate change is greater than ever.

ercer Australia has committed to achieve net-zero carbon emissions by 2050 for its Australian funds and the Mercer-managed investment options within Mercer Super.

This represents a combined $36.4 billion in assets under management as at 31 December 2020.

To achieve the net-zero goal Mercer said it expects to reduce portfolio carbon emissions by 45% from 2020 baseline levels by 2030.

Mercer said the commitment aligns with targeting a 1.5 degree Celsius limit on global temperature increases and the Paris Agreement’s ambitions.

Mercer Pacific chief investment officer Kylie Willment01 said the commitment is based on the belief that it is in the best financial interests of superannuation members and investment clients.

“Robust analysis has informed our view that this decision is in the best financial interests of our members and clients to invest for a 1.5 degree scenario,” Willment said.

“What’s more, the demand from members and clients for a rigorous and measurable approach to climate change is greater than ever.”

She added that the target builds upon Mercer’s already established climate change beliefs

and scenario analysis over multiple years and is supported by a climate transition plan.

“The preparations we have completed across asset classes gives us confidence that we can reduce emissions in our funds while delivering on our investment objectives,” Willment said.

“As leaders in sustainable investment across both research and advice, we’re excited to be taking these significant steps, in Australia first, as part of our global roadmap to supporting clients to achieve net-zero. This is the first of a number of initiatives to be announced globally

by Mercer.”

Under Mercer’s Climate Transition Plan, the firm will be working with its appointed investment managers to identify and manage a staged emissions reduction plan, oversee portfolio allocations to climate solutions, and steward an increase in transition capacity across the funds.

“The greatest change is expected in equity and real asset portfolios, where members invested in these growth assets typically have timeframes aligned to carbon neutrality goals over the long-term,” Willment said.

Mercer now joins the likes of many superannuation funds and investment firms in Australia to make the pledge to target net-zero emissions. fs

Super fund halves admin fees Jamie Williamson

An $11.2 billion superannuation fund will halve its administration fees later this month.

Mine Super is reducing its MySuper administration fees by a whopping 50%, dropping to $52 per year from $104.

“We know the fees you pay today can make a big difference to what you end up with in retirement. That’s why we work hard to find ways to keep our fees low,” the fund said.

The change will take effect from March 25, the fund said.

Members with an account-based pension will also see changes to their administration fees, with the fund opting to replace the fixed $180 per annum fee with a percentage-based fee of 0.16%.

“Before applying these changes, we worked hard to reduce total investment fees and indirect costs over the past 18 months,” Mine Super said.

“This means most pension members will be paying less in fees than what they did a year or so ago.”

The fund estimates about 87% of members will see a reduction in the fees they pay.

According to Mine Super’s modelling, for those in its balanced investment option, all account balances up to $1 million will see a reduction in total fees. For those in the capital guarded/ stable options, only members with a balance of

$500,000 or more will be negatively impacted.

Mine Super is also overhauling its Lifecycle Investment Strategy as of the same date.

Currently, members are invested in one of four diversified options and are moved to another option as they hit 45, 55 and then 65 years of age.

Going forward, members will be invested in just two options. This will see them invested in more growth assets and for longer, and they’ll also move to more defensive assets in smaller amounts but more often from age 51.

On the latter, Mine Super said: “This is an important change as your super won’t automatically make sharp and sizeable shifts throughout your working life from one investment option to another.”

For example, a 53-year-old member with $315,000 invested in the strategy is currently invested 100% in growth. From March 25, that member will have 80% invested in the high growth option, while the other 20% will be in the conservative balanced option.

The fund is also renaming two of its options to better reflect the underlying assets, with its ‘aggressive’ option changing to ‘high growth’ and ‘balanced’ changing to ‘conservative balanced’.

There is no change to how the options are invested or the return objectives. fs

6

News

www.financialstandard.com.au 8 March 2021 | Volume 19 Number 04

Global investor confidence drops

01: Jane Hume

minister for superannuation, financial services and the digital economy

Eliza Bavin

Global investor confidence has decreased since the start of the year, with large drops in Asia and Europe dragging down the index, according to State Street.

The Global Investor Confidence Index decreased to 91.9, down 8.9 points from January’s revised reading of 100.8.

The decline in investor confidence was driven by large drops in Europe and Asia, falling by 16.6 points to 78.1 and 17.5 points to 98.2, respectively.

The North American index also declined, but by a smaller magnitude, falling 2.8 points to 93.3.

State Street Associates head of investor behaviour research Rajeev Bhargava said the contraction was driven primarily by sharp declines in risk appetite from Europe’s and Asia’s institutional investors.

“The slower than expected vaccine rollout combined with the added complexity of new, potentially more infectious variants are elevating growth fears, particularly in Europe where official growth forecasts have recently been lowered,” Bhargava said.

“And while Asia continues to experience a rebound in activity on the back of strong exports, concerns over tightening credit conditions out of China may have dampened enthusiasm or the region, evident by the much weaker sentiment expressed by institutions this month.”

The Investor Confidence Index was developed at State Street Associates, State Street Global Markets’ research and advisory services business, in partnership with FDO Partners.

It measures investor confidence or risk appetite quantitatively by analysing the buying and selling patterns of institutional investors. fs

Channel starts US business Kanika Sood

The Sydney multi-boutique is set to establish a new funds management incubator based in New York.

The new business will be called Eolas Capital and partner with either US fund managers and ex US fund managers looking to tap into the American market.

Eolas will provide partner capital, industry expertise and business platform – similar to Channel’s Australian business.

Channel’s partner in the new US subsidiary is Des Mac Intyre, who was the chief executive and chair of the $613 billion Mellon Investments for three years, ending February.

He was previously the chief executive of U.S. asset management at BNY Mellon.

“I’m excited and energised by the opportunity to embark on an entrepreneurial venture with Channel Capital,” said Mac Intyre, who will be Eolas Capital’s managing director.

“In Gaelic, Eolas means knowledge and experience, and that’s exactly what we’ll provide to boutique managers. Investment management is a dynamic industry where agile firms with differentiated investment ideas and operational excellence can thrive.” fs

Super assets hit record high Karren Vergara

T The numbers

3.04tn

The size of Australia’s retirement system.

he superannuation sector’s assets reached a milestone of $3.04 trillion at the end of last year.

While the investments of superannuation funds copped a beating when the pandemic hits around this time last year, APRA’s December 2020 statistics shows that the asset pool rebounded 7.7%.

On a year-on-year basis, the asset pool rose 2.2%, buoyed by APRA-regulated assets, which increased 3% to $2.06 trillion. The self-managed super fund sector was flat at $764.2 billion.

There were 96 MySuper products at the end of last year, 12 less than the prior year. MySuper’s assets reached $812.2 billion, up 7.8%.

The minister for superannuation, financial services and the digital economy Jane Hume 01 said the balance is a clear indicator of the resilience of the superannuation system.

“However, as we’ve said countless times, our system is not perfect. High fees, persistently underperforming funds and too many duplicate accounts are a drag on the system. Australians can be reassured that the Morrison government is determined to continue our arc of reform ensuring the superannuation system is working harder for all Australians,” Hume said.

Despite the fact that about $37.3 billion was withdrawn as a result of the government’s early release of super scheme, the second half of 2020 enjoyed a strong market recovery.

During the quarter, net contribution flows were $8.3 billion and $7.7 billion for the year.

Total benefit payments in the year to December 2020 were $113.3 billion.

A Plan For Life analysis shows that $119 billion was withdrawn over 2019 or 9.10% on average. This is higher compared to 2015, which saw 7.28% on average withdrawn from super. fs

State Street loses Fearless Girl replica claim, HESTA and Cbus settle Kanika Sood

HESTA and Cbus have settled claims brought against them by State Street over the Fearless Girl statue, while Maurice Blackburn scored a win in court in late February.

State Street Global Advisors Trust Company and its local subsidiary State Street Global Advisors Australia Limited in 2019 initiated trademark infringement proceedings against Maurice Blackburn and the two superannuation funds.

The last hearings were held in February 2020, but the court only made orders in February 2021.

Justice Beach has ordered State Street’s principal claims had failed, but still must make orders about the Fearless Girl replica and how Maurice Blackburn can display it in the future. The orders also stated that Cbus and HESTA had settled out of court at the time the orders were made.

The matter relates to a 2016 statue of a young girl standing akimbo. It was commissioned by advertising agency McCann from artist Kristen Visbal as a part of State Street’s campaign to promote its SHE fund (the SPDR SSGA Gender Diversity Index ETF) and a campaign for 3500 public companies to increase the number of women on their boards.

In March 2017, a day before International Women’s Day, State Street (US) installed the statue opposite the Charging Bull statue at Bowling Green Park on Wall Street in the Financial District of Manhattan, New York City (eventually moved to outside NYSE).

It was a clever strategy and led to a 450% increase in the SHE fund webpage views,

according to court documents. During the period 7 March 2017 to 4 April 2017, average daily trading volume in the SHE fund increased by 170%.

In Australia, State Street used the Fearless Girl in presentations and marketing materials to institutional clients such as superannuation funds, on its website, at industry conferences and in some presentations to researchers, dealer groups and financial advisers.

Around October 2017, a staffer at Maurice Blackburn, Rebecca Hanlan, read an article about the statue and eventually contacted the artist in June 2018 to commission a replica, as a part of the firm’s ongoing planning for advocacy in equal pay. The next step was for Maurice Blackburn to find other companies for the campaign from industries including professional services, accountancy, property, energy, superannuation, private health funds, retail banking, legal, education, construction and other industries.

Around the same time, HESTA indicated its interest. In November 2018, Cbus came on board as well.

“At that time, Ms Pantelidis and Ms Hanlan were aware that HESTA and Cbus were sensitive to being seen to be acquiring the replica with members’ money and that their financial contribution was to the broader campaign costs and launch event. Ms Hanlan understood that their concern was that the media might make HESTA and Cbus’ use of members’ funds the focus of the story, which might risk the campaign message getting lost,” according to court documents. fs

Product showcase

www.financialstandard.com.au 8 March 2021 | Volume 19 Number 04

7

01: Michael Glenane

founding executive director and portfolio manager Fairview Equity Partners

Find the emerging opportunities

It would be easy for investors to focus on big growth technology companies, but to find opportunities in smaller companies a quality active manager is worth its weight in gold. ost market-watchers agree that last year M we all witnessed the end of something magical – the longest bull market in history. It lasted from March 2009 and crashed to an end in March 2020, as the impact of the COVID-19 pandemic began to be felt the world over.

During the spectacular decade of growth we enjoyed, passive investing naturally became extremely popular. Investors the world over poured their hard-earned cash into exchangetraded funds (ETFs), tracking a market that seemed to never fall.

Active managers might have fallen out of favour to some in the rush to enjoy these cheap returns. This seemed logical, especially as the largest companies in the world and the big, household name technology stocks have seemed at times to be on a trajectory of endless growth.

But any informed investor knows diversification is key. Those huge growth stocks cannot make up a whole portfolio.

In smaller companies, active managers have a unique opportunity to prove their worth.

This is where Fairview Equity Partners founding executive director and portfolio manager Michael Glenane 01 comes in.

Glenane and his team – fellow portfolio managers Leo Barry and Tim Hall - take a bottomup approach to finding the opportunities in Australian emerging companies. Over time, it has proven fruitful for investors.

Through experience, the Fairview team understand that when it comes to small caps there are information gaps that a good active manager can exploit to the benefit of unitholders.

This is because there is a yawning gap between the analyst coverage of small caps and large caps. The biggest companies in the world also have the most analysts covering them.

“There’s less analyst coverage at the small end of the market. We think this is great,” Glenane explains.

“Because the stockbroking analysts have so many more stocks to cover as small caps analysts – only about half the number of analysts per stock in the small cap index – there’s an information gap and we aim to exploit it.”

Active managers might have earned a bad reputation to some during the bull run, certainly there were some charging fees without beating the benchmark. This is part of what drove the immense popularity of ETFs. But small caps are a different game.

“We think that small caps are one of the sectors of the Australian market where active management works. ETFs have become a feature of the Australian market over the last decade and by and large in the large cap market they work, and they are cheaper,” Glenane says.

“They don’t work as well in small caps because of that information gap. We’ve beaten our index by 6.5% since the inception of the fund, compound.* The last three years, we’ve done considerably better than that.

And, he says the small caps sector generally has higher growth than those massive top 50 companies.

“This is because, they’re at an earlier stage of their lifecycle, their journey as a company,” Glenane says.

Fairview’s portfolio managers are stock pickers through and through. All three of the portfolio managers really understand each of the companies in the portfolio.

“We look across the spectrum of small caps. In fact, there is a lot of travelling involved. We can go anywhere from a gold mine to a salmon farm to an aged care home,” Glenane says.

“The diversity is stunning. We don’t limit ourselves to growth investing, or deep value investing.

What we aim to do is find stocks where there is an underappreciated catalyst and valuation support.”

Of course, small caps do not operate in isolation from the other factors that are impacting markets.

“These are volatile times. We are bottom-up stock pickers, but we don’t do that in a macro vacuum,” Glenane says.

How the Fairview team itself functions and considers the problems facing it is integral to making its investment process work.

“How we do this can be summed up in two words – company contact. We meet over 600 management teams per year. That’s a lot. We do this to gain insight. A vast majority of these meetings will not change our portfolio. The ones that do are exciting,” Glenane explains.

The process after those meetings with company management involves the portfolio managers generating an investment thesis for why the company might be worthy of being in the portfolio, modelling returns and carefully considering portfolio weighting.

“This is all done equally between the three team members,” Glenane says.

That egalitarianism just might be Fairview’s secret ingredient. The way its three portfolio managers work together is a little different compared to how other investment managers might work.

The quote

These are volatile times.

We are bottom-up stock pickers, but we don’t do that in a macro vacuum.

“Each of us is a significant unitholder in the fund as well as being an equal shareholder in the business,” Glenane explains.

Fairview has also been partnered with MLC since inception.

“They’ve been a wonderful partner and a 40% shareholder. They take care of all that boring back office business that we really don’t enjoy and therefore we can focus on our stock picking – the reason for our existence,” he says.

“It’s been a good journey, we’ve delivered good returns.

“For every dollar you put into Fairview at inception, by now you would have about four dollars.”

Fairview has just one fund – the Fairview Equity Partners Emerging Companies Fund.

Glenane says the fact that the team has a singular focus is another one of their strengths.

“It also eliminates conflict between different classes of unitholders. For instance, if you had a microcaps fund and a small caps fund sometimes there could be conflicts between those funds as far as allocations go,” he says.

“We also are very different by the fact we have three portfolio managers, and each of us have an equal say. That’s really important because it means each of us should have an equal understanding of all the stocks in our universe.” fs * Excess return as at 31 January 2021. Fund inception date: 8 October 2008. Net returns are calculated after deducting management fees and are pre-tax. Benchmark: S&P/ASX Small Ordinaries Total Return Index.

IMPORTANT NOTICE AND DISCLAIMER The Speaker featured in this article is an authorised representative of MLC Asset Management Pty Limited ABN 44 106 427 472, AFSL 308953 (‘MLC Asset Management Pty Ltd’). MLC Asset Management Pty Ltd is the distributor for units in the Fairview Equity Partners Emerging Companies Fund (‘Fund’) issued by responsible entity, Antares Capital Partners Ltd ABN 85 066 081 114, AFSL 234483 (‘ACP’). The Speaker is not the holder of an AFS licence, or an employee of MLC Asset Management Pty Ltd or in partnership or joint venture with MLC Asset Management Pty Ltd. MLC Asset Management Pty Ltd and ACP are members of the group of companies comprised National Australia Bank Limited ABN 12 004 044 937, AFSL 230686, its related companies, associated entities and any officer, employee, agent, adviser or contractor (‘NAB Group’). An investment with ACP does not represent a deposit or liability of, and is not guaranteed by the NAB Group.

A copy of the PDS is available upon request by phoning Client Services 1300 738 355 or on our website at mlcam.com.au.

While it is believed the information is accurate and reliable, the accuracy of that information is not guaranteed in any way. Opinions constitute our judgement at the time of issue and are subject to change. We do not give any warranty of accuracy, nor accept any responsibility for errors or omissions in this presentation. Past performance is not a reliable indicator of future performance. Whilst we believe any projections have been formulated reasonably, actual results may differ materially from these projections.

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8

International Women’s Day

www.financialstandard.com.au 8 March 2021 | Volume 19 Number 04

Why women lack mentors and the impact on their career

Do you want to know why men are elevated to the top jobs in higher numbers than women?

Do you think it is because women are discriminated against?

You will be surprised to know that discrimination may not be what is holding you back. Remember the old saying, ‘It’s not what you know, it’s who you know’? The statement is still as relevant today. However, I have changed it slightly to ‘It’s who you know and how you access their help’.

The bottom line is you need people in your corner who are more senior in position than you are, and who can provide you with support and guidance throughout your career. You could try to progress by yourself, but it will be a lot harder.

In my many years working in executive recruitment I noticed that most of the men, had people in their corner guiding them through their career trajectory - including mentors, advocates, coaches, advisors. They are called by various names, but they all do one thing: they help you achieve your goals and make attaining success easier.

When I was recruiting, it was obvious that the guys had support in their corner. I could tell they had been briefed on what to do in every interview.

They had knowledge about the person they were interviewing with – the kind of knowledge you can’t get from a Google search. This valuable information provided by the people in their corner would help them get over the line and give them the edge. Where did it come from?

It came from their mentors – people they had been collecting to guide them from the moment they took their first job. Every time they needed some advice, they would call them up to get their view and guidance on what move to make. These mentors were basically their own personal board of directors for their career.

Wouldn’t it be nice to go into an interview or meeting with a potential client and know everything about that person? What if you knew what type of personality they had, their management style, how they viewed things and what not to do when you meet them? Wouldn’t that give you the edge? Yes, it does!

Call it fair or unfair, but this is what happens every day. Having people in your corner will give you not only an edge, but also a greater chance of success.

