www.financialstandard.com.au 5 September 2022 | Volume 20 Number 17 13 Executive appts: BlackRock, FIIG Securities 14 Feature: Multi-asset ETFs 04 News: Quality of Advice Review 11 Opinion: Annika MorningstarBradley, 25 Between the lines: Clime, QIC 32 Profile: Nathan DivergerJacobsen,
Continued on page 4 Continued on page 4
Phil Anderson chief FinancialAssociationexecutiveofAdvisers
Speaking at the event, FICAP chair Marnie McLaren said: “It’s so exciting to see everyone together. We’ve had a few false starts trying to reorganise the event and lockdown contributed to that but being here tonight is incredible.”
Cassandra Baldini
“This would be an incredible disappointment to the victims of financial advice scandals who gave evidence to the Royal Commission,” heHesaid.added it would fuel a revival of vertical integration and set those protections back 15 years.
The interim paper from the Quality of Advice Review contained several surprises, with perhaps the most significant change proposed by chair Michelle Levy being that the obligation for financial advisers to act in clients’ best interests be removed; a move not everybody is in favour of, with some even going so far as to say it would herald a return to “the bad, old days.” “Evidence suggests the best interests duty has not been more effective than disclosure in protecting consumers from poor advice,” LevyInstead,wrote.she proposed there should be a focus on providing ‘good advice’ which she defined as that which “would be reasonably likely to benefit the client, having regard to the information that is available to the provider at the time the advice is provided.” She added that the best interests duty and the duty of priority are intended to impose fiduciary-like duties, but they are not fiduciary duties. The requirement would also replace the appropriate advice duty, the duty to warn the client and Chapter 7’s duty of priority.
Jamie Williamson Treasury has kicked off its review of adviser professional standards with a consultation paper that outlines its proposed new pathway for experienced advisers.
The government’s position has been that a minimum of 10 years’ experience and a clean record, in addition to passing the adviser exam, should be enough to meet the educational standards required of a financial adviser.
FICAP’s annual fundraiser returned for the first time since 2019, raising over $120,000 for SHINE for Kids and the Starlight Children’s Foundation.
Financial Counselling Australia also criticised the recommendation, saying that so long as asset-based fees remain, there is real potential for conflicts of interest. “The best interests duty is the only bulwark consumers have against poor advice,” Financial Counselling Australia chief executive Fiona Guthrie“Fromsaid.time to time, financial counsellors assist people who have received poor financial advice and as a result are experiencing financial hardship. A best interests duty means it is less likely that poor advice is provided.” However, Anderson says that if the intention of the QAR is to be achieved, stakeholders must keep an open mind and avoid being automatically resistant to change. “Financial advice has been subjected to so much change in recent years, however almost all of it has added complexity and cost. This is our chance to substantially reduce the complexity and cost,” he says. “We need to be prepared to engage in this process and warmly welcome constructive debate. The end objective must be that more Australians get access to great advice.” fs
This proposal is a win for female advisers as they are more likely to be working part-time or to have spent time out of the industry, caring for FICAP raises over $120k for charity
WT Financial Group managing director Keith Cullen says the ‘good advice’ proposal has real merit.
CHOICE chief executive Alan Kirkland said he has grave concerns the removal would see the industry return to “the bad old days that allowed scandals like those involving Commonwealth Financial Planning and Storm Financial to occur.”
“These are straight-forward, remove duplication, and it will provide significant relief to current regulatory overburden without eroding any consumer protections,” he says. However, consumer groups disagree, coming out in force to slam the recommendation to remove the obligation to act in clients’ best interests.
To date, FICAP has raised more than $2.2 million.
www.financialstandard.com.au 5 September 2022 | Volume 20 Number 17 13
“On the surface, it makes a lot of sense to us,” he told Financial Standard “However, the devil is in the detail, and we believe that considerably more consultation will be necessary to ensure that an unlevel playing field is not created between product manufacturers who provide advice and independently owned advice practices and their advisers. “As it stands, that’s a clear risk which we’re sure is unintended.” The Association of Financial Advisers also welcomed the paper, which chief executive Phil Anderson described as “quite revolutionary.” “We all recognise that there are substantial problems in the financial advice sector that have made it too costly to provide financial advice and this has left many Australians unable to access affordable advice. Something very major needed to be done to fix this. The QAR is the best option to achieve quantum change,” he told Financial Standard “If implemented, these proposals would have a huge impact on the financial advice process. We need to carefully consider what has been proposed and engage in a mature process to agree the best way forward. For some, this will require careful reimagining of what the future might look like.” There is much to like about most of Levy’s proposals, Cullen adds, particularly those around ongoing fee disclosures, Statements of Advice and Design and Distribution Obligations.