When I was running my search firm, I never felt that any of my clients were discriminating when deciding who to hire for the role. They always wanted a balance and focused on getting the best person for the role. The best person for the role is not always the one who performs the best in the interview – but they get the job anyway because of that performance.

Remember the short list for a job is usually two or three candidates. All of them look great on paper, but one gets over the line because they had the advantage over the others.

If you are coached through an interview process, given important tips and intel, it will increase your chance of getting over the line. I

You could try to progress by yourself, but it will be a lot harder.

believe the reason women were not getting more senior positions boiled down to a difference in support systems – mainly lack of mentors.

I found most men had mentors and most women didn’t. It was so obvious why the men were progressing faster:their mentors were helping them.

If a business has not one woman in a senior role, direct discrimination needs to be called out as the main cause. However, I personally know of hundreds of women who are in senior roles. If they did it, why can’t others? If I did it, why can’t others?

Would I personally have achieved success if I didn’t have mentors? Maybe, but it would have taken longer, and I probably would have made more mistakes along the way. So, why make it harder for yourself?

Eventually your bosses will get new roles in other divisions and companies, and who do they look for to help them set up the new direction?

They often approach people in their network who they feel can do the job - people they worked with before and who they trust.

Lots of times over the years I would hear female candidates say, ‘He hired his buddies for his new team - the boys club’.

When people made this comment, I would look at who the person hired and often there would be several women included in the new team as well. He didn’t hire his buddies/boys club, he hired from his network. If you are part of the network – you are part of the club, regardless of your gender.

International Women’s Day

www.financialstandard.com.au 8 March 2021 | Volume 19 Number 04

9

01: Judith Beck

author

So why don’t women collect mentors in the same way as the guys do early in their career?

Let’s go back to the early childhood and school days for someone to blame. Let’s face it, these habits start early, and old habits are hard to break.

At home or at school, the boys likely had someone in their corner telling them what to do to prepare them for the big bad world of work.

Boys are encouraged to speak up, be brave, take chances, go outside the gate, play sport, honour mateship and the ‘bro code’, carry the load, be the bread winner, don’t cry, get dirty, along with numerous other pieces of advice. Their father, uncle or brother probably told them to ask for more or go for it.

Most girls, on the other hand, were not given the same encouragement. If no-one is in the household encouraging the girls that they can be whatever they want, then that encouragement will need to come from school or an external source.

Mixed messages are all over the media for girls as well as in schools, but the boys’ messages are consistent due to historical behaviours.

So, yes someone is to blame, as with most things we do in this world. But how do you want to deal with this - blame the past for the present, instead of just making the change now? The cycle needs to stop with early mentors, schools, and social media working on taking the gender bias off the lens.

Progressing in your career is more about identifying what you need to help you get there and how you do it, rather than the gender you were born with. A big part of that is seeking and taking help from mentors who will give you the guidance and support you need.

I have found from running Financial Recruitment Group and later as founder of Financial Executive Women (FEW) that senior people are more than willing to pass on their knowledge and expertise to the next generations.

They want to give back to the industry, see you succeed, and they want to make sure you don’t make the same mistakes they did. All you need to do is ask.

Women need to even the playing field and build up their mentor networks. This is not acting like a man or playing their game. This is good business sense to get you from A to B, accessing help from those who have more experience and who are willing to give you guidance.

The purpose of having advocates and mentors is to have someone with a fresh eye to give you support and advice based on their experience.

In addition, you are building your own personal board of directors you can access when needed.

The numbers of mentors you need increases as you progress in your career.

their guidance on the path they travelled and what they learnt along the way. Weigh up their advice with everything else you have access to. Having several views will help you with your decisionmaking process.

What makes a good mentor?

The first requirement for any mentor relationship is respect. You must respect the person you are asking to be your mentor. In addition, look at the following: • Do they have a background of success in the industry you are in? Or do they have expertise in an area you need help with?

• Are they stable in their career history, with good progression?

• Are they going to keep your information confidential?

• Do they have your best interest at heart?

People often ask me if it’s better to choose mentors from within your current organisation, or external to it. I always suggest working with external mentors, because they will be able to talk to you more openly and will have fewer filters or worries about what they can or can’t say.

Unfortunately, internal mentors can’t be as honest in their feedback as needed, for fear of being misunderstood or introducing issues that could affect their own position in the company.

I found men tended to have mentors who were external to their organisation and only included current bosses in their mentor group when they became former bosses. Once a boss left and if they had a good relationship with them, that relationship would continue for years. This relationship would often open opportunities for them in the future.

Women would often say their boss was a good support to them, however when they left the organisation, they did not continue the relationship; citing that they didn’t want to bother them or felt it wouldn’t be appropriate.

So where do you find mentors?

Start your mentor search by making a list of all the people you know who meet the criteria I’ve listed. If you haven’t contacted them in a long time, reach out and touch base. LinkedIn is a good way to reconnect. Meet for a coffee and update them on what you have been doing, then ask them if they would be willing to be a mentor.

Most people feel complimented when they are asked to be a mentor.

Don’t be afraid to contact people you don’t know that well. They may say no, but many no’s will lead to a yes.

Mentoring is not a perfect science Mentors do not have all the answers and their advice may not be right for you. They are basing

On average men will have seven to nine advocates in their corner by the time they are in a management role, typically between the ages of 29 and 42. Women tend to have zero up to two.

Advocates are not your partners or friends - they are outside your organisation and friend group, who will give you a fresh eye/unbiased perspective.

Mentoring for small business

Women need to even the playing field and build up their mentor networks. This is not acting like a man or playing their game. This is good business sense.

Whether you are currently running a small business or thinking about starting one; if you try to go it alone or think you know it all, you could be making a costly mistake.

There is more to running a business than having a good product or expertise. I have often seen people who have come from large corporate environments decide to start a new business, only to find out that it is harder than they thought.

I started my executive search business over 25 years ago and then FEW in 2012. Having people in my corner that I could access for help meant the success of both businesses.

In addition, I consulted to many business owners over the years and I know from my own experience and theirs, that you will never be in a position where you know it all and don’t need guidance – even if it is just having someone as a sounding board.

Whether you are a business owner or an employee, to get the best out of a mentor relationship, you need to understand how to take critique and not see it as criticism.

Mentors have your best interest at heart and give their time freely. If they tell you something that you may not want to hear or pick up something that isn’t right – thank them. Getting defensive will prevent them from giving you the tough love that you may need. Better to hear it from them, then your customers or boss.

The mentors you choose for your business, are not your accountant or lawyer (they are important as well). Mentors for your business should have successful track records in the area that you are in and understand your business. They can also be experts in specific areas. Don’t try to do it all and make sure to seek out people who meet the criteria for good mentors.

If you needed career guidance today, who would you call outside your family or close friends? And ask yourself: are you making an effort to develop your own board of directors? fs

Judith Beck is the author of No Sex at Work (Major Street Publishing), which shares the do’s and don’ts from her experience as founder of executive search firm, Financial Recruitment Group. Over her career, Judith has successfully placed thousands of candidates at senior to managing director level with some of Australia’s most successful financial institutions. Judith also founded Financial Executive Women (FEW) and is a sought-after speaker and media commentator. For more information visit www.judithbeck.com.au.

10

International Women’s Day

www.financialstandard.com.au 8 March 2021 | Volume 19 Number 04

Celebrating

in financial services In 2018, a PwC study found that achieving economic gender parity in Australia could increase GDP by 11%. Meanwhile, 2021 data from the Workplace Gender Equality Agency shows women hold 14.6% of chair positions, 28.1% of directorships and represent 18.3% of chief executives and 32.5% of key management personnel. Only 0.4% of Australian boards have no men on them, but 30.2% have no women.

So, this International Women’s Day, Financial Standard recognises the women of financial services who are climbing the corporate ladder, be they just starting out in the industry or already in leadership positions. We asked a selection of women in the industry, at very different stages of their lives and careers, about their experiences and what equality means to them.

01: Natasha Traugott portfolio analyst, responsible investment, Sunsuper Q: Do you think you’ve faced any challenges in your career because of your gender?

A: The main thing I’ve found challenging is self-doubt in an industry where self-confidence is generally abundant. Women are more likely than men to be perfectionists, setting excessively high standards and being concerned about others evaluations. It tends to show up as women holding themselves back from answering a question, struggling to feel comfortable promoting their contributions, asking for a raise or applying for a stretch role.

Q: What is your earliest memory of being treated differently to your male colleagues?

A: Being asked to get the coffees.

Q: Do you think women in financial services are rewarded or penalised for speaking up about gender discrimination?

A: Early in my career, I quietly tolerated discriminatory comments and jokes out of fear of rocking the boat if I called someone out on their behaviour. These days, I’m much more confident to speak up if an incident arises and incredibly fortunate to work for an organisation that doesn’t tolerate discrimination in the workplace.

Q: How do we most effectively address the gender pay gap?

A: There’s no silver bullet. Commit to flexible working policies, ensure employees have

equal opportunities to progress, monitor promotions to ensure they are free from unconscious bias and link pay to market value so those who don’t negotiate their salaries aren’t perpetually disadvantaged.

Fifita Ngaue head of claims, MetLife Australia Q: How do we most effectively address the gender pay gap?

A: Easy - take the gender out of it and pay the person based on their work and their merit.

If there is clear disparity within roles due to gender, then as a leader - act and make it right.

Q: What is one change that you’ve been grateful to see occur over your time in the industry?

A: Women actively networking and advocating for each other! The formation of groups such as Women in Super and Women in Finance has built awareness and created opportunities that were not really known or readily available when I first started in the industry.

Q: Do you think you’ve faced any challenges in your career because of your gender?

A: While I’ve certainly faced challenges in my career, whether I could contribute them to being a woman has never been entirely clear cut. This is perhaps one of the reasons that gender inequalities continue to exist in society – they are often difficult to see and expose.

Greater awareness and education will help.

International Women’s Day

www.financialstandard.com.au 8 March 2021 | Volume 19 Number 04

01: Natasha Traugott

Rashmi Punjabi account director, Honner Q: Do you think the glass ceiling still exists?

A: It probably does, for those who like to believe it still exists. If you look around you see women like Jacinda Arden, Kamala Harris, Whitney Wolfe Herd are leading change in their areas of work, irrespective of the perceived glass ceilings. These, and many other women in and outside of financial services, have made it purely because of their talent and grit, as opposed to gender.

Q: Do you think women in financial services are rewarded or penalised for speaking up about gender discrimination?

A: Women have historically been on the receiving end of this discrimination so it’s only fair for them to speak up about their

Q: Do you think you’ve faced any challenges in your career because of your gender?

A: I’ve been privileged to enter the industry at a time in which the women before me have really worked hard to build an inclusive workforce, allowing me to be embraced by the industry without many of the challenges that may have been present in the past.

Q: Do you think women in financial services are rewarded or penalised for speaking up about gender discrimination?

A: People’s response to others’ views comes down to 1) what is being said and 2) how it is being said. The same applies to gender discrimination. If the speaker addresses the issue objectively and sensitively without emotional bias and makes thoughtful wellreasoned suggestions for change, I think members of both sexes will be open to the ideas.

Q: What is one change that you’ve been grateful to see occur over your time in the industry?

A: In recent times, I’ve loved seeing the adaptability of advisers in the face of a pandemic.

There’s something oddly intimate about seeing someone’s home surroundings, hearing their pets make noise, or having their kids interrupt on a Zoom call. I think that has brought down the walls many of us have up.

Q: Do you think you’ve faced any challenges in your career because of your gender?

A: I’ve always taken the attitude that if you believe that you can succeed then you will.

For me, I don’t believe I’ve ever had to face challenges because I am a woman, that’s too simple a perspective. Inequality and injustice are multidimensional and systemic, and we need to work together to instigate the change.

Q: What is one change that you’ve been grateful to see occur over your time in the industry?

A: My career spans across two major markets: India and Australia. While both are culturally very different countries, one thing I found common was that gender inequality exists in varying degrees. Due to its patriarchal history, parts of India still fight for female education and women to be in the workforce.

Australia, on the other hand, is more about equal opportunity, equal pay and women in leadership positions.

03: Swati Reddy senior equity analyst Aoris Investment Management

Q: An example of an experience in your life that was memorable on the topic of inclusivity and open-mindedness?

A: On a podcast recently I heard Tobi Lutke, chief executive of Shopify, talk about his expectations from employees very eloquently: “When I hire someone, let’s say everyone has five creative hours in a day, I’d love for them to give four of those hours for Shopify. That is the sort of relationship that exists with a mission-based company. How much I get out of someone depends on how much they apply themselves.”

Q: What are you most excited for in the industry as a woman?

A: I am excited to see and hear more people give importance to ‘diversity’ not just as lip-service for inclusiveness but because it also produces better results. Research shows that organisations are more successful in eliminating blind spots and costly errors when they bring people from different backgrounds, cultural experiences and perspectives to the table.

03: Swati Reddy

04: Kate Anderson group executive advice services and solutions Centrepoint Alliance

experiences and not being penalised for it.

What’s more rewarding is when our male counterparts in the financial services industry support our voice for change. I have immense respect for men who not only speak out against gender discrimination, but also walk the talk as allies by implementing those changes in the workplace.

02: Azaria Bell advice associate Skye Wealth

Q: If your daughter were entering the financial planning industry tomorrow, what three pieces of advice would you give her?

A: 1. Check out the ‘our team’ page of a firm’s website before interviewing. If the leadership team are all men, and the support team are all women, ask what that might say about their culture.

2. Find a strong mentor of any gender who acknowledges that sexism is an issue, and actively works to empower you in the face of those challenges.

3. Believe in yourself so strongly that no one has the chance to question your capabilities.

02: Azaria Bell

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Q: What is one change that you’ve been grateful to see occur over your time in the industry?

A: One area that I’ve been particularly grateful for in this industry is the financial independence that can be offered by compulsory superannuation.

Being financially independent is a mindset that many women are aspiring to and the industry is continuing to develop products and services that understand the challenges that women face.

This includes the implementation of legislation including superannuation splitting and spouse contributions.

Check out the ‘our team’ page of a firm’s website before interviewing. If the leadership team are all men, and the support team are all women, ask what that might say about their culture.

Azaria Bell

Q: How do we most effectively address the gender pay gap?

A: Firstly, it’s vital to recognise that a gap still exists. The Australian government reports that the gender pay gap is about 14% and has been around that level for the last couple of decades. It’s clear that we still have work to do to narrow this disparity. This includes things like offering better parental leave, offering flexibility in working practices (working from home, working hours to suit, etc.), improving work-life balance for both men and women, providing free universal childcare, and addressing unconscious bias.

Q: What are you most excited for in the industry as a woman?

A: For me, seeing the de-stigmatisation of mental health in the workforce is especially pleasing.

I am an advocate of employee assistance programs and I have seen more conversations and care about the mental health of employees than ever before. It’s encouraging to see the openness and sharing that comes from these conversations and the real support that assistance programs provide to people, not just in times of crises, but as a part of the toolkit of achieving general wellbeing.

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International Women’s Day 04: Kate Anderson

05: Angela Hartl consulting actuary and relationship manager Mercer Q: Do you think you’ve faced any challenges in your career because of your gender?

A: Many. Until recently, most boards were mainly male and almost always older than me (although I have now reached that pivot point) and I have found it challenging in the past to be taken seriously without a “chaperone”. The way that I have dealt with these scenarios is by making it clear that I am the subject matter expert, and that I am more than able to answer any questions that may arise.

Q: What is your earliest memory of being treated differently to your male colleagues?

A: In my early twenties, I was presenting actuarial results to the trustee board of a pension fund and every member of the board was male and at least twice my age. The chair was very dismissive of my report.

Q: What is one change that you’ve been grateful to see occur over your time in the industry?

A: It has become more acceptable to work part-time and still progress your career. And meaningful change in diversity, equity and inclusion has become an expectation rather than a ‘nice to have’. Many businesses are actively investing in ensuring they have a pipeline of female leaders, and I’ve experienced this first-hand.

Sally Surgeon head of client services Northern Trust Q: Do you think you’ve faced any challenges in your career because of your gender?

A: At the very beginning of my career, I took a while to navigate how to progress and I observed that my male colleagues seemed to be moving ahead and being promoted at faster pace. However, with perseverance, hard work and some invaluable mentoring from female leaders I was able to seize new opportunities that led to promotion.

Q: What is one change that you’ve been grateful to see occur over your time in the industry?

A: I have been grateful to witness a greater emphasis on the benefits of diversity, equity and inclusion. The benefits of different points of view, experiences and approaches on overall

www.financialstandard.com.au 8 March 2021 | Volume 19 Number 04

05: Angela Hartl

06: Larisha Jerome

Q: Do you think the glass ceiling still exists?

A: Yes, unfortunately. My observation is that the majority of women still find it very difficult to progress beyond a certain level. While you do see senior women in HR and risk, there are very few that run their own P&L. However, in superannuation, there is an increasing number of females in chief executive and chief investment officer positions which is great to see.

Q: How do we most effectively address the gender pay gap?

A: Review pay across all employees doing the same role and continue to review this at pay review time. Don’t make excuses that someone negotiated better – if you benchmark the results, the gap should be removed.

06: Larisha Jerome community engagement and project officer First Nations Foundation Q: Why did you choose a career in financial services?

A: I chose a career in financial services because, growing up, finance was something unspoken and something that heavily impacted my family and our quality of living. From lived experiences I found a passion for breaking the generational barriers, which enabled me to be the impact in my family to redress the economic injustices that we face, not only as an Aboriginal person in today’s economy, but as a young Aboriginal woman.

business outcomes are well documented. As more companies recognise these benefits, it is my hope that scores on diversity, equity and inclusion will continue to improve.

Q: If your daughter were entering the financial services industry tomorrow, what three pieces of advice would you give her?

A: For every young woman entering the financial services industry, I have three pieces of advice: 1. Choose your roles carefully and then work hard on your brand, be curious and don’t be afraid to take on new challenges.

2. Build long-term relationships with mentors who will provide a sounding board on your career journey.

3. Give back to the industry and community by getting involved, volunteering and supporting the next generation of young women entering the financial services industry.

Q: Do you think you’ve faced any challenges in your career because of your gender?

A: Yes, and particularly as a young Indigenous woman I have always had the added pressure of needing to prove myself to be deserving of my role within the industry. I struggled a lot with selflimiting beliefs – thinking I am not good enough to be in the position to speak on this topic, when really, it’s the opposite – and it’s so important that we do everything we can to challenge the assumptions and biases of the industry. I overcame that really quickly when I realised that I wasn’t just representing myself and my family, but all the women who have the same lived experiences as me.

Until recently, most boards were mainly male and almost always older than me and I have found it challenging in the past to be taken seriously without a “chaperone”.

Angela Hartl

Q: What are you most excited for in the industry as a woman?

A: I am so grateful that the leaders before my time have paved the way for me to have the opportunity to assume a more dominant presence in the industry. As most know, women are underrepresented in the financial sector and are also less likely to be promoted to high executive roles.

Q: What is one change that you’ve been grateful to see occur over your time in the industry?

A: I lead the Indigenous Women’s Financial Wellness Project here at FNF, and we have a network of more than 500 Aboriginal and Torres Strait Islander women across the country who are participating. It is the first time I have seen a focus around a holistic approach to finance and addressing the cultural injustices we have had through generational change, which is a big change for Indigenous financial education.

07: Sophia Rahmani chief executive and managing director Maple-Brown Abbott Q: What is one change that you’ve been grateful to see occur over your time in the industry?

A: I suspect I won’t be alone in saying that one of the biggest learnings from 2020 is that flexible work arrangements can work, and you don’t need to be at your desk in the office five days/week, as was the traditional working expectation for high performers. Returning to the workforce in late 2019 after having a baby, into a new and full-time role, I knew I was going to do my best to make it all work, but it was going to be hard at times.

Q: If your daughter were entering the financial services industry tomorrow, what three pieces of advice would you give her?

A: I think I’d give the same advice to anyone thinking about entering the financial services industry which is: Do the best you can in whatever it is you’re doing, as it gives you the

International Women’s Day

www.financialstandard.com.au 8 March 2021 | Volume 19 Number 04

07: Sophia Rahmani

Michelle Lacey head of core client group, Australia AXA Investment Managers Q: Do you think the glass ceiling still exists?

A: No, I think there are many opportunities out there for women. I’ve been fortunate to work for a truly inclusive organisation, where I have always felt supported and encouraged to progress in my career. I had the great fortune to work with some incredibly inspirational female leaders – for me, seeing women who I admire and respect in leadership roles is a very powerful motivator. Equally, I’ve worked with men who have been very supportive of my development.

Q: How do we most effectively address the gender pay gap?

A: Companies need to nurture female employees’ career progression through coaching, mentoring programs, supporting

most opportunities. Then make the most of those opportunities. You might have a “plan” (I didn’t particularly) but you also need to be open to what comes your way and make the most of things! And finally, surround yourself with people who inspire you – for their smarts, their style and approach to things, their achievements and/or how they face their challenges. We are constantly drawing from everything around us so being in the right environment is critical to your own growth and happiness.

Q: What is one change that you’ve been grateful to see occur over your time in the industry?

A: I’m grateful to see that there is more flexibility for both women and men. Flexibility translates into better productivity. If I can be 100% there for my family when I need to, I can give 100% back to my work. More and more companies are now recognising this, particularly with more flexible parental leave for men. This has been a very positive change within financial services.

equity to really succeed we need to break down stereotypes in all their forms and open all roles to all qualified candidates.

09: Pooja Antil research manager Rainmaker Information

08: Katie Constance associate director, institutional business Fidelity International Q: Do you think you’ve faced any challenges in your career because of your gender?

A: The work/parenting juggle continually keeps me on my toes, however, the high level of flexibility and trust I have in my current role assists greatly with trying to keep everything together! It is great to see the flexibility practices that are emerging in the wake of the COVID pandemic which are positive for so many across different industries.

Q: Do you think you’ve faced any challenges in your career because of your gender?

A: The only challenge which I believe many other women in my position would also agree was to choose between their career and having a child.

It’s a very difficult choice as your ambitious side feels let down when you are out of work for a couple of years and then when you start you’re doing so from scratch in many cases.

Q: Do you think the glass ceiling still exists?

A: There are only 10 female chief executives in the ASX 200 and only three women were amongst the 50 chief executives appointed over the past two years. So, there is still some work to be done.

Q: Do you think the glass ceiling still exists?

A: I would love to believe that it doesn’t, but from my personal experience there have been numerous instances when I was the only woman in the room. And it makes me think if it isn’t the glass ceiling, what is it that we don’t have as many women in the industry as I would like and as the industry would like? Maybe there are no barriers as such, but there isn’t enough encouragement and mentorship either.

09: Pooja Antil

Q: How do we most effectively address the gender pay gap?

A: By walking the talk. We in the industry are very concerned about the superannuation gap, which is just an outcome of the gender pay gap, further amplified by career breaks. There is constant rhetoric but no constant action. We do plenty of things well as a country but our maternity/paternity leave laws aren’t very generous. And for gender pay gap, I doubt it is something we can achieve by regulatory changes. More women representation in C-suite is the way to go.

working families, embracing flexible work and ensuring that leaders in the organisation practice inclusive leadership skills. We need more transparency on companies’ gender pay gap, for example the UK is looking at forcing employers to publish action plans with specific targets and deadlines alongside their pay gap data.

Companies also need to monitor their progress to ensure equal opportunities.

Q: Why did you choose a career in financial services?

A: My mum was a teacher, and my dad was a banker. While all my siblings followed in my mum’s footsteps, I think I got it from my father. Because of him I had an uncommon exposure to all things financial and I think the idea of numbers telling the story just stuck with me.

Q: How do we most effectively address the gender pay gap?

A: I think there’s still a lot of unconscious bias we bring to many roles in society. For equality and

08: Katie Constance

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If it isn’t the glass ceiling, what is it that we don’t have as many women in the industry as I would like and as the industry would like?

Q: If your daughter was entering the financial services industry tomorrow, what three pieces of advice would you give her?

A: My three pieces of advice, probably irrespective of the industry she chooses would be: Be honest, don’t emphasise doing things right, rather focus on doing the right things and pay just enough attention to your critics. fs

Angela Ashton founder Evergreen Consultants

Pooja Antil Q: What are you most excited for in the industry as a woman?

A: There is definitely systematic discrimination in our industry, which still occurs. Working with other women to address this and create a more level playing field is exciting.

Q: Do you think you’ve faced any challenges in your career because of your gender?

A: Of course. There are many meetings where I asked questions and my male colleagues were given the answers. I think I just work hard and I take mistreatment as a challenge. I also have my secret weapon – I grew up with a very strict Italian father and there is nothing any of these guys could do to me that came close to that!

Q: What is your earliest memory of being treated differently to your male colleagues?

A: It was probably not being invited out to ‘beers at the footy with the boys’ very early on.

Q: If your daughter were entering the financial services industry tomorrow, what three pieces of advice would you give her?

A: Don’t let yourself be walked over, know that you are good enough (if not better) and enjoy the ride!

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Feature | Global macros

www.financialstandard.com.au 8 March 2021 | Volume 19 Number 04

THE SAME BUT DIFFERENT As vaccines roll out across the world, it’s becoming clear how the events of 2020 and COVID-19 cemented themes that have been growing for decades. Elizabeth McArthur writes.

Global macros | Feature

www.financialstandard.com.au 8 March 2021 | Volume 19 Number 04

I

01: Josh Berelowitz

02: Anthony Doyle

03: Diana Mousina

portfolio manager J.P. Morgan

cross-asset investment specialist Fidelity International

senior economist AMP Capital

t’s difficult to find what to say about the big picture 2020 painted for us all. It was a year that changed lives, and as we all continue to live through it not much probably needs to be said to sum it up.

Looking back at articles written at the end of 2019, few saw the threat of COVID-19. At the start of 2020, those that were able to sense the imminent impact the virus were able to profit from the complacency that proliferated the rest of the market.

Despite many of those investors who pride themselves on being soothsayers taking a hit early in 2020, it is still important for money managers to form a view of what is to come.

During the height of the pandemic, this meant that investors have had to stay on top of a huge amount of information, which was changing at a rapid pace, to predict what might happen next.

For J.P Morgan portfolio manager Josh Berelowitz01, it’s been an incredibly challenging year. Berelowitz is based in London and – like so many of us – has adapted to a very new way of doing things. He acknowledges that staying abreast of international news and central bank moves have meant long hours and jokes that at least he didn’t have to commute.

According to J.P. Morgan’s long-term capital market assumptions, a portfolio with a 50% equity and 50% bond allocation is expected to achieve a 4.5% return on an annualised basis over a 10–15-year time horizon.

This is considerably lower than the 7% to 8% return that investors have been experiencing from those kinds of portfolios over the past 10 years, leaving a return gap for investors to grapple with. Now the fortune tellers of the markets are focused on how investors might replace those missing returns.

While some in the industry like to accuse others of being pseudo-psychics, the reality is that every informed investment professional knows it is not possible to predict the future. All they can do is observe the present and past and build a case for what might come – revealing some major themes on the horizon.

investors, with a new ultra-easy monetary policy approach the world over.

Anthony Doyle 02 , cross-asset investment specialist at Fidelity International, says monetary policy is responsible for the dominant forces at play right now.

Under the Biden administration, Janet Yellen is the US secretary of the treasury. She was the chair of the Federal Reserve from 2014 to 2018 and is considered a relatively dovish banker, supporting expansionary monetary policy and low interest rates.

“The reason that ultra-easy monetary policy and very stimulatory fiscal policy is so important is that it has a big impact on the US dollar, the world’s reserve currency,” Doyle says.

“So, the dollar is weak, the US economy is returning to growth, people are worried about inflation, and the Fed is going to keep interest rates low for a long time. Those trends reverber- If stock markets ate right through capital markets.” get concerned Doyle says if last year was defined by unprece- about inflation dented events, this year will be defined by reflation. rising too fast...

Diana Mousina03 , senior economist at AMP We could easily Capital agrees. She sees the risk of inflation as a see a 10% long-term issue that could trouble share markets. correction in the “A rise in bond yields tends to mean that eq- next few months. uities look a little less favourable, because the Diana Mousina return you get on a safe-haven investment like a bond looks better, so it normally leads to some underperformance by shares,” Mousina says.

“If stock markets get concerned about inflation rising too fast, which means that the Fed would have to increase interest rates soon, that’s when share markets could get spooked. We could easily see a 10% correction in the next few months.”

That said, she believes that over a six-to-12month time horizon the outlook for global equity market returns is positive.

As COVID-19 vaccines become available and economies start to reopen again, Doyle says that while the pandemic has been painful for many, the data shows that consumers are actually flush with cash.

“There will be a reflationary spending boom which will have impacts across the world as growth starts to accelerate again,” he says.

“What we’re seeing in the US is that incomes Money printers plugged in have actually risen, disposable income has risen, The response central banksAUGMO_FS around DoublePage&Strip_output_OL_v2.pdf the and the reason is because interest rates are9:56:00 so Finalfrom Artwork 210054-001 3 2/26/2021 AM world to the pandemic has soothed many worried low and paying off debt is cheaper.

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Of course, this mainly applies to the middle class and high net wealth population. The people feeling the pressure of the current crisis are those on low incomes and/or working in sectors like tourism and hospitality.

“One thing that is a big question going forward is how much income inequality will be exacerbated because of the pursuit of policies that central banks are following,” Doyle says.

“Since 2009, income inequality in regions that have pursued quantitative easing has grown significantly. What you found was the polarisation of politics to the right and to the left.”

But what is significant in this crisis is that central banks have shifted their focus from inflation targets to one where they’re trying to drive unemployment lower and generate higher real wages to compensate for inflation.

This shift in monetary policy can be seen in Australia too. In November 2020, Reserve Bank of Australia governor Philip Lowe said as much during a speech announcing a reduction of the cash rate to 10 basis points from 25 and a $100 billion program of government bond buying.

“It is not enough for inflation to be forecast to be in the target range. For inflation to be sustainably within the target range, wage growth will have to be materially higher than it is currently.

This will require a lower rate of unemployment and a return to a tight labour market,” Lowe said.

“On the current outlook, it will take some years to get there. Given this, the board is not expecting to increase the cash rate for at least three years.”

Berelowitz agrees with Doyle’s observation, saying he thinks the way central banks use monetary policy seems to have shifted entirely.

“We think we’ve seen a bit of regime change for monetary policy, and it’s likely to be structurally easier than it has been in the past,” Berelowitz says.

“And even as the economies recover, we’ve seen central bankers move incrementally more dovish in their reaction function.”

The unpredictable future For Shadforth private client adviser Sally Huynh04 , the news and data that impacts the macroeconomic environment is not something she thinks financial advisers need to be bogged down in to be effective.

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Feature | Global macros

www.financialstandard.com.au 8 March 2021 | Volume 19 Number 04

04: Sally Huynh

05: John Pearce

06: Sweeney Lachman

private client adviser Shadforth Financial Group

chief investment officer UniSuper

head of research Longlead Capital Partners

In fact, Huynh says it should be front of mind for every financial adviser to remember that they do not have psychic abilities.

“We can form a view, and we can even have a go at predicting things but at the end of the day that is just speculation – it’s not what we consider proper investing,” Huynh says.

Huynh bases her investment philosophy on extreme diversification, focusing on the longterm results through what she refers to as an evidence based approach to portfolio construction.

This isn’t just an index approach, instead it has tilts towards value or growth or small companies depending on the clients’ risk profile.

“As an example, our overseas share portfolio has 6000 companies in it. Our Aussie portfolio has about 400 businesses. It’s extreme diversification, it’s not about picking companies based on themes,” Huynh says.

“Everything starts from the client’s goals and we plan assuming the worst will happen. We put in place measures in the portfolio to make sure there is enough reserve in the portfolio to fund the clients’ cash flow if the worst happened.”

At $90 billion industry superannuation fund UniSuper, chief investment officer John Pearce 05 shares Huynh’s skepticism when it comes to some global macro multi-asset strategies or macro hedge funds.

Although, Pearce’s reluctance to embrace this investment approach comes from a different perspective.

“We don’t have those mandates because if you think about it, it’s effectively outsourcing your asset allocation decision,” he says.

“The other frequently used argument for macro strategies is that they can provide a source of uncorrelated returns. I find that a tenuous argument… Most of these strategies perform well when markets are up, and they perform poorly when markets are falling.”

For Pearce, taking the top-down view is a job for him and his team when they consider the funds’ strategic asset allocation.

During the sell-off that saw markets crash in March 2020, the J.P. Morgan Global Macro Opportunities fund managed to perform well.

Berelowitz says this is because his team noticed market complacency and through their analysis were able to take opportunities to capitalise on that.

“In mid-February, our concern started to increase when we suddenly saw more impacts [of COVID-19] in other parts of the world,” he says.

“What we thought was most important was the significant market complacency around it…

The price of options hadn’t risen at all, it was very cheap. In other words, saying that markets were not really worried about anything.”

Berelowitz and his team saw this as an opportunity to add downside protection against what they were beginning to view as a significant and rising risk, one that many investors were not positioned with proper consideration to.

“We added significant put option exposure.

What we saw from the middle of February, which was really a notable month, was a fairly incredible market sell off,” he explains.

“And as that accelerated through February into March, and volatility rose, we switched over protection strategies from options to futures. But we remained cautiously positioned throughout February and March.”

That allowed the fund to perform well in the first quarter of 2020, at the beginning due to select risk assets but then also holding fast during the sell off.

Pearce and Berelowitz, despite their different views on the role of global macro strategies, both identify the same major thematics playing out on a macro scale.

Will the tech “bubble” burst?

Pearce agrees with Berelowitz when it comes to several of the dominant themes driving investment decisions – one of them being the technology revolution.

They also agree that while the tech sector has been driving spectacular returns for equity investors for some time now, concerns that a second tech bubble could burst should not be too readily dismissed.

“There are obviously elements of a bubble in the technology sector. We’re kind of getting to historical highs in terms of companies having initial public offerings when they don’t make any money – and you’re seeing some really strong one day, one week performance in those companies,” Pearce says.

“There are definitely signs of a bubble in those companies…. But then you get to the big end of town and everyone talks about how expensive FAANG stocks are in terms of P/E. That’s just one statistic and it’s not a particularly meaningful one. If you look at the free cash flow that these companies are generating, they’re absolutely enormous.”

Similarly, Berelowitz cautions that, “it’s always difficult to say what is a bubble until it bursts”. But he says the pandemic has crystalised the technological revolution.

“We see positive fundamental stories underpinning a lot of the top performance in tech, accelerating trends,” he says.

“The acceleration, for example in e-commerce, is telling us that at least some of the strong performance is justified. So, we don’t think there necessarily is a bubble.”

That said, Berelowitz is still cautious on some of the highest valuation and highest growth sectors of tech and instead sees more opportunities in semiconductor companies.

In agreement is Longlead Capital Partners head of research Sweeney Lachman 06 , who has also observed the pandemic accelerating and crystalising macro themes that she and her team had already identified.

“Tech has certainly benefited from acceler-

We can form a view, and we can even have a go at predicting things but at the end of the day that is just speculation – it’s not what we con­sider proper investing.

Sally Huynh

ated digitisation, but in some segments, the market structure was already fundamentally improving,” she says.

“Take the supply side of the DRAM memory market for example, it has consolidated into a cosy oligopoly, with three players controlling 95% of the market. Ten years ago, 95% of the market was controlled by seven players.”

While tech is a diverse sector with different end market drivers. Lachman cautions that in certain segments valuations are looking quite stretched.

The market recovery after March 2020’s crash was led, in no small part, by technology.

“All the big names in the US – Facebook, Alphabet, Tesla, Netflix, Amazon – and the consumer discretionary names in the US did extraordinarily well because so many of us were using technology last year,” Mousina says.

“We saw really good redistribution of spending from consumers. You couldn’t spend money on eating out, but people were still spending on items relating to the home. That’s why the US outperformed other parts of the world in terms of its share market. It has a higher weighting to many of these consumer stocks.”