Executive Annika MorningstarBradley, Clime, Nathan DivergerJacobsen,
appts: BlackRock, FIIG Securities 14 Feature: Multi-asset ETFs 04 News: Quality of Advice Review 11 Opinion:
25 Between the lines:
QIC 32 Profile:
In its consultation, the government has detailed that to fulfill the 10 years’ experience requirement, an adviser must have had 10 years of full-time equivalent experience in the 15 years to 1 January 2019. It does not have to be 10 consecutive years. The 15-year period was selected as it covers significant events, including the Global Financial Crisis, Treasury said.
SHINE for Kids business development manager
The event returned with something a little different, taking things down a notch with a Live & Acoustic set, drawing a crowd of 300 investment industry“Usually,professionals.wewouldhave our RockStar event, which is a lot of fun, but we didn’t feel it was Covidfriendly and we wanted everyone to be able to get together, network and connect,” McLaren said “Everyone just wants to catch up, it’s a little bit lower key but what we are here to do is highlight those charities and the amazing work they do, while raising as much money for them as possible.”
Proposal to scrap BID sees mixed response
Adviser standards review begins
to provide a Statement of Advice or Record of Advice unless specifically requested by the client. Where it has been commented on, it seems as though most view this as a good thing; the removal of an onerous, lengthy document that is largely unread, misunderstood, and expensive to compile. And that’s true – it’s removal would be a significant step towards reducing the compliance burden currently weighing financial advisers down. But what would it mean for the paraplanning community? Paraplanners are the backbone of the financial advice industry, doing much of the work that the average client likely assumes is being done by their adviser. That’s not to say that paraplanners have nothing more to add beyond SOA construction, far from it. Their technical knowledge and ability to deliver a sound strategy, in addition to all else they offer the advisers they work alongside, is what truly makes them invaluable. But in a world where SOAs and ROAs are few and far between and advice businesses are feeling the pinch of super funds taking a large chunk of their prospective – and possibly existing – clients, will the same opportunities exist for paraplanners? While nothing is set in stone and many of the proposals may never come to fruition, for a review intended to provide certainty and stability, some of its unintended consequences may well do the opposite for some. fs
People who would never consider seeking advice would likely think twice knowing they could do so through their fund – the place most expect it from already – and likely at a more affordable price point given the economies of scale our super funds demonstrate. On the flip side, what would this mean for the wider financial advice industry? If the vast majority of advisers’ bread and butter is retirees or those approaching retirement, such a change would see super funds cut themselves a mighty large slice of that pie. There would need to be mechanisms in place to ensure super funds’ involvement isn’t at the expense of smaller licensees and practice owners. Otherwise, the very review charged with revitalising the sector would instead be decimating it further. But one proposal from Levy that has so far escaped any in-depth commentary is that of removing the requirement for financial advisers
2 Download Subscribers can read the Financial Standard newspaper on the go, accessing the very latest news and insights in wealth management. T: +61 2 8234 7500 F: +61 2 8234 7599 A: Level 7, 55 Clarence Street, Sydney, NSW, 2000, Australia www.financialstandard.com.au Financial Standard is proud to work with IVE Group, an environmentally responsible printing company. IVE Group has Forest Stewardship Council®(FSC®) certification, and Financial Standard is printed on paper from well managed forests and controlled sources. All editorial is copyright and may not be reproduced without consent. Opinions expressed in the Financial Standard are not necessarily those of Financial Standard or Rainmaker Information. Financial Standard is a Rainmaker Information company. ABN 57 604 552 874. Search: Financial Standard By Jamie Williamson financialstandard.com.aujamie.williamson@ Editorial Editorial Available Now FS Super THE JOURNAL MANAGEMENTSUPERANNUATIONOF Latest edition out now Director of Media & Publishing Michelle Baltazar +61 2 8234 7530 michelle.baltazar@financialstandard.com.au Editorial Jamie Williamson +61 2 8234 7562 jamie.williamson@financialstandard.com.au Cassandra Baldini +61 2 8234 7500 cassandra.baldini@financialstandard.com.au Chloe Walker +61 2 8234 7570 chloe.walker@financialstandard.com.au Andrew McKean +61 2 8234 7500 andrew.mckean@financialstandard.com.au Research Alex Dunnin +61 2 8234 7508 alex.dunnin@financialstandard.com.au John Dyall +61 2 8234 7551 john dyall@financialstandard.com.au Advertising Stephanie Antonis +61 2 8234 7547 stephanie.antonis@financialstandard.com.au Client Services & Subscriptions Kayleigh Sotto Corona +61 2 8234 7524 clientservices@financialstandard.com.au Design & Production Jessica Beaver +61 2 8234 7536 jessica.beaver@financialstandard.com.au Shauna Milani +61 2 8234 7542 shauna.milani@financialstandard.com.au Mary-Clare Perez +61 2 8234 7500 mary-clare.perez@financialstandard.com.au CPD program James Yin +61 2 8234 7527 james.yin@financialstandard.com.au Managing Director Christopher Page +61 2 8234 7501 christopher.page@financialstandard.com.au
At first glance these recommended tweaks might not seem too substantial, but combined they represent fundamental changes that would reshape the future of financial advice in this country – and each has its pros and its cons. Take the point on super funds, for example. Allowing funds to provide personal advice, including to those transitioning to retirement, would benefit millions in the years to come.