Mousina points out that tech stocks benefit from a low interest rate environment, because these companies are generally priced on forward earnings. An environment of higher interest rates could certainly dampen the performance of these tech stocks, she points out.

Matt Peron07, director of research at Janus Henderson, identifies another issue tech investors should consider carefully – the rise and rise of passive investing. He points out that passive trackers tend to follow the winners, and many of those winners are tech companies trading at very high valuations.

“There are areas of the market that have expectations embedded in them that are too optimistic,” he says.

“That said, we continue to view the tech sector favourably, but now more than usual, one needs to be selective and sort out the realistic technologies from those that may disappoint.

We feel confident that our key holdings have a long runway of growth in front of them, with valuations that are not unreasonable.”

Peron believes that there is genuine innovation underpinning the returns from some tech companies and driving the ongoing digitisation revolution.

Schroders head of fixed income and multiasset Simon Doyle 08 thinks fears of a bubble in tech are a little exaggerated given that parts of the sector have grown earning significantly.

But, he says: “A key risk would come from changes to the regulatory environment that reduced the power of the sector.”

With Australia’s news media and digital platforms mandatory bargaining code passing parliament, government’s curtailing tech companies’ growth and earnings is certainly an area to watch.

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Feature | Global macros

www.financialstandard.com.au 8 March 2021 | Volume 19 Number 04

07: Matt Peron

08: Simon Doyle

09: Patricia Ribeiro

director of research Janus Henderson

head of fixed income and multi-asset Schroders

vice president and senior portfolio manager American Century Investments

Reflation meets decarbonisation Lachman and Peron also each have their concerns about another thematic that has firmly emerged at the macro level – decarbonisation, perhaps also identified through the lens of the rise in ESG investing.

“Given the spotlight ESG has seen recently, we are concerned of the risk of greenwashing.

It is important to take a step back and to focus on what ESG investing was originally designed for,” Lachman says.

“For example, perceived ‘dirty’ energy companies may experience less availability to financing, but it is these companies that can generate a meaningful positive impact if they could invest in new cleaner technologies.”

Peron, meanwhile, is concerned that stocks given an ESG label could become over owned by passive trackers or casual investors. If this is true, then expectations for these stocks could be far too high.

“Taking a broader perspective on the intention of ESG, namely, to drive improved societal outcomes, many of our funds invest in the key themes that we believe will benefit society through first and second order channels that might not be obvious to a non-industry professional, but are just as important,” Peron says.

“So, while it is important to invest in a lifesaving drug, or a new battery technology, it is

just as important to invest in the tools and platforms that can drive further advancement in these key technologies. It is an exciting time to invest in these themes as the rise of ESG is highlighting to our clients and to the public at large, the benefits of innovation and capital formation in these areas.”

Berelowtiz cautions that although the growth in ESG has been so strong it could easily be compared to tech; it looks to him as though it is largely justified by improving fundamentals.

“We’re seeing these fundamental stories coming through at all levels. Most significantly for us has probably been at the macro level, where you’ve seen governments committing to net zero targets and cuts to emissions,” he says.

With US President Joe Biden likely to announce his Build Back Better program later this year, Berelowitz is anticipating a further boost to spending on renewables. In Europe, the EU Recovery Fund has already committed to a similar focus on decarbonised investments.

According to J.P. Morgan’s BP Energy Outlook 2020 (Figure 1), past performance of oil, gas and coal investments are about to be turned on their head. The firm’s research predicts that renewables will over take coal as a percentage of global energy by 2030, oil by 2037 and gas by 2040.

Pearce acknowledges that the speed of decarbonisation has not been as rapid in Asia. How-

Figure 1. Global energy mix

Source: BP Energy Outlook 2020, J.P. Moran Asset Management. Part performance in not a reliable indicator of current and future results.

Guide to the Markets - Europe/ Data as of 31 December 2020.

Figure 2. Growth of the middle class

Source: J.P. Moran Asset Management; Brookings Institute, May 2019. Middle class defined as $3,600-$36,000 annual per capita income in purchasing power parity terms. Historial and forcast figures come from the Brookings Development, Aid and Governance Indicators.

ever, he points out that China committing to net zero emissions by 2060 could be a turning point.

“China is the giant in the region, so that’s already put a line in the sand,” he says.

“I expect over time the goal of 2060 will become 2050 and other Asian countries will follow suit.”

Emerging opportunities

It is important to take a step back and to focus on what ESG investing was originally designed for.

Sweeney Lachman

Prior to the pandemic, many in the investment industry had their money on the emerging middle class in Asia (Figure 2) and the rise of emerging markets as a macro trend that would drive returns.

Despite hospitals in less developed countries struggling to handle COVID-19 and the possibility that vaccines could be hogged by wealthy countries, this positive view of emerging markets has largely remained unchanged.

American Century Investments vice president and senior portfolio manager Patricia Ribeiro 09 concedes some valuations appear stretched, but emerging markets stocks are still trading at an important discount compared to developed markets.

“Based on emerging markets’ share of global mutual fund assets under management, allocation is still at an early stage,” Ribeiro says.

“Our emerging markets portfolio held up very well which should be an indication of the underlying strength in the businesses we own(ed). We didn’t make large scale changes to the portfolio during March 2020; the few changes we made were due to company-specific issues (such as less visibility in the improvement of earnings).”

Doyle’s view on this has not changed either, with the pandemic having accelerated what he views as a structural trend.

“A lot of people thought these emerging markets would be hard hit by the COVID-19 pandemic. But these populations are younger, that assisted them in having a better profile in terms of the spread,” Doyle says.

“While the health systems struggled, they didn’t shut down like you saw in the developed markets that had the ability to do that so subsequently their growth has been a little stronger.”

Asian equities have outperformed US equities during the pandemic, Doyle points out, however as commodity prices were hit Eastern Europe, the Middle East, Africa and Latin America were hard hit. But this, he says, could be reversed by reflation and commodities accelerating again. He thinks the next wave of emerging market outperformance could come from Latin America or Europe and the Middle East.

For Berelowitz, COVID-19 has not changed the macro theme of emerging market consumer demand.

“We think getting exposure to those consumers is really attractive,” he says.

The rise of the middle class in emerging markets is a long-term trend and the data on consumption as a proportion of GDP supports this, he says – with indications it is rising rapidly. fs

20

News

www.financialstandard.com.au 8 March 2021 | Volume 19 Number 04

J.P. Morgan top custodian

01: Helen Coonan

chair Australian Financial Complaints Authority

Karren Vergara

The Australian Custodial Services Association’s (ACSA) biannual statistics revealed J.P. Morgan owned the lion’s share of the $4 trillion local custody market at the end of December 2020.

Nearly a quarter or $973.2 billion of the asset pool is serviced by J.P. Morgan, followed by Northern Trust at $660.9 billion, which has a 16% market share, and Citi at $589.7 billion, with a 15% holding.

J.P. Morgan won several custody mandates last year; CareSuper, TelstraSuper and Xplore are some examples.

The rest of the top 10 comprised: NAB Asset Servicing ($538.5bn), BNP Paribas ($475bn), State Street ($460.7bn), HSBC ($196.1bn), Clearstream ($70.9bn), Netwealth ($38.8bn) and BNY Mellon ($25.9bn).

With total assets under custody growing 7.4% over the six months, ACSA chief executive Robert J Brown attributed the rebound to improving market returns.

“Looking behind the numbers, there has been continued operational adaption to pandemic impacts that have allowed the industry to remain resilient,” he said.

During the national lockdown last year, exception processing emerged as a weak link for custodians.

Some transaction types depended on wet-ink signatures and physical documents, Brown said, adding that such transactions require new approaches to improve efficiency, contain risk and minimise the potential for disruption. fs

Best platforms named: Research Jamie Williamson

Investment Trends’ latest look at the platforms space has seen HUB24 just inch out Netwealth for the lead when it comes to overall functionality.

The 2020 Platform Benchmarking & Competitive Analysis Report sees HUB24 rank first for platform functionality with a total score of 89%, just beating Netwealth on 88.9%.

Investment Trends said HUB24 scored highly across all six metrics measured, while Netwealth scored highly across four of the six.

“The narrow difference in overall platform functionality scores highlights the intense competition between the leading platforms, many of which have made meaningful refinements to their product offering, reporting, decision support tools and integration in the last 12 months,” Investment Trends’ associate research director King Loong Choi said.

Rounding out the top five are Praemium (84.8%), BT Panorama (82.4%) and Macquarie Wrap (76.5%).

The research house said it was clear this year that platforms are responding to the needs of financial advisers with functionality improvements, namely the move to paperless, fully digital processes.

“In the last 12 months alone, HUB24 and MLC MasterKey have incorporated electronic ID verification services to automate KYC checks and super withdrawals, while Praemium and CFS FirstChoice launched tools for advisers to electronically send documents to clients for digital acceptance,” Choi said. fs

AFCA chair under fire Elizabeth McArthur

T

The quote

Her background is the law and Crown has been not just found to have broken the law on her watch but also committed serious breaches of good corporate governance.

he woes of Crown Resorts seem far from over, and now scrutiny has turned to executive chair Helen Coonan – with some suggesting she should resign from the Australian Financial Complaints Authority (AFCA) before her term as chair ends in May. Crown announced that Coonan will be paid an extra $1.8 million, after stepping in as interim executive chair to lead the company when chief executive Ken Barton resigned on Monday. This brings her total remuneration from Crown to $2.5 million a year.

Speaking to Financial Standard, Alphinity portfolio manager Bruce Smith said he isn’t sure how Coonan sailed through the NSW inquiry into Crown - which found the company was not suitable to hold a casino licence - and kept her position as chair.

“Helen Coonan seemed to get a tick from the inquiry although after a decade on the board and several years as chair this is surprising,” he said.

“Her background is the law and Crown has been not just found to have broken the law on her watch but also committed serious breaches of good corporate governance.”

He suggested perhaps she is staying in her position for the sake of the company having some continuity.

“I can see her staying in the job for a period of time, overseeing a renewal of the board and the appointment of a new chief executive, and then after a period of time, making a gracious exit,” Smith said.

“There will need to be radical changes in the organisation - more than just a couple of directors and the chief executive - in order for

Crown to assuage regulators’ concerns. This will likely include significant changes to the share register.”

WA is poised to push ahead with a Royal Commission style probe into the casino company. Crown said in a statement to the ASX that it would fully cooperate with the inquiry.

Coonan commented that she hopes Crown can assist in restoring public and regulatory confidence in its operations.

“I expect it will do whatever it takes to fix this but the path to get there is not clear and it is likely to take some time,” Smith added.

A spokesperson for AFCA said: “As chair of AFCA, Helen Coonan01 has helped to establish a world-class ombudsman service that is free to consumers and small business, and binding on financial firms. During her time as chair, AFCA has assisted over 153,000 Australians to resolve disputes with financial firms, providing over $535 million in compensation to individual consumers and small business owners.”

The AFCA spokesperson also pointed to the Independent Liquor and Gaming Authority report, which found that Coonan had relied too heavily on Barton without knowing about his involvement in advocating for the maintenance of certain accounts when ANZ Bank alerted him to money laundering risks.

The report found this “misplaced reliance” on Barton was not a flaw on Coonan’s part.

Coonan announced at the AFCA annual general meeting in November that she would not be seeking reappointment in May 2021.

However, that’s not enough for the Victims of Financial Fraud (VOFF) group, which is unsatisfied with Coonan’s position at the authority. fs

Macquarie profits off severe weather Annabelle Dickson

Macquarie Group has increased its short-term guidance as demand rises for gas and power in Texas after severe weather conditions caused the collapse of its local electricity supply.

Macquarie expects its annual profit to increase by between 5% and 10% on the previous year as client demand has increased for its stores of energy.

Texas’ independent power grid, which operates as the Electric Reliability Council of Texas, was unable to handle the freezing temperature and heightened demand for power.

“Macquarie’s Commodities and Global Markets (CGM) business physically ships gas on the majority of major pipelines across the US and overtime has built capacity to support clients by delivering power and physical commodities to help them meet the unexpected needs of their customers,” Macquarie said in a statement.

Macquarie previously announced on February 9 that it expected its FY21 result to be slightly down on the previous year.

However, Macquarie said the short-term outlook is subject to uncertain factors including the duration of COVID-19, the speed of global economic recovery and the geographic composition of income.

As a result, the group maintains a conservative approach to capital, funding and liquidity so it is able to respond to any of these factors.

The upgraded outlook comes as Macquarie Infrastructure and Real Assets (MIRA) made an offer to acquire telecommunications company Vocus earlier in the month.

MIRA offered to acquire Vocus for $5.50 per share, however the offer is conditional on the completion of due diligence. fs

News

www.financialstandard.com.au 8 March 2021 | Volume 19 Number 04

21

Products 01: Arian Neiron

VanEck readies new ETF VanEck will launch a new global equities ETF that tracks 30 listed companies in the clean energy sector.

VanEck said it expects the ETF to start trading on the ASX in the coming weeks, subject to regulatory approval under the ticker CLNE, for The VanEck Vectors Global Clean Energy ETF. CLNE tracks the S&P Global Clean Energy Index, which has been around since 2007.

The underlying index includes 30 companies from around the world, including clean energy production and clean energy equipment and technology companies.

“The demand for clean, green energy and the inevitable transition away from scarce nonrenewable fuels is a global mega-trend offering huge investment potential,” Van Eck chief executive Arian Neiron 01 said.

“In an Australian first, investors will soon be able to invest in an ETF of global clean energy and technology companies that are positioned to benefit from this structural shift that has the potential to transform industries, society and the world.”

Newly elected US president Joe Biden recently turned the spotlight on the Paris climate agreement, to which the US has re-committed.

Biden has promised to spend US$2 trillion on clean energy projects over the next four years.

Elsewhere around the globe, money is pouring into the sector to invest in renewable energy projects.

“This is creating significant demand for renewable energy. As the momentum builds, so too will demand for renewable energy and investment in those companies that produce it and the technologies that drive it,” Neiron said.

“Investors are demanding action on climate change and increasingly they are demanding investment products that facilitate a lower carbon future. CLNE responds to this need.”

Seek launches investments arm Seek’s founder and long-time chief executive Andrew Bassat is transitioning into a new role within the company as the chief executive of its new venture, Seek Investments.

Seek said Seek Investments will focus on being an investor and business builder that partners with emerging leaders to support their aspirations and deliver long-term returns.

It said the board was reviewing various options that will allow Seek to retain significant economic exposure to Seek Investments while having the ability to access third party capital for Seek Investments as it continues to grow.

An independent board committee, which has retained unnamed external advisers, has been established to oversee the process of the review.

Seek said it is expected that the review will lead to two independent and focused businesses.

The first being Seek and the second being Seek Investments which will own and manage earlystage ventures and online education services.

It said its key to success will include the ability to operate independently and access third party capital.

PIMCO eyes ETFs The fixed income giant is getting ready to list its fixed income funds as active ETFs in Australia.

PIMCO, which managed over $52 billion in Australian assets at September end, has so far stayed away from ETFs. It did list nine of its strategies in ASX’s mFunds marketplace. These totalled $256 million in total assets at January end.

It has now applied to ASIC for approvals on listing at least three fixed income funds on the exchange: the $1.1 billion PIMCO Income Fund, the $7.2 billion PIMCO Global Bond Fund and the $4.3 billion PIMCO Diversified Fixed Interest Fund.

PIMCO plans to list the three strategies as quoted managed funds on Chi-X. A local spokesperson for PIMCO declined to comment.

ETF assets (for ASXlisted funds) sat at $96 billion at January end.

New launches have returned to the market in recent months, after ASIC removed regulatory scrutiny on active ETFs.

Seek chair Graham Goldsmith thanked Bassat for his 23 years in leading the Seek APAC and Australia business and said this transition has been a long-time priority.

“Andrew decided now is the time to transition away from the Seek chief executive role and focus his expertise and passion on growing Investments,” Goldsmith said.

The board said Investments will need substantial additional capital and a willingness to support further sustained periods of larger losses.

“An independent Investments will be better placed to make aggressive long-term investment decisions and access external capital,” Seek said.

“Online education services stands to benefit from ongoing investment and a close cooperation with early stage ventures education portfolio to continue to deliver a world-class experience for partners and students.”

The transition will see Ian Narev02 , former Commonwealth Bank boss, take over as chief executive of Seek, effective 1 July 2021.

“I am honoured that Andrew and the board have chosen me to become Seek’s chief executive. I am not going to try to fill Andrew’s shoes,” Narev said.

“It is impossible to overstate the value of his strategic insight, and the esteem in which he is help by Seek’s people.”

Narev said he is committed to do whatever he can to help Seek to continue its record of pursuing its vision and purpose.

“I have been tremendously impressed with the passion and talent of Seek’s people during my two years here. I look forward to continuing to work with them to help achieve Seek’s purpose,” he said.

New corporate bond fund launches Artesian Capital has launched a new corporatefocussed, green and sustainable bond fund open to both wholesale and retail investors.

Artesian said the fund was seeded by an Australian ethically minded super fund, which has been running since late September.

The Artesian Green & Sustainable Bond Fund aims to offer investors access to a diversified portfolio of green, sustainable and social bonds.

Artesian said it is not necessary to sacrifice best of class, risk adjusted returns while pursuing transformational impact investments.

The fund aims to outperform commonly used “vanilla bond indices” net of fees.

Artesian said while it only has a relatively short track record, the fund has beaten its benchmark in each of the five months since inception.

“We have been actively trading green bonds from our New York and London offices for five years, so we were delighted when we saw issuance take off in the AUD market,” Artesian chief investment officer Matthew Clunies-Ross said.

“In saying that, the AUD green and sustainable corporate bond market is still quite niche due to its size, so it made perfect sense for us to offer this type of fund to our investors.”

Artesian said the fund has proven popular since

02: Ian Narev

its inception, attracting institutional, wholesale and retail investors.

Artesian portfolio manager David Gallagher said the fund tackles climate change, as well as aims to address the United Nations 17 Sustainable Development Goals (SDGs).

“Whilst the fund is still in its infancy, we are quite proud we have been able to address 13 of the 17 SDGs, such as sustainable cities and communities, clean water and sanitation and gender equality through some of the corporate bonds owned by the fund,” Gallagher said.

“We are achieving this whilst not compromising on investment returns for our investors.”

CommSec launches trade knowledge tool CommSec said it has seen a 200% increase in investors seeking executional information around how trading works as younger people show increased interest in wholesale trading.

CommSec said first time traders contributed to around 10% of total trades since February 2020, compared with 4% prior to COVID-19.

Additionally, the data found the number of firsttime traders more than doubled since February last year, up to 18% from 8% pre-pandemic.

CommSec said most new customers (83%) were under 44 years old, marking a 17% increase compared with pre-COVID trends.

In response to more investors entering the market, CommSec has launched CommSec Learn, a series of free learning topics with videos and exercises designed to help investors expand their knowledge.

CommSec executive general manager Richard Burns said the bank saw an increase in consumption of its educational materials when COVID hit.

“There was a thirst for learning, however, it was interestingly leaning towards more executional topics with fewer clicks on the important basics such as planning or strategizing,” Burns said.

“As such, we felt there was an opportunity to help build those important investment foundations and assist investors in hopefully achieving long term success.”

Burns said CommSec Learn aims to be an easy way for investors to grow their skills and knowledge, at their own pace, to make informed investment decisions.

He added that the tool is not intended to offer personal advice or recommendations, rather it was designed to help investors get a better understanding of their investments and the factors that can affect their performance.

“It’s helpful to think of investing as just the beginning of your share market journey. It’s important to regularly monitor the markets and your portfolio, and understand your risk appetite,” Burns said.

“Knowing how to keep track of your progress and how you stack up against key benchmarks is essential for understanding how your investment is performing and whether you may need to rebalance your portfolio.” fs

22

News

www.financialstandard.com.au 8 March 2021 | Volume 19 Number 04

Financial services least trusted

01: Xavier O’Halloran

director Super Consumers Australia

Elizabeth McArthur

According to the 2021 Edelman Trust Barometer, financial services is the least trusted industry in the world – losing even more trust during the pandemic.

Global public relations giant Edelman has been assessing the public trust in various sectors since 2012, using surveys and assigning percentage points based on trustworthiness.

Since 2012, financial services has consistently scored the lowest of any sector for trust. But, over the decade Edelman has been keeping score, the industry has managed to claw back eight points – perhaps reflecting the increased emphasis on ethics and regulation following the global financial crisis.

Just 44% of people trusted financial services in 2012, compared to 77% trusting technology and 64% trusting food and beverage companies.

Over the years since, financial services managed to claw back some trust – hitting a high of 57% trustworthiness in 2019. But, in 2020 that dropped to 56% and in 2021 it has dropped again to 52%.

Despite gaining points over the years, financial services remain the least trusted industry. It is behind energy companies, which are trusted by 59% of people and entertainment companies (also 59%).

Technology and healthcare are the most trusted sectors, with 68% and 66% public trust respectively.

The Edelman Trust Barometer surveyed 33,000 people in 28 countries between October and November 2020.

Edelman suggested the COVID-19 pandemic has deeply impacted consumer trust of corporates. fs

Mergers prompt 13% fee drop Karren Vergara

A

The quote

In all mergers considered members of the junior partner (the smaller fund) experience reduced fees.

Review of AFCA underway The government has released terms of reference for the review of the Australian Financial Complaints Authority, asking for stakeholder feedback.

The review will be conducted by Treasury, aiming to test whether AFCA is operating effectively and achieving its objectives.

The terms of reference consider how AFCA is delivering against its statutory objectives of resolving complaints in a way that is fair, efficient, timely and independent.

Stakeholders are asked to provide feedback on AFCA’s dispute resolution approach, process for identifying responses to systemic issues and whether its funding and fee structures impact competition.

At the moment, AFCA’s independent assessor has the ability to review complaints about the standard of service provided by AFCA but does not have the power to review the merits or substance of an AFCA decision. Treasury is asking stakeholders where this scope and remit for the independent assessor is appropriate and effective.

Treasury also wants to understand whether there is a need for AFCA to have an internal mechanism where the substance of its decision can be reviewed. The review asks for feedback on how such a mechanism should operate to ensure consumers and small business have access to timely decisions by AFCA. “The establishment of AFCA represented significant reform of financial services complaints resolution in Australia,” AFCA chief ombudsman and chief executive David Locke said. fs

n analysis by Super Consumers Australia (SCA) found MySuper fees of merged entities dropped by 13.4% on average.

The consumer advocate group looked at eight mergers that occurred in 2019 and 2020; six were single successor fund and two involved consolidating but maintaining two distinct product offerings.

SCA found that members in non-merged funds saw their fees decrease by just 2.76%.

“In all mergers considered members of the junior partner (the smaller fund) experience reduced fees, as do members of the majority of senior partners,” the report said.

“We find that 29% of the funds in our sample can be classified as underperformers in terms of their investment performance and that they are involved in 40% of the mergers we analysed. All of these underperforming funds have already finalised their mergers.”

Super Consumers Australia director Xavier O’Halloran01 said it is clear that in superannuation size matters.

“Responsible super funds are looking to find merger partners so they can pass efficiency gains on to members in the form of lower fees,” O’Halloran said.

“While the mergers are encouraging, we hoped to see more underperforming funds opt to merge with a stronger partner.”

Several mergers are currently in the works, LGIAsuper and Energy Super; NGS Super and Australian Catholic Superannuation and Retirement Fund; QSuper and Sunsuper; and Media Super and Cbus.

WA Super recently folded into Aware Super, while MTAA Super and Tasplan will be known as Spirit Super from April 1.

Research from Rainmaker, which spanned over three years, found that merged entities passed on a 20% fee saving to members.

Across 11 mergers, the more expensive fund’s fees were lowered and members saw an average fee drop of 21%. For the fund with lower fees going into the merger, seven of the 11 saw an average reduction of 5%.

However, fees went up for Virgin Super and Mercer Super Trust members and those in Catholic Super and Equipsuper.

Rainmaker executive director of research Alex Dunnin said fees do not go down just because a super fund merges, they go down because the trustees redesign the product.

“Products are more likely to be redesigned in a merger but not when funds just combine their back offices,” he said.

O’Halloran added that APRA’s performance heatmap shows there are still 18 struggling funds which, on SCA analysis, are chronically underperforming. fs

Aon, WTW merger will reduce competition Eliza Bavin

The ACCC has flagged concerns over Aon’s proposed merger with Willis Towers Watson (WTW), throwing a spanner in the works for the two companies.

The ACCC said Aon and WTW are two of the three largest providers of commercial risk, reinsurance and employee benefits broking and advisory services globally, including in Australia.

The ACCC is concerned the proposed merger will significantly lessen competition in the supply of those services locally.

“We are concerned that the combination of Aon and WTW will remove a significant competitive constraint from the markets for commercial risk broking to large customers or those with more complex and/or high-value insurance premiums; reinsurance broking; and employee benefits broking in Australia” ACCC commissioner Stephen Ridgeway said.

The regulator said the proposed merger may lead to price increases or reduced service levels for large, complex or highvalue commercial insurance customers.

Additionally, it said it may also limit the insurance coverage and pricing smaller brokers are able to obtain for their customers.

The ACCC is now considering whether the effects of the proposed merger are especially pronounced in certain commercial insurance risk classes or industry specialities such as financial and professional, cyber, marine insurance and insurance for construction projects.

It also said it was concerned about the impact of the proposed merger on the supply of reinsurance broking and advisory services, particularly for the supply of reinsurance which covers all current and future policies written by the primary insurer for particular risks.

“Reinsurance is vital for the Australian economy as it enables insurers to continue to write new insurance policies,” Ridgeway said.

“The ACCC is concerned that the proposed merger will reduce insurers’ choice of reinsurance brokers in an already concentrated market. This could lead to price increases or reduced service levels for customers, including the ability to access sufficient reinsurance capacity.”

The proposed merger will reduce the three major providers of employee benefits broking and consultancy services in Australia to two, especially for customers that require global coordination of these services, the ACCC said.

It may also increase the risk of coordinated effects in the markets where Aon and WTW compete, it added.

“Reducing the number of brokers in these already concentrated markets, increases the potential for the remaining brokers to align their pricing and strategies,” Ridgeway said.

Shareholders approved the merger back in August last year after an extraordinary general meeting and at the special meeting of WTW shareholders which was ordered by the High Court of Ireland. fs

News

www.financialstandard.com.au 8 March 2021 | Volume 19 Number 04

23

Executive appointments 01: Jacqui Arnott

T. Rowe Price names new executive T. Rowe Price has promoted from within to appoint a new wholesale and family office distribution lead for Australia and New Zealand.

The global asset manager announced the appointment of Jacqui Arnott01 who has been working at the firm since 2015.

Arnott will remain in her role as T. Rowe Price relationship manager as well as taking on the responsibilities of the new position.

Arnott has over 12 years’ experience at global financial institutions in a range of relationship management roles looking after ultra-highnet-worth and high-net-worth research and intermediary clients.

Prior to joining T. Rowe Price in 2015 Arnott worked for Julius Baer Private Bank and Merrill Lynch Wealth Management in London and Los Angeles.

In her new role, Arnott will be responsible for leading the firm’s growth in the wholesale and family office distribution channels, including the private banks.

She will continue to report to head of intermediary Australia and New Zealand Jonathon Ross and will remain based in Sydney.

“Greater demand is being seen by this segment for more selective exposure and risk management amidst these times of accelerated change and unprecedent volatility,” Ross said.

“Our key focus is to ensure wholesale and family office clients have access to T. Rowe Price’s global investment expertise across our equity, fixed income and multi-asset capabilities that align with their long-term objectives.”

Ross added that Arnott has demonstrated strong experience in the wholesale and family office distribution channel and said she is an ideal candidate to lead the important growth area for the firm.

“Her extensive knowledge and experience in this important client segment make her an ideal candidate to deepen our existing relationships and drive new partnerships,” he said.

T. Rowe Price offers six Australian unit trusts to wholesale investors in Australia and New Zealand, providing access to the firm’s global equities, Australian equities and global fixed income strategies.

The firm also offers its global range of investment strategies to institutional clients across a range of vehicles.

PIMCO names Asia Pacific lead PIMCO has named a new lead for its Asia Pacific business as part of an executive shuffle.

The global fixed income fund manager promoted Alec Kersman as the head of Asia Pacific, leaving behind his role of head of strategic accounts in US global wealth management (GWM), which he held for about a year.

Kersman joined the firm in August 2005 as executive vice president to lead Latin America and the Caribbean and went on to become managing director for the regions.

Trilogy appoints property head Trilogy Funds Management has appointed a head of lending and property assets following the retirement of David Hogan last month.

Clinton Arentz has been named head of lending and property assets, which encompasses his current role leading Trilogy’s financing team as head of lending, property acquisition and development management.

He replaces Hogan who retired in January after more than 50 years in the property and financial services industries.

Arentz, who has been with the fund manager since 2017, has more than 25 years’ experience in asset management and property development.

Before joining Trilogy Arentz ran Winston Group for close to three decades, advising on commercial, industrial and residential projects in Queensland. He has also previously worked with JLL Australia.

Commenting, Arentz said: “With the property market strengthening, we are seeing great support from our investors, allowing us to continue to provide competitive finance for property and construction developers, and, on the other hand, grow our property asset portfolio to provide opportunities for our investors.”

Kersman takes over from Kimberley Stafford, who led APAC for over four years, based in Hong Kong.

She will become the new global head of the product strategy group, returning to PIMCO’s Newport Beach, California office in mid-2021 to oversee traditional strategies and alternatives, which include private strategies and hedge funds.

Kersman and Stafford will report to chief executive Emmanuel Roman.

Vice chair of the firm’s executive office John Studzinski will continue playing a key role in broadening relationships in Asia Pacific with leaders in business, finance, government and NGOs. Roman commented: “With his deep understanding of the regulatory environment and proven strategic leadership, Alec will build on the excellent work that Kim and the team have delivered over the past four years driving our expansion in Asia Pacific.”

On Stafford’s appointment, he said her expertise in managing client relationships will be invaluable as PIMCO continues to evolve products and strategies for investors in traditional and private strategies.

David Fisher and Eric Sutherland will take over Kersman’s responsibilities as co-heads of US global wealth management strategic accounts.

Fisher is currently the head of traditional product strategies, while Sutherland is the president of PIMCO Investments. They will report to Gregory Hall, the head of US GWM. Hong Kong-based head of hedge fund and quantitative strategies Ryan Korinke will relocate to Newport Beach.

Super fund names new chief executive A $2.3 billion government fund has announced that its chief executive of 13 years is departing, with a replacement from a merging industry fund stepping into the role.

Michelle Wade 02 has resigned from AvSuper after 13 years leading the fund.

She will be replaced by Michael Sykes, currently deputy chief executive of MTAA Super.

Sykes has been with MTAA, which will merge with Tasplan on April 1, for 15 years.

“Michelle has contributed greatly to the fund and she will be missed by everyone involved with AvSuper; the members, the staff, the board and the companies that partner with us to deliver outstanding customer service,” AvSuper chair Ben Firkins said.

“She has been instrumental to AvSuper’s continual expansion of services to our members, and in steering us through the challenging times of the GFC, COVID-19 and the significant regulatory change that has occurred over the past decade.”

Sykes will commence in the role in April 2021.

Wade’s departure is immediate, so AvSuper has appointed executive manager Nick Smith as acting chief executive until Sykes’ arrival.

“The board and staff of AvSuper are looking forward to Michael becoming part of the team

02: Michelle Wade

and continuing to build upon the living ethos of ‘members’ first’,” Firkins said.

AvSuper won member’s choice at the 2019 Rainmaker SelectingSuper awards, which Rainmaker said indicated the fund was successful at engaging members.

AvSuper was established in 1990 to provide super benefits to employees and former employees of Airservices Australia and the Civil Aviation Safety Authority (CASA). It went public offer on 1 July 2005 and currently has more than 6500 members.

Aviva Investors appoints CIO Global asset manager Aviva Investors has appointed a new chief investment officer to its $84.4 billion real assets business.

Daniel McHugh has been appointed, reporting to former chief investment officer Mark Versey who has now stepped up to the role of chief executive.

McHugh will be responsible for overseeing 300 professionals working across funds management, asset management, development, transactions, origination, underwriting, research and business management.

He joined Aviva Investors in 2018 as managing director, real estate and is a member of the real assets senior leadership.

Prior to that, McHugh was head of continental European real estate investments at Standard Life Investments.

“I’m delighted that we have promoted one of our own to the role of chief investment officer for Real Assets, which is central to our commercial strategy and an area we continue to see strong demand from our UK and international clients,” Versey said.

He added that McHugh has an exceptional investment pedigree, with a relentless focus on clients and delivering strong performance.

“Since he joined the business, we have significantly built out our development, asset management and transaction capabilities in Real Estate, expanding our investment strategy in exciting new European locations and forging strong partnerships with key international investors,” he said.

“Daniel shares my ambition to establish Aviva Investors as a market leader in Real Assets, and I have every confidence the business will flourish under his leadership.”

McHugh added: “I’m excited and proud that Mark and the executive team have given me the opportunity to lead our Real Assets business and I can’t wait to get started. We have a fantastic franchise, with highly capable and motivated teams across Real Estate, Infrastructure and Private Debt, and an integrated ESG approach that I believe is a differentiator for our parent Aviva and our external clients.”

“My objective will be to ensure we continue growing the platform by delivering the investment outcomes our clients demand.” fs

24

International

www.financialstandard.com.au 8 March 2021 | Volume 19 Number 04

CFA unveils exam results

01: Nico Marais

chief executive Wells Fargo Asset Management

Karren Vergara

Less than half of the candidates who sat the first stage of the rigorous CFA exam have passed, global results from the institute shows.

The CFA Institute announced 12,806 of the 26,212 or 49% of Level I candidates passed their examination in the December 2020 sitting.

Fifty-five percent or 10,025 of the 18,136 Level II candidates passed and will progress the third and final stage.

Some 6290 of the 11,330 or 56% of the Level III candidates passed the exam and will move onto become charterholders, a qualification held in high regard by the investment management industry.

CFA charterholders work in different areas of investment management such as private wealth, investment banking and insurance.

In mid-2020, the institute surveyed its global members asking about the impact of COVID-19 on their employment. The majority (77%) reported that their roles were unaffected, while nearly half said their firms had either frozen hiring (36%) or commenced downsizing (9%).

Exams were held in specific locations because of the pandemic. Last December, the CFA Institute administered the tests in 170 test centres in 91 cities.

CFA institute president and chief executive Margaret Franklin congratulated the candidates who sat the most recent exams and passed their respective levels.

“It is a tribute to the resilience and dedication of these candidates to have persevered with their exam preparation in the midst of all of the uncertainty brought on by the pandemic. Well done to all candidates progressing to the next level of the exams and to those who are now on the path to earning their CFA charter,” Franklin said. fs

Wells Fargo sells asset management business Eliza Bavin

W The quote

This transaction reflects Wells Fargo’s strategy to focus on businesses that serve our core consumer and corporate clients.

Goldman Sachs goes robo Goldman Sachs has launched a robo-investment offering that helps retail clients achieve their financial goals by automatically rebalancing their portfolios with the use of exchange-traded funds.

Marcus Invest offers over 50 ETF products invested in bonds and equities, categorised across three strategies.

Core is for investors who believe “it’s hard to beat the market’s average returns” and invest in companies based on their market capitalisation.

Impact invests in companies that meet certain environmental, social and governance (ESG) criteria, while Smart Beta scores companies on fundamental and technical factors of performance.

“We’ll recommend a diverse mix of stock and bond ETFs that are aligned with your goal.

You’ll have exposure to a range of industries and economies, so you have multiple opportunities for growth and won’t be tied to the fate of a single stock,” the website shows.

The functions that are automated include the portfolio recommendation tool, account monitoring and rebalancing.