A sign of things to come?
A fter what felt like an age of slow news days here in the newsroom, this past fortnight saw the release of the consultation on adviser standards, the Quality of Advice Review’s interim report and draft reform proposals and the results of the second annual Your Future, Your Super performance test. When it rains, it pours.
It was difficult to decide which to focus on for this column, so I stuck with my rule of going with that which sparked the most discussion and that was, of course, the QAR paper. Arguably, the QAR consultation paper came as a surprise to many – not its release, but its contents.QAR chair Michelle Levy has not only acknowledged the many issues hindering affordability and accessibility of advice in Australia, but she’s understood them, and she’s listened, producing a paper overflowing with reform recommendations, some simple and manyNow,extensive.whether you agree with every one of Levy’s 12 proposals is another thing entirely. In her report, Levy said: “I think the changes need to be substantial if financial advice is going to be widely accessible and truly affordable.” Of the 12, the most significant proposals include only regulating personal advice, removing general advice altogether, removing the Best Interests Duty with a focus instead on providing ‘good advice’ and allowing superannuation fund trustees to provided personal advice while also giving them the discretion to decide how to charge for that advice.
Maybe www.financialstandard.com.au 5 September 2022 | Volume 20 Number 17
Commenting on her decision to step down, Lander said she feels it is the right time to hand over the reins to a new leader who can take CareSuper forward. “It has been an honour to lead an amazing team of truly professional and dedicated people working together for a fund, and industry, with a strong purpose - to help Australians get ahead,” she “Throughsaid.thededication of our board and staff, and with the assistance of our service providers, CareSuper punches well above its weight...”
Make your money work harder 12 MONTH TERM ACCOUNT
Perpetual said a newly appointed executive committee will be named in due course, all of whom would report to Adams.
Julie01: Lander outgoing chief CareSuperexecutive
A fter 20 years in the role, CareSuper chief executive Julie Lander is stepping down. Lander first joined the fund in 2001 when it had just $1 billion in funds under management. She was appointed chief executive in 2002 and the fund has since grown to $20 billion and has about 220,000 members. Lander came to CareSuper from a career in human resources, having held senior HR roles with RACV and Australian Industry Group.
The quote Julie has played a significant role in industry,superannuationAustralia’sserving our members and the broader superannuationmovementwithdistinctionovermanyyears.
“Julie has played a significant role in Australia’s superannuation industry, serving our members and the broader superannuation movement with distinction over many years.
“Julie has lived CareSuper’s values, building a strong, thriving culture and her leadership has driven the fund’s growth, quality member experience and strong investment returns.
Julie Lander resigns as CareSuper chief
current variable rate after fees, reviewed monthly. 5.00 p.a. %*
Pendal’s board has unanimously recommended its shareholders vote in favour of the scheme in the absence of a superior “Pendal’sbid.board is pleased with the improved proposal received from Perpetual, which is the result of extensive engagement between our companies,” Pendal chair Deborah PageShesaid.added that the scheme is also supported by the firms’ respective investment teams.
The acquisition would be the combination of two iconic financial services firms to create Australia’s pre-eminent global asset manager, the announcement reads. They would have combined assets under management of $201 billion and $1.4 billion in revenue. The Pendal brand will be retained, it said, sitting alongside Barrow Hanley and Trillium.
The board is now recruiting for a replacement, with Lander to stay on board until a suitable candidate is appointed. It’s expected to take until the end of the year. “The board is excited to begin the process of recruitment for the next leader of our awardwinning fund. We are committed to ensuring our strong culture is retained as we grow to be the leading challenger fund to Australia’s mega funds and continue to outperform for our members for the future,” CareSuper chair Linda Scott said.
Jamie Williamson
Perpetual to acquire Pendal
www.financialstandard.com.au 5 September 2022 | Volume 20 Number 17 News 3
Perpetual will acquire 100% of Pendal, in a scheme of arrangement that’s been unanimously endorsed by the latter’s board. Under the agreement, Pendal shareholders will receive one Perpetual share for every 7.5 Pendal shares plus $1.97 per share, to be funded by a new debt facility. This is an implied value of $6.54 per share and an increase of 30 cents per share when compared to Perpetual’s first offer in April. It will be reduced by any final FY22 Pendal dividend.
Julie leaves her successor with a substantial foundation to build on... We’re grateful that Julie will continue to serve as our chief executive during the transition to a new leader...” fs
In a letter to shareholders, Page said: “We believe this is a compelling opportunity for shareholders and the business alike. The combination will deliver a significant increase in scale, boost our position in an increasingly competitive global market and bring strategic benefits in the dynamic sectors in which we operate, both domestically and internationally.” fs
Mercer LutheranSuper,tomerge
Current Perpetual chair Tony D’Aloisio will be chair of the combined group and Perpetual chief executive and managing director Rob Adams would lead it. Up to three Pendal directors would be invited to join the Perpetual board.
After months of delay, Lutheran Super has announced it will merge with Mercer Super.
Lutheran Super members were informed of the decision at the fund’s annual members meeting. It’s a logical move for the funds; in addition to being Lutheran Super’s administrator and asset consultant, Mercer has also managed the fund’s investments sinceLutheran2017.
Super chair John Grocke said the merger is in the best financial interests of its 5700 members. It’s expected to take place later this year. “From the outset, we have sought a merger partner that could deliver the best retirement outcomes possible for our members,” Grocke“Followingsaid. a rigorous process, we’re pleased to have chosen the Mercer Super Trust, where our members will access a wider range of services, options and personalised support to get the most out of their super or pension. Importantly, members will continue to benefit from our tailored balanced investment option as well as other characteristics of the existing plan.” The merger process has been ongoing for close to a year now, with Lutheran Super first announcing in September 2021 that it was considering its options. In December 2021 it had determined a shortlist of three potential suitors and in January this year it said it had identified a preferred partner and expected to announce the merger in February or March, but this was Lutherandelayed.Super has about $700 million in funds under management. It was established in 1987 and is home to employees of the Lutheran Church of Australia.
“We’re proud of what we have achieved on behalf of our members over the years. We trust that our members’ best interests will continue to be well served as they join Mercer Super,” GrockeMerceradded.Super chief executive Tim Barber said he is looking forward to serving Lutheran Super’s“Mercermembers.isproud of its long-term partnership with Lutheran Super... We know well the commitment they have to helping their members enjoy a healthy retirement, and we look forward to welcoming them to Mercer Super,” he said. This follows the news earlier in the year that Mercer will take over BT’s superannuation business by way of successor fund transfer. fs * The rate of return on your 12 Month Term Account is current at 1 September 2022. The rate of return is reviewed and determined monthly and may increase or decrease each month. The rate of return applicable for any given month is paid at the start of the following month. The rate of return is not guaranteed and is determined by the future revenue of the Credit Fund and may be lower than expected. An investment in the Credit Fund is not a bank deposit, and investors risk losing some or all of their principal investment. Past performance is not a reliable indicator of future performance. Withdrawal rights are subject to liquidity and may be delayed or suspended. View our website for further information. La Trobe Financial Asset Management Limited ACN 007 332 363 Australian Financial Services Licence 222213 Australian Credit Licence 222213 is the responsible entity of the La Trobe Australian Credit Fund ARSN 088 178 321. It is important for you to consider the Product Disclosure Statement for the Credit Fund in deciding whether to invest, or to continue to invest, in the Credit Fund. You can read the PDS and the Target Market Determinations on our website or ask for a copy by calling us on 13 80 10. 1800 818 818 latrobefinancial.com
Levy said this would encourage better quality advice and provide consumers and advisers with clarity as to what they can expect and what’s required of them.
Elsewhere, Levy believes the financial services regime should only regulate the provision of personal financial advice.
Finally, she said there should be an adequate transition period for implementing these changes, with consideration also given to allowing providers to ‘opt in’ early. fs
A focus on providing ‘good advice’, the scrapping of general advice, and allowing superannuation funds to provide personal financial advice are just some of the proposed reforms contained in the Quality of Advice Review’s consultation paper. The QAR lead Michelle Levy’s 01 consultation paper suggests removing the best interests duty, saying “evidence suggests the best interests duty has not been more effective than disclosure in protecting consumers from poor advice.”
News4
5 September 2022 | Volume 20 Number 17
Levy has also suggested allowing super funds to provide personal advice to members. Super trustees should also have discretion to decide how to charge members for that advice and the restrictions on collective charging of fees should be removed, Levy writes. They should also be able to pay a fee from a member’s account to an adviser for personal advice provided on their interest in the fund, if the member allows it.
“The definition of ‘personal advice’ should be somewhat broader so that it is clear it applies whenever a recommendation or opinion is provided to a client about a financial product (or class of financial product) and, at the time the advice is provided, the provider has or holds information about the client’s objectives, needs or any aspect of their financial situation,” the paperLevyreads.adds that this broader definition would mean that an institution could not seek to avoid giving personal advice to a customer by quarantining information they hold about the customer for the purposes of giving advice.