“However, there is frequent human involvement in designing and providing oversight to our investment process, ETF selections, and portfolio recommendations,” the firm said. fs

ells Fargo has entered into a definitive agreement to sell Wells Fargo Asset Management (WFAM) to GTCR and Reverence Capital Partners for US$2.1 billion, while also offloading four of its closed-end funds.

The sale includes Wells Fargo Bank N.A.’s business of acting as trustee to its collective investment trusts and all related WFAM legal entities.

Wells Fargo said the transaction is expected to close in the second half of 2021.

As part of the transaction, Wells Fargo will own a 9.9% equity interest and will continue to serve as the client and distribution partner.

WFAM has US$603 billion in assets under management, 24 offices globally, and specialised investment teams supported by more than 450 investment professionals.

“Operating as an independent firm as a portfolio company of GTCR and Reverence Capital will provide numerous benefits to WFAM’s clients, employees, and strategic partners — including Wells Fargo,” chief executive of Wells Fargo wealth and investment management Barry Sommers said.

“At the same time, this transaction reflects Wells Fargo’s strategy to focus on businesses that serve our core consumer and corporate clients and will allow us to focus even more on growing our wealth and brokerage businesses.”

Wells Fargo confirmed that once the transac-

tion is complete the new, independent company will be rebranded.

WFAM chief executive Nico Marais 01, who has been in the role since June 2019, will remain in his position and his leadership team will continue to oversee the business.

Additionally, the former chair and chief executive of Legg Mason Joseph Sullivan has been appointed as executive chair of the board of the new company.

Marais said the transaction represents a significant milestone.

“Through this new partnership, our business will be even better positioned to execute our strategy and provide our clients with innovative products and solutions to help them reach their investment goals,” Marais said.

Managing director of GTCR Collin Roche said he was excited about working with Marais and the WFAM team.

The funds’ boards of trustees will be asked to approve new investment advisory arrangements with the new company.

If approved by the boards, and shareholders the new investment advisory arrangements will take effect at the completion of the transaction.

The four funds include the Wells Fargo Global Dividend Opportunity Fund, the Wells Fargo Income Opportunities Fund, the Wells Fargo Multi-Sector Income Fund and the Wells Fargo Utilities and High Income Fund. fs

Standard Life Aberdeen sells 196-year-old brand Jamie Williamson

Following the pair’s strategic partnership in 2018, Standard Life Aberdeen will sell the Standard Life name to Phoenix Group as part of a revised deal.

Standard Life Aberdeen, which has a 14% stake in Phoenix Group as part of the partnership, entered into a new binding agreement with the insurer which will see Phoenix acquire ownership of the Standard Life brand.

Consequently, some employees who support the brand and marketing efforts related to Standard Life Aberdeen will transfer to Phoenix Group, and Standard Life Aberdeen will pay $45 million in return for Phoenix covering costs associated with the transfer.

Standard Life Aberdeen chief executive Stephen Bird said the Standard Life brand has an important heritage and strong recognition in the UK as a life insurance and pensions provider, which bodes well for Phoenix Group.

“This is much less the case with the business we are building at Standard Life Aberdeen, which is focused on global asset management, our market-leading platforms offerings to UK financial advisers and their customers, and our UK savings and wealth businesses,” Bird said.

Standard Life Aberdeen said it has initiated a branding review and will announce a new name later this year.

The revised partnership will now focus on the provision of Standard Life Aberdeen’s asset management services to Phoenix Group and its insurance and pension customers, totaling $207 billion. This agreement will now operate until at least 2031.

As part of the transaction, Standard Life Aberdeen has in turn acquired Phoenix Group’s Wrap Self-Invested Personal Pension, Wrap Onshore Bond businesses to support its growth plans for its existing platforms business. The transfer of these is expected to complete at the end of 2022.

It has also acquired Phoenix Group’s UK Trustee Investment Plan to consolidate its investment offering for UK pension clients.

For all of the assets an upfront payment of $88 million will be made.

The revised agreement aims to simplify the existing partnership, which also saw Phoenix acquire Standard Life Assurance.

“While the insurance sale allowed Standard Life Aberdeen to streamline its own operations, it also created a complex network of commercial and operational services between the groups, including in respect of certain pensions and savings products and the shared use of the “Standard Life” brand,” Standard Life Aberdeen said. fs

Between the lines

www.financialstandard.com.au 8 March 2021 | Volume 19 Number 04

JANA awarded mandate

25

01: Patrick Allaway

chair Bank of Queensland

Annabelle Dickson

TUH Health Fund selected JANA after a threeway tender process in January 2021 and follows growth in JANA’s investment advisory offering across insurance, retail and not-for-profit space.

JANA head of insurance strategy Greg Wilkinson said the firm is impressed with TUH’s strong member-centric approach and respected history.

“We look forward to supporting TUH in their journey to deliver positive social change along with working closely with the Product and Investment Committee to the betterment of their members,” Wilkinson said.

“A key focus of our work with TUH will be delivering tailored asset management strategies, which JANA is industry-renowned for, alongside helping them navigate the evolving regulatory landscape currently faced by insurers.”

JANA has been providing advisory services to the insurance industry for nearly 20 years and its insurance clients have over $9.3 billion in assets under management.

TUH is not-for-profit and was founded by the Queensland Teachers’ Union and is open to past and present union members including teachers, nurses and government employees.

TUH chief executive Rob Seljak said the health insurer was impressed by JANA’s extensive research and asset management capability along with its commitment during the tender process. fs

BOQ acquires ME Bank Elizabeth McArthur

B The quote

This agreement brings together two culturally aligned organisations to form what will be an enhanced and influential banking alterna­tive.

ank of Queensland has acquired industry super fund owned ME Bank for $1.325 billion.

The move will see BOQ acquire 100% of ME Bank for $1.325 billion cash, funded by an underwritten capital raising of $1.35 billion. BOQ said the move will create a compelling alternative to Australia’s big four banks.

The acquisition price represents 1.15 times ME’s net tangible assets.

“Today’s announcement is another major step in our strategy to be the leading customercentric alternative to the big banks. With the addition of the ME Bank business, BOQ now has material scale and a compelling growth platform to support this ambition,” BOQ chair Patrick Allaway01 said.

“The combination of our highly complementary businesses brings together two organisations with a shared purpose and values generating greater value for customers, employees and shareholders. This is underpinned by the successful

Rainmaker Mandate top 20

revitalisation of the bank since early 2020 with the team’s strong execution capabilities being reflected in our earnings progress to the half.”

ME Bank is currently owned by 26 industry superannuation funds, the bank confirmed that the funds had unanimously endorsed BOQ’s offer which was recommended by the board.

The transaction will be finalised by August and ME Bank’s brand, operations and Melbourne-based presence will be retained.

“Today’s decision represents a permanent shift for the better in the Australian banking landscape. This agreement brings together two culturally aligned organisations to form what will be an enhanced and influential banking alternative for customers,” ME Bank chair James Evans.

“The increased scale and complementary offerings will benefit customers and employees alike. The combined group will be able to offer a wider network of service options, deeper resources, and the added reassurance that comes with a larger banking organisation.” fs

Note: Select equities investment mandates appointed last two quarters

Appointed by

Asset consultant

Investment manager

Mandate type

Australian Catholic Superannuation and Retirement Fund

Frontier Advisors

Challenger Limited

International Equities

592

AustralianSuper

Frontier Advisors; JANA Investment Advisers

C WorldWide Asset Management Fondsmaeglerselskab A/S

International Equities

150

Aware Super

Willis Towers Watson

First Sentier Investors

International Equities

431

Aware Super

Willis Towers Watson

AllianceBernstein Australia Limited

International Equities

302

Aware Super

Willis Towers Watson

C WorldWide Asset Management Fondsmaeglerselskab A/S

International Equities

403

Construction & Building Unions Superannuation

Frontier Advisors

Lazard Asset Management Pacific Co.

Emerging Markets Equities

219

Health Employees Superannuation Trust Australia

Frontier Advisors

State Street Global Advisors Australia Limited

Australian Equities

Health Employees Superannuation Trust Australia

Frontier Advisors

State Street Global Advisors Australia Limited

International Equities

221

legalsuper

Willis Towers Watson

AllianceBernstein Australia Limited

Australian Equities

338

Local Government Super

Cambridge Associates; JANA Investment Advisers

Alphinity Investment Management Pty Ltd

Australian Equities

292

MTAA Superannuation Fund

Whitehelm Capital

State Street Global Markets

International Equities

981

Retail Employees Superannuation Trust

JANA Investment Advisers

Paradice Investment Management Pty Ltd

Australian Equities

26

Retail Employees Superannuation Trust

JANA Investment Advisers

Macquarie Investment Management Australia Limited

Australian Equities

1,199

Retail Employees Superannuation Trust

JANA Investment Advisers

Greencape Capital Pty Ltd

Australian Equities

558

Retail Employees Superannuation Trust

JANA Investment Advisers

First Sentier Investors

Australian Equities

879

State Super (NSW)

Frontier Advisors

Ninety One Australia Pty Limited

International Equities

State Super (NSW)

Frontier Advisors

Macquarie Investment Management Australia Limited

Australian Equities

286

State Super (NSW)

Frontier Advisors

Ausbil Investment Management Limited

Australian Equities

703

State Super (NSW)

Frontier Advisors

Alphinity Investment Management Pty Ltd

Australian Equities

804

Flinders Investment Partners Pty Ltd

Australian Small Cap Equities

Warakirri Asset Management Pty Ltd

Amount ($m)

2,125

96

49 Source: Rainmaker Information

26

Managed funds

www.financialstandard.com.au 8 March 2021 | Volume 19 Number 04 PERIOD ENDING – 31 DECEMBER 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

Hyperion Australian Growth Companies Fund

1,969

32.6

1

19.7

1

14.0

5

Australian Unity Diversified Property Fund

287

13.6

1

13.5

1

16.4

1

Bennelong Australian Equities Fund

673

22.7

2

17.5

2

15.0

3

UBS Property Securities Fund

251

-0.1

6

9.7

2

10.5

2

Australian Unity Platypus Aust Equities

201

18.1

4

16.6

3

14.4

4

Pendal Property Securities Fund

464

1.4

5

9.4

3

9.9

3

Australian Ethical Australian Shares Fund

427

19.7

3

14.5

4

12.7

7

Resolution Capital Real Assets Fund

15

2.2

3

8.4

4

9.7

4

1,309

17.6

5

13.1

5

15.3

2

Australian Unity Property Income Fund

274

-3.1

12

7.7

5

9.3

5

Alphinity Sustainable Share Fund

280

6.9

19

12.0

6

11.8

10

Resolution Cap. Core Plus Prop. Sec. Series II

28

-0.3

7

7.0

6

8.5

9

Russell Australian Shares Fund

122

1.5

48

11.8

7

16.0

1

Macquarie Property Securities Fund

45

-5.2

22

7.0

7

8.6

8

Greencape Broadcap Fund

995

10.4

12

11.0

8

12.7

6

Freehold Australian Property Fund

376

1.9

4

6.8

8

8.0

10

45

4.4

29

9.6

9

10.6

18

Fiducian Property Securities Fund

172

-3.1

13

6.7

9

8.7

7

Greencape High Conviction Fund

570

5.0

26

9.6

10

11.7

11

Charter Hall Maxim Property Securities Fund

175

-1.2

8

6.4

10

9.1

6

Sector average

498

2.1

6.2

8.9

Sector average

621

-7.8

3.8

5.9

S&P ASX 200 Accum Index

1.4

6.7

8.7

S&P ASX200 A-REIT Index

-4.6

5.4

7.0

Bennelong Concentrated Aust Equities

Aberdeen Standard Australian Equities Fund

INTERNATIONAL EQUITIES

FIXED INTEREST

Platinum International Health Care Fund

239

58.6

1

40.3

1

Loftus Peak Global Disruption Fund

147

40.5

2

24.7

2

14.8

Zurich Concentrated Global Growth

56

18.3

11

22.9

3

18.0

BetaShares Global Sustainability Leaders ETF

1,069

25.0

6

22.6

4

T. Rowe Price Global Equity Fund

4,879

30.6

5

21.8

5

18.8

Franklin Global Growth Fund

490

30.7

4

20.7

6

Nikko AM Global Share Fund

134

18.9

9

19.3

7

Capital Group New Perspective Fund

903

21.1

7

18.8

8

Intermede Global Equities Fund

220

15.9

14

17.6

54

3.8

53

17.4

Evans and Partners International Fund Sector average

9

Legg Mason Brandywine Global Inc Optimiser Fund

104

15.1

1

7.4

1

2,098

6.1

11

6.4

2

5.1

12

AMP Capital Wholesale Australian Bond Fund

979

5.7

15

6.2

3

5.3

7

Schroder Fixed Income Fund 3

Pendal Government Bond Fund

900

5.3

22

6.1

4

5.0

17

1

Macquarie Australian Fixed Interest Fund

236

5.1

27

6.1

5

5.2

8

18.3

2

iShares Government Inflation ETF

253

6.8

3

6.1

6

4.5

37

16.0

4

Perpetual Wholesale Active Fixed Interest Fund

197

4.8

31

6.0

7

15.7

6

Macquarie Dynamic Bond Fund

703

6.1

9

6.0

8

5.4

5

9

14.5

10

9

5.1

13

10

15.2

7

QIC Australian Fixed Interest Fund

1,487

5.9

14

6.0

Pendal Sustainable Aust. Fixed Interest Fund

313

6.3

7

6.0

10

835

6.3

10.8

11.0

Sector average

930

4.5

4.9

4.4

MSCI World ex AU - Index

6.1

11.6

11.5

Bloomberg Barclays Australia (5-7 Y) Index

4.6

5.6

4.5

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

Source: Rainmaker Information

Like it or not, Bitcoin is here to stay you are anything like me, thinking about IheadfBitcoin for any length of time can make your spin.

Dial tones

By John Dyall john.dyall@ financialstandard .com.au www.twitter.com /JohnDyall

It’s supposed to be a digital currency, but I’ve only met one person who ever actually bought anything with it. The thing they bought cost one bitcoin, which was worth around $US1500 at the time.

The last I heard Bitcoin was hovering around US$50,000 and subject to massive fluctuations, depending on whatever Elon Musk tweets before going to bed. So, the question I asked myself was this: “What’s the difference between Bitcoin (and the other cryptocurrencies) and the Australian dollars we use to buy groceries and stuff?”

Well, Australian dollars are just much easier to use. You are paid in Australian dollars and you spend Australian dollars. They are both digital, in that the vast majority of your dealings with Australian dollars are conducted through a computer network.

Bitcoin is much harder to transact with. Soon, you will be able to buy a Tesla car in bitcoin, and more organisations are lining up to accept Bitcoin as payment. Some of this is a branding exercise, with brands like Tesla wanting to be associated with the sort of people that would hold Bitcoin (shoutout to the “crypto bros” reading this!).

But no-one wants to buy stuff with it, they want to see its value climb.

There is a cost in transacting in both Australian dollars and bitcoin. If you pay cash there is little in transaction costs (except for the cost of physically holding the stuff) but there is a limit to how much cash it is convenient to hold.

Credit cards cost every time you pay for something, sometimes it costs the user, sometimes the merchant. It is still a net cost that someone has to pay for. And don’t get me started on buying something in a foreign currency, whether it’s using an ATM overseas or buying something on eBay. Foreign exchange rates provided to regular people is a crime, in my opinion.

The cost of transacting in bitcoin is estimated to be around $10 per transaction, mainly because it takes so much energy for the computers to get together to verify the transaction and add to the blockchain associated with every bitcoin.

The Australian government has a monopoly on Australian dollars. People are forced to use them because the government demands that taxes be paid in Australian dollars. Dollars are therefore created and destroyed all the time.

Theoretically there is no limit to the expansion of money supply. Too many dollars would, however, create inflation, including asset price infla-

tion. No government would be foolish enough to do this because it would create too much income inequality in society and young people wouldn’t be able to afford things like housing without taking on massive debt burdens that impacted their ability to form households and have children who are, of course the economic engines of the future. Oh, wait.

Bitcoins have a limited supply. They are still being created, or “mined” but it is getting harder all the time. It uses an enormous and increasing amount of energy to mine each new bitcoin, with the last bitcoin is due to be mined 119 years from now, in 2140, where the limit of 21 million will be reached.

This means that bitcoin is a bit like gold; there is a limited supply and it is becoming harder to get.