Continued from page 1 children or other loved ones. Advisers must also have a clean disciplinary record in order to access the proposed new pathway. This would, at minimum, require them to have no disciplinary actions recorded against them on the Financial Adviser Register. Other sources for determining whether an adviser has a clean record could include whether their conduct has resulted in adverse findings against their licensee by the Australian Financial Complaints Authority; CPD compliance; and action taken by professional associations. “It is proposed that isolated incidences of minor misconduct would not be sufficient to disqualify an adviser from accessing the experienced pathway. However, multiple instances of minor misconduct over a sustained period should be considered disqualifying misconduct for accessing the experienced pathway,” the consultation paper reads. Finally, Treasury has proposed that it may be required that regulators be provided new powers in dealing with any potential future misconduct that an adviser who has accessed this pathway may be found guilty of. “... it may be necessary to create explicit powers for regulators to order an adviser who once accessed the experienced adviser pathway to complete formal education requirements for existing advisers...” the paper reads. fs Julianne Sanders explained that for 40 years SHINE has supported children and young people effected by the criminal justice system. “The funds raised from FICAP provide essential support for SHINE’s RISE Education program in Western Sydney. RISE gives primary-age students with a parent in prison access to a vital support system that encourages their learning and development. Each student is matched with a mentor who supports them academically, socially and culturally,” she said. Meanwhile, Starlight national partnerships manager Matt Geraghty said the money raised from the FICAP community has been critical to fund its Livewire program at the Westmead Children’s Hospital.
She said where advice fees are deducted from more than one product, a single consent form should cover each of the products issued.
FICAP raises over $120k for charity
www.financialstandard.com.au
Levy highlighted that the providers of personal advice should be able to determine what form of advice would best suit their clients and to maintain complete records of advice provided.
Jamie WIlliamson, Cassandra Baldini
Instead, there should be a focus on providing ‘good advice’; “A duty to give good advice does place a different kind of responsibility on providers than laws which prescribe process. It also creates the opportunity to remove many of the regulatory requirements relating to disclosure and some relating to conduct.” ‘Good advice’ is defined by Levy as that which “would be reasonably likely to benefit the client, having regard to the information that is available to the provider at the time the advice is provided.” In addition to replacing the best interest duty, this requirement would also replace the appropriate advice duty, the duty to warn the client and Chapter 7’s duty of priority.
Levy said she remains unpersuaded SOAs provide any real protection to consumers.
In making this particular change, the provision of general advice would no longer be regulated as a financial service, with Levy saying the definition and obligation to provide a general advice disclaimer should be removed.
Further, Levy suggests the reporting requirements for the design and distribution obligations should be simplified by only requiring relevant providers to report to the product issuer where they have received a complaint in relation to a financial product.
Focus on providing ‘good advice’: QAR draft proposals
“Livewire transforms the healthcare experience and well-being of teenagers living with chronic illness or disabilities through opportunities for social connection, creative expression, and personal development,” he said. FICAP’s platinum sponsors for 2022 are BlackRock, Challenger, Count Charitable Foundation, MLC Asset Management and PIMCO. Its gold sponsors for 2022 are BT, Capital Group, Colonial First State, FIL Investment Management (Australia) Limited, First Sentier Investors (Australia) Services Pty Limited, Franklin Templeton Investments, GSFM, Hub24, Ironbark, Janus Henderson, KPMG, Macquarie, Magellan, Montgomery Investments, Morningstar, NMG Consulting, Pendal, Profusion Group, Schroders, Spire Capital, and SQM Research. fs Financial Standard is the official media partner of FICAP and the Live & Acoustic event.
Meanwhile, a provider of personal advice should be a ‘relevant provider’, where the provider is an individual and the client pays a fee for the advice, the provider receives a commission, there is an ongoing advice relationship between the adviser and the client, or the client believes one exists, the paper reads.
However, this wouldn’t mean that what currently constitutes ‘general advice’ would go on unregulated, with Levy saying other existing regulations cover the provision of such recommendations and opinions.
Turning to disclosure documents, Levy has proposed replacing current requirements for advisers to give clients annual fee disclosure statements, seek their agreement to renew fee arrangements and obtain their clients’ signed consent to deduct fees from financial products, with obtaining annual written consent from their client to deduct ongoing advice fees from a financial product. Levy added that the consent form should explain the services that will be provided as well as the fee proposed by the adviser over the course of the upcoming 12 months.
They would only need to provide a written Record of Advice to a client on request, replacing the current requirement for advisers to provide a Statement of Advice or ROA.
“In my own experience, SOAs are not necessarily even reliable records of the recommendations and opinions provided by advisers given the heavy emphasis on templated content,” Levy writes.
Michelle01: Levy Qualitychair of Advice Review
Continued from page 1 Adviser standards review begins
When in doubt about whether personal advice is being provided, Levy said assume that it is.
She highlights that removing the requirement for a SOA and ROA with their prescribed content would place more responsibility on providers to consider how they should offer advice but added it also makes it easier to provide digital advice, simple advice and regular advice to consumers.
The quote A duty to give good advice does place a different kind of responsibility on providers than laws which prescribe process.
Vanguard granted RSE licence by APRA Jamie Williamson Vanguard expects to launch its product before the end of the year, having been handed a registrable superannuation entity licence.APRA granted a new RSE licence to Vanguard Super Pty Ltd, the trustee of Vanguard Super, on August 25. In an update, Vanguard said: “That’s our green light to proceed towards launching Vanguard Super in the coming months.” “There’s still more to be done before then, but we’re on track to open our offer to members at the start of a journey of entering the superannuation market.”
Future Safe.
losses.Limitreturns.Harness
end
Carlyle, amicaa in local credit JV
Volatile markets pose unique challenges for investors. Returns have become hard to find without exposing retirement capital to a multitude of risks. Incorporating a defensive asset alternative like Future Safe can help to rebalance the risk profile of retirement portfolios and protect capital. Seek out market-linked returns with greater certainty. Future Safe. The defensive alternative.
www.financialstandard.com.au 5 September 2022 | Volume 20 Number 17 News 5
Find out more at allianzretireplus.com.au/harness-returns we’re on track to open our offer to members the of the
AR2022-07_IDGR-A5861-M The quote ...
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The partnership aims to capitalise on growing private credit opportunities in the countries, combining the local knowledge of the amicaa team with the investment management expertise of Caryle’s global credit platform.
This material is issued by Allianz Australia Life Insurance Limited, ABN 27 076 033 782, AFSL 296559 (Allianz Retire+). Allianz Retire+ is a registered business name of Allianz Australia Life Insurance Limited. This information is current as at July 2022 unless otherwise specified. This information has been prepared specifically for authorised financial advisers in Australia, and is not intended for retail investors. It does not take account of any person’s objectives, financial situation or needs. Before acting on anything contained in this material, you should consider the appropriateness of the information received, having regard to your objectives, financial situation and needs. The returns on the Future Safe product are subject to a number of variables including investor elections, market performance and other external factors, and may differ from the information contained herein. Past performance is not a reliable indicator of future performance. No person should rely on the content of this material or act on the basis of anything stated in this material. Allianz Retire+ and its related entities, agents or employees do not accept any liability for any loss arising whether directly or indirectly from any use of this material. Allianz Australia Life Insurance Limited is the issuer of Future Safe. Prior to making an investment decision, investors should consider the relevant Product Disclosure Statement (PDS) and Target Market Determination (TMD) which are available on our website (www.allianzretireplus.com.au).
“We are under no illusion that it is a lot of work to get a licence and then to get a product to the market.” In October 2020, it began culling the special mandates it managed on behalf of other superannuation funds. In 2021, Vanguard Super appointed its board, chaired by Peggy O’Neal. Michael Lovett was named head of superannuation at Vanguard, and GROW Inc. was awarded the mandate to provide administration services.
The board has declared a dividend of 10 cents, bringing the annual dividend to 20 cents.
fs
Effective October 1, Matt Heine will become the sole managing director of Netwealth, as his father steps back from day-to-day management.
PIMCO provides investment management and other support services to Allianz Australia Life Insurance Limited but is not responsible for the performance of any Allianz Retire+ product, or any other product or service promoted or supplied by Allianz. Use of the POWERED BY PIMCO trade mark, or any other use of the PIMCO name, is not a recommendation of any particular security, strategy or investment product.
Chloe Walker Global giant Carlyle and Sydney-based credit investment firm amicaa have teamed up to manage a diversified portfolio of private debt investments in Australia and New Zealand.
Michael Heine steps back
The platform will manage two primary strategies. Firstly, the amicaa core plus strategy, designed in collaboration with local superannuation and private wealth investors, will focus on delivering stable, income-oriented returns from Australian and New Zealand corporate loan investments. Meanwhile, the amicaa credit opportunities strategy will focus on providing financing solutions to companies going through transitions, acquisitions, growth, or refinancing, where a tailored capital package is required. Carlyle’s contribution will be led by its managing director Taj Sidhu, with Carlyle Global Credit, and Jay Ditmarsch, a member of the Carlyle Credit Opportunities team. “We are excited to be partnering with amicaa to form a joint venture that combines the deep local knowledge and extensive relationships of the amicaa team with the strong investment management expertise and investor relationships of Carlyle’s global credit platform,” Sidhu said. “We see a multi-billion-dollar opportunity to deploy capital in Australia and New Zealand, a structurally growing market, and look forward to working with the amicaa team to build out the long-term growth of the business.” fs
The news came as part of Netwealth’s results announcement, with Netwealth saying Michael Heine will continue as an executive director. The decision is in line with the company’s succession plan, Netwealth said. To date, Michael and Matt Heine have served as joint managing directors.“Thesuccession plan has been in place for a long time and this change is the continuation of the planned succession,” Michael Heine said. “The executive team under the leadership of Matt are very well placed to continue to lead and grow the company and build on the existing successful strategy. I look forward to continuing to contribute to the management and being actively involved in the future of NetwealthNetwealth.”reported record inflows of $13 billion for FY22, an increase of 32.4%. It also recorded underlying operating net cashflows of $90.8 million and underlying EBITDA of $88.2 million. As of this month, it has $60 billion in funds under administration, the platform said.