Think of this: People tend to think the Dutch tulip bubble in the 1600s was crazy, but move forward 400 years and the Netherlands remains the world’s largest producer of tulip bulbs in the world, producing three billion every year. That’s a lot of wealth created over the years. There have been many revolutions in the concept of money through the ages. The technology behind bitcoin could be the start of a new revolution. You might not own any bitcoin directly now but someday down the road you will benefit from it. fs

Super funds

www.financialstandard.com.au 8 March 2021 | Volume 19 Number 04 PERIOD ENDING – 31 DECEMBER 2020

Workplace Super Products

1 year

3 years

% p.a. Rank

5 years

SS

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

MYSUPER / DEFAULT INVESTMENT OPTIONS

27

* SelectingSuper [SS] quality assessment

1 year

3 years

% p.a. Rank

5 years

SS

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

PROPERTY INVESTMENT OPTIONS

Australian Ethical Super Employer - Balanced (accumulation)

7.8

1

8.1

1

7.7

15

AAA

Prime Super (Prime Division) - Property

-5.2

22

9.2

1

15.1

1

AAA

UniSuper - Balanced

5.7

3

8.0

2

8.5

2

AAA

AMG Corporate Super - AMG Listed Property

2.9

1

7.6

2

7.7

4

AAA

TASPLAN - OnTrack Build

3.5

25

7.5

3

AAA

Telstra Super Corporate Plus - Property

2.2

2

7.1

3

8.6

2

AAA

AustralianSuper - Balanced

5.2

7

7.4

4

1

AAA

CareSuper - Direct Property

-0.4

5

5.8

4

8.2

3

AAA

Virgin Money SED - LifeStage Tracker 1979-1983

3.8

20

7.4

5

AAA

TASPLAN - Property

1.8

3

5.6

5

AAA

GuildSuper - MySuper Lifecycle Growing

5.7

4

7.2

6

7.7

16

AAA

Rest Super - Property

-2.1

9

5.3

6

7.5

5

AAA

Aware Super Employer - Growth

5.2

6

7.1

7

8.1

6

AAA

Sunsuper Super Savings - Australian Property Index

-3.6

15

5.1

7

6.5

11

AAA

Cbus Industry Super - Growth (Cbus MySuper)

4.9

8

7.0

8

8.4

3

AAA

Sunsuper Super Savings - Property

0.6

4

5.0

8

6.3

13

AAA

Vision Super Saver - Balanced Growth

5.9

2

7.0

9

8.0

9

AAA

FirstChoice Employer - Property Securities Select

-1.9

8

5.0

9

6.6

9

AAA

VicSuper FutureSaver - Growth (MySuper)

5.7

5

6.9

10

7.9

10

AAA

HOSTPLUS - Property

-0.8

6

4.9

10

7.0

6

AAA

Rainmaker MySuper/Default Option Index

3.3

Rainmaker Property Index

-5.7

6.0

8.7

7.2

AUSTRALIAN EQUITIES INVESTMENT OPTIONS Vision Super Saver - Just Shares

3.2

5.3

FIXED INTEREST INVESTMENT OPTIONS

10.7

1

9.4

1

11.0

1

AAA

Australian Catholic Super Employer - Bonds

5.7

1

5.8

1

4.7

1

AAA

UniSuper - Australian Shares

5.7

5

9.3

2

9.8

2

AAA

AMG Corporate Super - AMG Australian Fixed Interest

5.5

3

5.1

2

4.0

6

AAA

ESSSuper Beneficiary Account - Shares Only

6.8

3

8.5

3

9.4

4

AAA

Mine Super - Bonds

4.0

20

4.7

3

4.0

7

AAA

Prime Super (Prime Division) - Australian Shares

7.3

2

7.9

4

9.6

3

AAA

UniSuper - Australian Bond

4.0

21

4.7

4

3.8

11

AAA

CBA Group Super Accumulate Plus - Australian Shares

5.4

7

7.8

5

8.7

12

AAA

Vision Super Saver - Diversified Bonds

5.6

2

4.6

5

4.2

5

AAA

Maritime Super - Australian Shares

5.6

6

7.3

6

8.8

9

AAA

Intrust Core Super - Bonds (Fixed Interest)

4.7

8

4.5

6

4.2

4

AAA

Aware Super Employer - Australian Equities

2.4

18

7.1

7

8.8

10

AAA

Aware Super Employer - Australian Fixed Interest

3.8

24

4.5

7

3.7

14

AAA

Sunsuper Super Savings - Australian Shares Index

1.8

24

7.0

8

8.7

13

AAA

GESB Super - Mix Your Plan Fixed Interest

4.2

13

4.3

8

3.6

20

AAA

Vision Super Saver - Australian Equities

3.1

12

7.0

9

8.8

11

AAA

StatewideSuper - Diversified Bonds

4.9

6

4.3

9

4.4

2

AAA

Virgin Money SED - Indexed Australian Shares

1.8

26

6.9

10

AAA

HESTA - Diversified Bonds

4.1

17

4.2

10

3.9

8

AAA

Rainmaker Australian Equities Index

2.1

Rainmaker Australian Fixed Interest Index

3.8

6.1

8.1

INTERNATIONAL EQUITIES INVESTMENT OPTIONS

4.0

3.3

AUSTRALIAN CASH INVESTMENT OPTIONS

UniSuper - Global Environmental Opportunities

49.5

2

21.8

1

18.8

1

AAA

AMG Corporate Super - Vanguard Cash Plus Fund

0.8

2

1.5

1

1.8

1

AAA

UniSuper - Global Companies in Asia

10.7

13

13.9

2

13.3

2

AAA

AMG Corporate Super - AMG Cash

0.8

3

1.4

2

1.6

2

AAA

AustralianSuper - International Shares

15.2

5

13.1

3

12.3

6

AAA

Intrust Core Super - Cash

0.6

10

1.4

3

1.6

3

AAA

Equip MyFuture - Overseas Shares

15.0

6

12.4

4

12.0

7

AAA

NGS Super - Cash & Term Deposits

0.7

5

1.4

4

1.6

4

AAA

UniSuper - International Shares

15.3

4

12.3

5

12.5

4

AAA

Rest Super - Cash

0.7

4

1.3

5

1.5

9

AAA

LUCRF Super - International Shares (Active)

13.3

7

12.0

6

10.8

15

AAA

ANZ Staff Super Employee Section - Cash

0.9

1

1.3

6

1.4

12

AAA

Intrust Core Super - International Shares

12.8

9

11.3

7

11.5

8

AAA

Media Super - Cash

0.6

9

1.3

7

1.4

14

AAA

Vision Super Saver - International Equities

16.5

3

11.1

8

12.3

5

AAA

Virgin Money SED - Cash Option

0.3

28

1.3

8

AAA

Media Super - Passive International Shares

5.4

40

10.8

9

10.1

22

AAA

Aware Super Employer - Cash

0.5

13

1.2

9

1.4

13

AAA

13.2

8

10.7

10

12.7

3

AAA

Sunsuper Super Savings - Cash

0.5

11

1.2

10

1.4

10

AAA

Rainmaker Cash Index

0.3

HOSTPLUS - International Shares Rainmaker International Equities Index

7.2

8.2

9.6

Note: Tables include Australia’s top performing superannuation products that also have a AAA SelectingSuper Quality Assessment rating.

Tables include Australia’s top performing superannuation products that also have a AAA SelectingSuper Quality Assessment rating.

WORKPLACE SUPER | PERSONAL SUPER | RETIREMENT PRODUCTS

Compare superannuation returns across asset classes using over 28 years of industry insights and research with SelectingSuper’s performance tables.

Simply visit selectingsuper.com.au/tools/performance_tables

1.0

1.2 Source: Rainmaker Information www.rainmakerlive.com.au

28

Economics

www.financialstandard.com.au 8 March 2021 | Volume 19 Number 04

The vaccine has landed Ben Ong

T

he 22 February 2021 will go down in Australian history as VAC (vaccine against COVID-19) Day. Almost 13 months after COVID-19 first reached Australian shores, the vaccine has landed.

With the exception of anti-vaxxers and conspiracy theorists – “They are one and a half, a few percent, maybe, in Australia,” according to Victoria’s chief health officer, Brett Sutton – the majority of Australians welcomed the vaccine’s roll out.

The Melbourne Institute’s fortnightly ‘Taking the Pulse’ survey – taken on 1-6 February 2021 – found that: “About two in three Australians are willing to be vaccinated and of these, two in three are willing to wait so those with higher risk get vaccinated first. Of the one in three who don’t want to or are unsure about the COVID-19 vaccination, 65% express concerns about side-effects while 37% express disbelief in the effectiveness and/ or distrust the vaccine.”

That’s about right. Informal get-togethers (er, drinking sessions) with friends and families reveal the same sentiments of hope, anxiety and hesitation.

But in line with other world leaders who got the first jab, Prime Minister Scott Morrison declares that: “This is a historic day for Australia … This vaccination program launches us down our path out of the COVID-19 pandemic in 2021... is the beginning of a big game changer, there’s no doubt about that.

Its successful rollout will only further reduce the risk, and when you reduce the risk, then obviously, you do not need more blunt and extreme measures”.

And as the AFR reports: “About 170,000 frontline healthcare, quarantine and border workers will be the first to receive vaccinations in stage 1A of the rollout, with more than 500,000 aged and disability care residents and staff” for a total of 678,000.

“About 60,000 Pfizer/BioNTech COVID-19 vaccine doses are expected to be administered to priority groups by the end of the first week.”

Phase 1B will see up to 1.48 million administered to 6,139,000 Australians, Phase 2A to another 6,570,000, Phase 2B would inoculate another 6,643,000, and, some 5,670,000 injected with the vaccine in Phase 3.

If all goes according to plan, that’s more than sufficient to cover all of Australia’s population of 25.7 million (as at 30 June 2020, Australian Bureau of Statistics figures show).

Water, water everywhere but not all want to drink. While there are enough vaccines to go around, only 66.2% of us, Australians all, are willing to be vaccinated, the Melbourne Institute survey shows.

If the survey translates into actual take-up, it won’t be good enough to generate herd immunity.

Quoting Marylouise McLaws – University of New South Wales (UNSW) professor of epidemiology, healthcare infection and infectious diseases – ABC News prints that: “She said it was difficult to identify the “magic number” needed to achieve herd immunity, but if three-out-of-five vaccines administered were AstraZeneca and the rest was Pfizer, then at least 75% of the population needed to be jabbed.

This number may even go up to 90%, depending on variant strains.”

Given these, it appears that Australia isn’t out of the woods yet. fs

Monthly Indicators

Jan-21

Dec-20

Nov-20

Oct-20

Sep-20

Consumption Retail Sales (%m/m)

0.56

-4.06

7.11

1.79

Retail Sales (%y/y)

10.67

9.60

13.33

7.05

-1.52 5.17

Sales of New Motor Vehicles (%y/y)

11.06

13.55

12.39

-1.50

-21.77

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

29.13

50.04

90.00

180.37

-44.15

Job Advertisements (%m/m, sa)

2.33

8.63

14.26

11.87

7.08

Unemployment Rate (sa)

6.35

6.60

6.83

6.99

6.91

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

-

15.82

6.62

5.08

12.15

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

-

10.92

3.37

4.91

16.82

Survey Data Consumer Sentiment Index

107.00

112.00

107.66

105.02

93.85

AiG Manufacturing PMI Index

55.30

-

52.10

56.30

46.70

NAB Business Conditions Index

7.16

15.79

8.04

3.17

1.15

NAB Business Confidence Index

10.05

4.71

12.55

4.13

-2.38

Trade Trade Balance (Mil. AUD)

-

6785.00

5014.00

6536.00

Exports (%y/y)

-

-7.79

-11.09

-12.78

-20.90

Imports (%y/y)

-

-13.10

-9.84

-20.74

-22.88

Dec-20

Sep-20

Jun-20

Mar-20

Dec-19

Quarterly Indicators

5743.00

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

-

10.02

16.35

7.23

3.45

% of GDP

-

2.06

3.49

1.43

0.68

Corporate Profits Company Gross Operating Profits (%q/q)

-

3.22

15.84

3.02

-3.71

Employment Wages Total All Industries (%q/q, sa)

-

0.08

0.08

0.53

0.53

Wages Total Private Industries (%q/q, sa)

-

0.53

-0.08

0.38

0.45

Wages Total Public Industries (%q/q, sa)

-

0.45

0.00

0.45

0.45

Inflation CPI (%y/y) headline

0.86

0.69

-0.35

2.19

CPI (%y/y) trimmed mean

1.20

1.20

1.30

1.70

1.84 1.50

CPI (%y/y) weighted median

1.40

1.20

1.30

1.60

1.20

Output

News bites

Employment The Australian Bureau of Statistics’ (ABS) reported that 29,100 workers found employment in January – in line with market expectations. Though, the monthly addition in jobs has slowed – 180,000 in October, 90,000 in November and 50,000 in December – January marked the fourth straight month of employment gains. The details of the report indicate better underpinning for the labour market and the economy. The latest survey shows all of January’s gains were due to increased full-time hiring (59,000) that was partly offset by reduced part-time employment (29,800). The unemployment rate dropped to 6.4% in January from 6.6% in the previous month.

CPI inflation Australia’s consumer prices continue to recover from the 1.9% drop in the June 2020 quarter – the

Real GDP Growth (%q/q, sa)

-

3.33

-7.03

-0.28

0.39

largest quarterly fall in the 72 year history of the CPI. However, the ABS reported that the country’s headline inflation growth decelerated from the 1.6% quarterly rate in the September quarter to 0.9% in the three-months to December 2020. The latest figures take the annual rate of headline inflation up to 0.9% in the quarter ended December 2020 from 0.7% in the previous quarter. This is well-below the low end of the Reserve Bank of Australia’s 2%-3% inflation target band. So are the underlying inflation readings – the trimmed mean measure steadied at 1.2% in the year to the December quarter; the weighted median increased slightly to 1.4% from 1.2% in the September quarter.

Real GDP Growth (%y/y, sa)

-

-3.82

-6.36

1.37

2.16

Industrial Production (%q/q, sa)

-

0.30

-2.91

0.29

0.39

Business, consumer confidence The Westpac-Melbourne Institute index of consumer sentiment increased by 1.9% in February from 107.0 in January. Although it’s lower than the 10-year high reading of 112.0 registered in December 2020, the current reading is the best in eight years and is above its long-term average of 101.3 points as “unemployment expectations” dropped by 3.8% over the month and by 15.0% from a year ago to 114.5 points in February – below its long term average of 130.1 points. Similarly, the NAB business confidence index jumped by five percentage points to a reading of +10 in January – above its long-run average of +6 and despite lower than the +13 recorded in November last year, remains the highest in three years. fs

Survey Data Private New Capex, Total, Chain, Vol, (%q/q, sa) Financial Indicators

- 19-Feb

-3.04

-6.36

-2.04

Mth ago 3mths ago 1yr ago

-3.04 3yrs ago

Interest rates RBA Cash Rate

0.10

0.10

0.25

0.75

1.50

Australian 10Y Government Bond Yield

1.43

1.06

0.89

1.02

2.89

Australian 10Y Corporate Bond Yield

1.33

1.29

1.34

1.77

3.22

Stockmarket All Ordinaries Index

7064.0

0.70%

4.77%

-2.40%

S&P/ASX 300 Index

6782.2

0.78%

4.00%

-4.45%

16.88% 14.91%

S&P/ASX 200 Index

6793.8

0.76%

3.77%

-4.91%

14.34%

S&P/ASX 100 Index

5609.5

0.78%

3.77%

-5.29%

14.65%

Small Ordinaries

3146.8

0.74%

5.63%

2.54%

16.87%

Exchange rates A$ trade weighted index

63.00

A$/US$

0.7862 0.7702 0.7271 0.6674 0.7907

63.40

59.50

58.10

65.60

A$/Euro

0.6483 0.6351 0.6141 0.6183 0.6378

A$/Yen

83.05 80.03 75.54 74.04 84.22

Commodity Prices S&P GSCI - commodity index

470.09

432.33

370.19

403.64

443.59

Iron ore

164.07

170.03

122.84

85.70

#N/A

Gold

1786.20 1834.70 1857.35 1604.20 1346.60

WTI oil

59.24

52.87

41.57

53.31

Source: Rainmaker Information /

61.89

Sector reviews

www.financialstandard.com.au 8 March 2021 | Volume 19 Number 04

Australian equities

Figure 1. Employment growth (seasonally adjusted)

Figure 2. Unemployment Rate

300

8.0

7.0

0

6.5

-100 -200

6.0

-300

Part-time

-400

Total

-500

Source:

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].

7.5

100

Prepared by: Rainmaker Information

CPD Program Instructions

RATE %

ACTUAL MONTHLY CHANGE '000S

200

5.5 5.0

Full-time

4.5

-600

4.0

-700 JAN19

MAY19

SEP19

JAN20

MAY20

SEP20

2004

JAN21

2006

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Australia’s not jobless recovery Ben Ong

its February 2021 Statement on Monetary ItralianPolicy (SoMP), the Reserve Bank of Aus(RBA) declared that: “The outlook for the labour market has improved as a result of the better starting point and growth outlook.

It now appears that the unemployment rate has already peaked. Although the end of the JobKeeper program in March creates some uncertainty for the near term, over the whole forecast period employment growth is expected to remain solid, consistent with the ongoing recovery in activity. The unemployment rate is expected to continue declining, but will still be around 6% at the end of this year and 5.5% per at the end of next year, reaching around 5.25% by mid 2023.”

Three months earlier, the RBA’s November 2020 SoMP forecast the unemployment rate at 6.5% by the end of this year and 6% in 2022 –

International equities

themselves, upgraded from the 8.5% (in 2021) and 7% (2022) printed in August 2020.

At the rate the labour market is going, chances are the RBA is going to revise its unemployment rate projections in three months’ time.

The Australian Bureau of Statistics’ (ABS) reported that 29,100 workers found employment in January – in line with market expectations.

Though the monthly addition in jobs has slowed – 180,000 in October, 90,000 in November and 50,000 in December – January marked the fourth straight month of employment gains (Figure 1).

Not only that, nationally employment was only 59,000 people less than in March 2020.

Wait, there’s more! The details of the report indicate better underpinning for the labour market and the economy.

The latest survey shows all of January’s gains were due to increased full-time hiring (59,000) that was partly offset by reduced part-time em-

Figure 1. Nikkei-225 and the yen 160

YEN/US$

150 140

Yen per US$

27000 23000

130

19000

110

ployment (29,800). The ‘permanent income hypothesis’ dictates that full-time workers tend to spend and borrow more (because they attribute more permanency in their incomes) than part-timers.

The unemployment rate dropped to 6.4% in January from 6.6% in the previous month. At its rate of decline over the past three months, the unemployment rate would hit the RBA’s 2021 forecast of 6% in the next two months (March) … and that’s despite the participation rate remaining at around 17-month highs – itself, a measure of workers’ optimism over their employment prospects (Figure 2).

This is backed by the Westpac-Melbourne Institute index of consumer sentiment that showed “unemployment expectations” dropped by 3.8% over the month and by 15% from a year ago to 114.5 points in February – below its long term average of 130.1 points. fs

4

ANNUAL CHANGE %

ANNUAL CHANGE %

90 80 70 2013

2014

2015

2016

2017

2018

2019

2020

2

2

1

1

0 -1

-1

11000

-2

7000

-3

2021

4 3

3

0 15000

100

2012

31000

Nikkei-225 index-RHS

120

Prepared by: Rainmaker Information Source: Rainmaker /

Australian equities

Figure 2. Japanese wages & core inflation INDEX

2010

-2 Core inflation (ex food)

-3

Average monthly cash earnings-RHS 2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

-4

T

he Japanese stockmarket’s benchmark equity index rose by 16% last year – a very close second to the S&P500’s 16.3% return – soaring by a mind-blowing 64.1% from the lows plumbed in mid-March 2020.