The report from National Seniors Australia and Challenger, entitled The evolution of retirement income: A 2022 snapshot, said the proportion of women who have accumulated super for their retirement is 82% which sits lower than men’s 88%.
Jamie Williamson F ive MySuper products have failed the sec ond annual MySuper performance test, with four of them failing for a second time.
The $28bnnumbers The total assets in the failed products.
ASIC brokersissueswarning
“Those changes have meant the return is $4 billion better than it would have been had we not made them.” He made the point that the June quarter was extremely volatile, and markets were down in some cases more than 15%. fs
Survey participants with super, savings and investments (2482) were asked how they would use this capital to generate their income in retirement.
“We continue to work in our members’ best financial interests and by being part of a much larger Mercer fund BT members will have the potential to benefit from stronger performance, lower fees with most members to see a fee reduction of around 25% off standard fees, more investment choice and broader members services.”
EISS Super told members it was disappointed to inform them it had failed again, while ACSRF has outlined members’ options.
The intention to maintain most or all their capital was statistically more likely for men than women and for those who had helped a family member or friend access aged care.
The Australian sovereign wealth fund reported a 3.1% drop in its return for three months to June and a 1.2% decline from $196.8 over last year. Future Fund chief executive Raphael Arndt commented that given market volatility the return is strong.“Toput that in context global equities and global bonds both fell over 10% during the year and that is because inflation is rising and central banks around the world are responding by rising interest rates which in turn is hitting asset values,” he said. “To preserve the capital of the fund in that environment is exactly what we look to do, we think the investment world is changing and we published very transparently at the end of last year our thoughts on that.” Arndt explained Future Fund has made over $30 billion worth of changes to the portfolio to start to position it accordingly.
“Pleasingly, almost 96% of MySuper superan nuation members are now in a performing My Super product, equating to 13.1 million mem ber accounts,” APRA member Margaret Cole 01 said.“Equally positive is that the performance test has contributed to over 5.1 million MySuper members (just over 38%) now paying lower fees than they were last year.
Only 10% of retirees rely on super alone and only 10% rely on pension alone. Women were more likely than men to take the minimum drawdown only.
Margaret01: Cole APRAmember
Two-thirds said it was somewhat or very important to leave the home as a bequest.
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ASIC said it has seen increased instances of brokers offering securities trading to retail investors and that some are seeking to offer high-risk products or services that may be inappropriate or result in poor outcomes in a bid to broaden their revenue base as market conditions impact investor activity. This includes crypto-assets and potentially misleading offers of ‘zero’ or ‘low cost’ brokerage, ASIC said.
The survey concluded that 75% of retirees surveyed are satisfied with their financial security. fs
“More men enjoy a comfortable retirement from super, and more women than men have super balances so low, they are reliant on the age pension,” National Seniors chief executive and director of research John McCallum said. “On just about every score on superannuation, women trail men.” When thinking about savings and investments, 48.7% of people said that they would maintain only part of their capital because they expected to spend some savings to fund retirement.
Data demonstrates success of superannuation
Data also found 81% owned their own home and 11% owned a home with a mortgage, just 2% used the equity of their home in retirement. Further, men were more likely than women to consider a reverse mortgage, the data shows.
The regulator said securities lending is complex and may be difficult for retail investors to properly understand, adding that it’s typically limited to institutional investors with size, scale and sophistication to understand and manage risks. Features that may be unfair or inappropriate include bundling of securities with other services or automatic opt-in of clients to lending; no re-qualification or vetting of investors; and a fee split that is heavily skewed in the provider’s favour.
Those that failed for a second time have un til September 28 to notify their members. They can now not take on any new members and can not be offered as a default fund for any employ ers. They must also return any contributions made by new members after today.
For the 77% of the survey sample who were permanently retired, income was drawn mainly from super 70%, the Age Pension 48%, savings 37%, shares 35% and investment property 11%.
Future Fund drops to $194.4bn
The standout reason for maintaining capital for most people was to fund medical or health needs.
In a statement, a BT spokesperson said: “We have worked hard to improve member outcomes, including reducing fees, and the outcome was mainly due to some periods of underperformance, particularly in the 2014-15 financial year and in last year’s turbulent global markets.”
Cassandra Baldini New data shows that 85% of people have accumulated super for their retirement and 75% of retirees are satisfied with their financial security.