As at 9 February 2021, the Nikkei 225 index rose by another 7.5% despite Japan extending the COVID-19 state of emergency for another month in 11 prefectures. It was originally slated to end on February 7.

Citizens of planet earth know by now what this means – social restrictions, business closures, etc. that in effect, freezes economic activity. More so now that the directive was given more teeth after Japan’s Parliament enacted laws introducing fines for non-compliance.

This disconnect between the real economy and stockmarket pricing has led to growing criticism that the Bank of Japan (BOJ) is distorting

market pricing. Forget Gamestop and Reddit, the BOJ is gaming the system.

This disconnect is highlighted by the breakdown in the negative correlation between the US$/¥ exchange rate and the Nikkei (Figure 1). The disruption of supply chains and closure of international borders brought on by the pandemic, compounded by the more expensive yen, should put downward pressure on economic growth, corporate profitability and by extension, share prices.

And it has. Japanese exports dropped by 4.2% in the year to December 2020 – the 24th straight month of declines and the longest stretch on record based on comparable data going back to 1979.

But wait! Perhaps, stockmarket investors are looking forward as they’re claimed to be. With the government’s pandemic fiscal stimulus measures the highest on the planet – 42.2% of GDP as of last count – economic recovery awaits.

CPD Questions 1–3

1. How many Australians found employment in January 2021? a) 29,100 b) 50,000 c) 90,000 d) 180,000 2. Which contributed to the increase in Australian employment in January? a) Full-time employment b) Part-time employment c) Seasonal adjustment d) All of the above 3. Australia’s unemployment rate rose to 6.4% in January. a) True b) False

International equities CPD Questions 4–6

4. How much has the Nikkei-225 index increase by in the year 2020? a) -7.5% b) 7.5% c) 16.0% d) 64.1%

2021

Nikkei not so fine Ben Ong

29

Sadly, latest stats indicate this is not the case.

The fall in Japan’s average monthly cash earnings (wages) accelerated to 3.2% in the year to December 2020 from 1.7% in the previous month – the ninth straight month of decline. Just think about its negative implications for consumer spending and inflation (Figure 2).

Not surprisingly, the au Jibun Bank Japan PMI indices – manufacturing, services and composite – have all weakened in January.

So what’s keeping the Japanese stockmarket buoyant? The usual suspects are there: vaccine optimism, relaxation of restrictions in some countries, fiscal and monetary policy accommodation, etc.

Nah, it’s the BOJ’s stupid and aggressive ETF purchases which, according to Reuters account for roughly 80% of Japan’s ETF market.

At time of print, the Nikkei 225 had jumped 2.14% to close at 29,663.50. fs

5. Which has a negative correlation with the Nikkei-225 index? a) US$/Yen exchange rate b) Japanese exports c) Wall Street d) Commodity prices 6. The au Jibun Bank PMI weakened in January 2021. a) True b) False

30

Sector reviews

Fixed interest

www.financialstandard.com.au 8 March 2021 | Volume 19 Number 04

Fixed interest

CPD Questions 7–9

7. What was the Eurozone’s GDP growth in the last three months of 2020 ? a) 0.7% b) 3.7% c) 11.7% d) 12.4%

Figure 1: Eurozone GDP growth

Figure 2: IHS/Markit Economics Eurozone PMI

15

65 PERCENT

60

10

50

5

45

0

40 35

-5

9. The European Commission downgraded its 2021 Eurozone GDP growth forecast. a) True b) False Alternatives CPD Questions 10–12

10. By how much did copper prices increase in 2020? a) -79.6% b) 7.1% c) 25.8% d) 79.6% 11. What has driven the rally in copper? a) China’s early return to growth b) Roll out of coronavirus vaccine c) US dollar depreciation d) All of the above

Manufacturing

30

-10

Prepared by: Rainmaker Information Prepared by: FSIU Source: Rainmaker / Sources: Factset

Composite

25 Quarterly change

-15

Annual change

Services

20 15

-20

10

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

8. Which Eurozone PMI measure weakened in January 2021? a) Manufacturing b) Services c) Composite d) All of the above

INDEX

55

JAN18

MAY18

SEP18

JAN19

MAY19

SEP19

JAN20

MAY20

SEP20

JAN21

The light at the end of the Euro tunnel Ben Ong

I

t’s beginning to look a lot like the Eurozone economy wouldn’t be able to dodge a double-dip recession given tighter and/or extended COVID-19 restrictions and lockdowns that remain in place in many of its member countries.

Eurozone GDP fell into recession in the first half of 2020, contracting by 3.7% in the first quarter and 11.7% in the second, rebounded 12.4% in the third, before contracting by 0.7% in the final quarter of 2020 (Figure 1).

Readings from the latest IHS/Markit Eurozone PMI surveys – both the composite and services PMI fell deeper into contraction territory, to 47.8 and 45.4 in January, although still in expansion, the manufacturing PMI weakened from a reading of 55.2 in December 2020 to 54.8 (Figure 2).

The European Commission’s (EC) fresh forecasts take all these on board, including surrendering to the inevitability of another reces-

Alternatives

sion, the “euro area economies are expected to contract in the first quarter of 2021.”

But there’s a light at the end of this dark tunnel.

In its Winter 2021 Economic Forecast report, the EC predicts that overall GDP growth in 19 countries euro-member countries would be 3.8% this year and in 2022 after contracting by 6.8% in 2020.

This compares with the Commission’s Autumn 2020’s forecasts “that the euro area economy will contract by 7.8% in 2020 before growing 4.2% in 2021 and 3% in 2022”.

The EC is more sanguine about the risks to its revised forecasts, “though they remain high”.

“They are mainly related to the evolution of the pandemic and the success of vaccination campaigns,” it said.

“Positive risks are linked to the possibility that the vaccination process leads to a fasterthan-expected easing of containment measures and therefore an earlier and stronger recovery.”

Also, NextGenerationEU, the EU’s recovery instrument of which the centrepiece is the Recovery and Resilience Facility (RRF), could fuel stronger growth than projected, since the envisaged funding has - for the most part - not yet been incorporated into this forecast.

In terms of negative risks, the pandemic could prove more persistent or severe in the near-term than assumed in this forecast, or there could be delays in the roll out of vaccination programmes.

This could delay the easing of containment measures, which would in turn affect the timing and strength of the expected recovery.

There is also a risk that the crisis could leave deeper scars in the EU’s economic and social fabric, notably through widespread bankruptcies and job losses.

This would also hurt the financial sector, increase long-term unemployment and worsen inequalities. fs

Figure 1: Copper price

Figure 2: Chinese industrial production

9000

10 ANNUAL CHANGE %

US$ PER TONNE

8

8000

6 7000

4

12. Copper is considered an indicator of economic activity. a) True b) False

6000

2

Prepared by: Rainmaker Information Prepared by: FSIU Source: IEA Sources: / Factset

5000

0 -2

4000 2012

2014

2016

2018

2020

2014

2015

2016

2017

2018

2019

2020

2021

Red metal’s turning red hot Ben Ong

T

Go to our website to

Submit

All answers can be submitted to our website.

he latest GDP growth updates show that the world’s major economies remain in contraction (in year-on-year terms) at the end of 2020 and despite the roll out of vaccines, the COVID-19 pandemic (and now its variants) remain with us, triggering stop-and-go snap lockdowns in most countries.

The lingering uncertainty provides fodder for a bearish narrative for the year 2021. Yet, equity markets are rallying.

Wall Street continues to register fresh highs, pulling up ‘the others’ along with it, powered by fiscal and monetary policy largesse … and FOMO (fear of missing out) and TINA (there is no alternative).

However, the rise and rise in copper prices suggests better health and wealth going forward.

Factset figures show copper prices surged to an eight-year high of US$8292 per tonne this year to date – a 7.1% addition to the 25.8% gain

it notched up last year and a whopping 79.6% surge from the four-year low it plumbed in March 2020 (Figure 1).

Because of the red metal’s copious and pervasive use in industries – from car manufacturing to electrical goods to construction to solar panels, etc. – makes it a good contemporaneous (if not a leading) indicator of economic activity.

Hence, the moniker Doctor Copper.

China’s – the world’s biggest copper importer – early return to growth in 2020 may have provided the impetus for the resurgence in copper prices.

This is highlighted by the continued acceleration in Chinese industrial production – up by 7.3% in the year to December, the fastest rate of expansion in 21 months (Figure 2).

The good news is that the “good doctor’s” prognosis is for continued strong growth in the global economy.

This is backed by, first and foremost, surrounding the COVID-19 pandemic.

While the number of confirmed cases of infections continues to grow, the number of new daily cases and new daily deaths had been lessening, despite the advent of the new and more infectious variants.

Vaccinations would only improve these stats that, in turn, would allow a return to near-normal – lesser or the withdrawal altogether of social and business restrictions.

The rally in copper prices has also been driven by the US dollar’s depreciation.

The US dollar index (versus major currencies) has now fallen by 11.4% from the 17-year high it recorded in March last year – which, in itself, suggests greater investor confidence (i.e., lesser safe-haven purchases) in the revival of global economic activity.

At time of print the US dollar had recovered slightly but was set to be tested by the debating of US President Joseph Biden’s US$1.9 trillion stimulus package. fs

Sector reviews

www.financialstandard.com.au 8 March 2021 | Volume 19 Number 04

Property

Property

CPD Questions 13–15

Prepared by: Rainmaker Information Source: CBRE, Asia Pacific Real Estate Market Outlook 2021

ompany leadership teams will be more inC volved in long-term corporate real estate strategy, creating a need for landlords and investors to refine their building hardware and tenant services.

That’s according to CBRE’s Asia Pacific Real Estate Market Outlook 2021, after 2020 forced most companies to delay making any major leasing decisions that year.

“The relatively successful mass adoption of remote working is prompting a rethink of workplace design and utilisation, challenging traditional decision-making processes based on headcount growth and forcing companies to take a more holistic view of portfolio planning,” CBRE said.

Strategies for business, workplaces and the workforce and real estate portfolios are set to converge in 2021 as occupiers crystallise a fresh new approach to creating the offices of the future, CBRE added.

Executive teams who are at the forefront of individual companies’ experiences will have more influence over leasing decisions going forward as a result.

Key trends to shape recovery: Real estate manager Jamie Williamson

CBRE expects many companies to retain the hybrid working models they adopted in response to the pandemic, with its latest survey finding more than 70% of managers would prefer to have office-based staff.

As such, CBRE expects Asia Pacific office demand in 2021 to increase by 5% over last year.

Further, leasing demand will be led by the technology and financial sectors.

The rebound in domestic consumption will support the resumption of leasing demand from companies in the retail and consumer products industries, CBRE added.

However, while accounting for only a small portion of the overall stock, vacancy pressure will be felt in the likes of Singapore, Tokyo and Sydney as large professional services firms and foreign banks vacate spaces. But CBRE is confident it will not be an enduring issue, with most of the spaces in high-quality CBD buildings.

Overall, CBRE expects Asia Pacific Grade A vacancy to rise to 16% - an all-time high – by the end of 2021, giving tenants the upper hand in negotiations.

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The trend will be further exacerbated by an increase in the number of companies establishing decentralised business hubs. For example, instead of having office spaces in the Sydney CBD, companies are increasingly looking to lease spaces in North Sydney or Parramatta.

Rent in these areas is expected to be more stable throughout 2021 and about 46% of new supply expected in these decentralised areas.

The impact of these will be a need for landlords to offer a more diverse range of buildings types and locations if they are to retain tenants, CBRE said.

The investment firm also expects the rental decline to lose momentum. The Asia Pacific Office Rental Index declined by just 4.7% in 2020; following the onset of the Global Financial Crisis it contracted more than 30% over six straight quarters.

“The mild downcycle and burgeoning economic recovery make it imperative for occupiers to capitalise on current weak leasing sentiment to negotiate better terms before the window of opportunity closes,” CBRE said. fs

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14. From where does CBRE expect a resumption in leasing demand to originate in Australia during 2021? a) Companies based in the Sydney and/or Melbourne CBDs b) Large professional services firms c) Companies supplying retail consumer goods, and the technology sector d) Foreign banks 15. CBRE found that across all businesses, managers were equally divided between preferring office-based staff versus working from home options. a) True b) False

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13. What action did CBRE recommend landlords take to retain their tenants in the face of companies reassessing their real estate needs post COVID-19? a) Provide a more diverse range of buildings, in locations and types b) Lower annual rentals while offering highergrade building facilities c) Supply more office space within a short commute to major CBDs d) Adopt a hybrid working model in response to the pandemic

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Profile

www.financialstandard.com.au 8 March 2021 | Volume 19 Number 04

A HELPING HAND With enough hard work and determination, and a dash of help from those around you, you can achieve anything. It’s what we all learn in our younger years but is personified in MLC general manager, asset management distribution, Mandy Mannix. Eliza Bavin writes.

andy Mannix moved around a lot in her M younger years. Born in New Zealand, from age four she lived in Albury-Wodonga before moving to Coolangatta, Queensland; and that was just the early years.

“I mostly grew up on the Gold Coast, certainly in terms of the earlier years that I can remember. Then at around 18 I moved to New South Wales and eventually, when I was 21, I moved to Melbourne,” Mannix explains.

Having left school at the age of 14 after the loss of her father, Mannix set out into the workforce.

Upon her arrival in Melbourne she secured a job as a team assistant at Mercury Asset Management.

“That was really when my finance career started and while I was there, I did some study, but I never got a formal degree. My education has been on the job,” she says.

Mannix credits those she worked with at Mercury for helping her find her path within financial services.

“I really loved the people and they clearly saw something in me, so they offered me a full-time role in their team,” Mannix explains.

“I was shown that there were people there who were willing to give me opportunities and encourage in me an ambition to grow my career.”

In 1997 Mercury was acquired by Merrill Lynch and rebranded Merrill Lynch Investment Managers, which would later be acquired

by BlackRock in 2006.

Then a product specialist, hedge funds, Mannix stayed on for a further six years.

In all, between Mercury and Merrill Lynch, Mannix worked her way up the ranks for close to 12 years.

“My roles were always client facing. So, once I moved on from being team assistant, I had the chance to work in client services and then I went into institutional sales,” she says.

“I then had the opportunity to go to London for some product training and while there I met a team who had a real passion and drive for client solutions and they offered me the chance to move to London. So, I did.”

In 2003, Mannix decided it was time for a change and joined Lehman Brothers as managing director, global head of capital introductions.

While not in New York when the Global Financial Crisis hit, and not one for pessimism, Mannix recalls observing some of the most positive traits of human nature throughout the crash.

“Obviously, we experienced some pain being inside Lehman, but I am acutely aware that everybody experienced pain off the back of that,” Mannix says.

“But I had this wonderful opportunity to witness people’s behaviour in times of stress and panic.”

Being in a global role at the time provided Mannix with a unique perspective on the unfolding situation and fallout.

“I witnessed some incredibly positive human behaviours,” she says.

One experience in particular has stuck with her, having a powerful, lasting impact.

“There are a lot of perceptions about bankers, investment bankers and people in finance, and some of it is fair,” Mannix says.

“But Lehman in the US got picked up by Barclays, and Europe and Asia were anticipating Nomura to pick it up, but the fixed income business didn’t have a home.”

During this time of intense uncertainty and distress the managing directors of the fixed income arm pulled together to do what they could to help, she recalls.

“Without any song or dance, the fixed income directors put together a fund of their own money to support any of the younger people, like the graduates, should they be facing financial difficulty,” Mannix explains.

“It still catches in my throat now when I think about it. These young kids who had just graduated and moved to an expensive city like London and in a heartbeat didn’t have a job and lost all certainty as to their income and the fact that these managing directors did that with their own money, I think is beautiful.”

Mannix says it was a wonderful thing to see against a backdrop of so much negativity.

“Not everybody gets to be at a company when it goes down, and it’s an environment that I don’t want anyone to be in again, but you do get to see something most unusual and it’s when people often show their true selves,” she says.

When Nomura acquired the Asian division of Lehman Brothers, Mannix continued on in her same role for a further two years.

She stayed in London as she transitioned to CQS as global head of sales and marketing, head of client management at BMO Global and head of client management group at F&C Management.

But in 2019 it was time to come home to Australia and Mannix joined MLC as general manager of distribution, the role she currently holds.

Despite the obvious stresses of the job, Mannix says she genuinely loves what she does, and it seems the adage is true.

“Every aspect of my career, every firm I’ve worked with, I’ve had the benefit not only to work with incredible people who inspire me but being in a client facing role has given me the benefit of meeting so many others to be inspired by,” Mannix says.

“I’ve been blessed, I do believe that. I’m always looking and watching people and trying to learn from them and improve myself and I’ve been given so many opportunities to do that.”

Mannix has a true passion for her job and says she is forever grateful for the relationships she has formed.

While hard work and determination will get you far, Man-

Every day I hope to learn and grow.

Relationships are precious and they’re fragile and you often don’t get a second chance.

Mandy Mannix

nix credits all those who have believed in her throughout her professional life..

“When I think about my career, what is so central to it, is that it has always been down to the people that have helped me. So many men and women have inspired me along the way,” she says.

“Every day I hope to learn and grow. Relationships are precious and they’re fragile and you often don’t get a second chance, so you want to make sure that every day to show up and give everything you can to those relationships.”

As for where the wind will take her next, Mannix says she has never been one to focus too much on trying to get to somewhere. Rather, she likes to focus on the opportunities that present themselves when they do.

“I’m so focused on the opportunity my current role provides, and I want to do it as well as I possibly can,” she says.

“I’ve never really thought ‘I want to do this next; I want to do that next’. I’ve just thoroughly loved what I’ve been doing and that has opened so many doors. All I’ve done is always had a willingness to look at the opportunities when they’re there.”

And it’s this kind of guidance that she is passing on to the next generation.

“I think my role is to provide the support mechanisms and the tools to allow or empower people to do the best they can, so that they may bring their own experience and judgement to the table,” she says. fs

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