BT’s MySuper option was one of the four to fail the test for a second time. The others were Australian Catholic Superannuation and Retirement Fund’s LifetimeOne, EISS Super’s MySuper - Balanced and AMG Super.
In total, APRA assessed 69 MySuper prod ucts with 93% passing. Further, five of the prod ucts that failed last year’s test passed this year.
A profile of retirement savings and investments revealed 8.5% have more than $1.5 million while 16.9% have $200,000 - $500,000.
ASIC said brokers offering crypto-assets alongside shares and other regulated financial products may give investors a false sense of security, “leading them to believe crypto-assets have the same protections as regulated financial products or they may underestimate the risks.” ASIC commissioner Danielle Press said: “Crypto-assets are high-risk, volatile and complex. Brokers should think very carefully before offering crypto-assets through their share trading apps. The differences in risks and protections must be made clear to investors. We expect brokers to do the right thing by their clients.” In the case of possibly misleading statements about cost, Press said: “We are concerned that ‘zero brokerage’ claims may not be true to label where the service is ‘bundled’ with other products or services that effectively subsidise brokerage and cause retail investors to take on additional risk.” fs
Future Fund assets slipped almost by 5% to $194.4 billion from its $203.6 billion December peak.
Four MySuper products fail for second time: APRA
For both super and other savings or investments, one-third nominated drawing down capital or spending, selling the capital to generate income, while approximately one-fifth did not want to use their capital at all for income.
All but AMG Super have already made moves to merge with other funds. ACSRF is currently undertaking a merger with UniSuper, EISS Su per is merging with Cbus and BT’s superannua tion products will soon move to Mercer.
Combined, the failed products are home to about 600,000 members and close to $28 billion.
APRA said it will be engaging with the four trustees to ensure members achieve better out comes as quickly and safely as possible.
The product that failed this year’s performance test for the first time is Westpac Group Plan MySuper. Westpac must now identify the causes of underperformance and set about working to correct it. It must also assess the potential implications of the failure on the fund and its sustainability, developing a plan to close the product and move members to another, if it becomes necessary.
“This is the culmination of APRA’s intensi fied supervisory approach, driving trustees to take meaningful action to improve member out comes. APRA encourages superannuation trus tees to continue to explore ways to improve the efficiency of their MySuper products.” fs
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Link expands UK footprint
Further, Chris believes the test has changed the way in which super funds consider and ultimately undertake mergers, saying historically mergers have occurred based on strong synergies, aligned investment philosophies and similar membership. However, as more funds fail or expect to fail the performance test, the drivers of mergers are changing and determining whether a merger is in members’ best interests will become increasingly challenging.
“Evidence suggests that members do take action against under performing funds, with some of those who failed in 2021 experiencing higher than average net member outflows.”Thismight impact mergers already underway and could even cause them to fail as potential merger partners reassess the impact of taking on the underperforming fund on its existing members, he said, adding that this would place additional strain on the underperforming fund looking to secure a more sustainable future for members. fs
The international developer is partnering with Dutch pension fund manager PGGM to develop and manage up to $1.5 billion in build-to-rent communities.
NGS Super chief executiveretires, interim named
Jamie WIlliamson
fs
Laura01: Wright former chief executive NGS Super
“Funds who fail the performance test and don’t have resources to work through the underperformance issues, may not be able to find a timely alternative solution before members start to ‘vote with their feet’ and leave the fund, opening up potential liquidity issues for the remaining members, and thereby reducing the appeal of the fund even more to any potential suitors,” Chris said.
The unintended consequences of the performance test
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Link Group Retirement and Superannuation Solutions chief executive Dee McGrath said: “Our commitment to the UK pensions sector is underpinned by our investment in building our capability, technology and platform to service clients and by bringing our global experience from a proven, successful Australian business to the UK.”
Already, the pair have a long-standing relationship in the United States, and now aim to deliver over 2500 build-to rent units across Australia. PGGM’s first investment tranche opens a pipeline of over $700 million toward initial developments, with two project sites already confirmed. Meanwhile, Sentinel will support the venture by providing investment management, development management, and property management services.
Link Group Retirement and Superannuation Solutions UK general manager Richard Wilson said the Group and HS Pensions joint capabilities will enable it to support future developments in collective defined contribution schemes. Together they’ll also be able to provide a best-in-class defined contribution and defined benefit proposition to clients, Wilson added.
Sentinel, PGGM build to rent Chloe Walker
L aura Wright 01 has retired from NGS Super, with an acting chief executive now in charge.Wright’s retirement follows 35 years in industry superannuation and 14 years with NGS Super, the last four as chief executive. In the early 1990s, she also served as a director on the board and, briefly, as chair. In addition to NGS Super, over the years Wright has also held roles with Print Super, AMIST Super and First Super. “Laura has made a significant contribution to the industry, but in particular to NGS Super. Her commitments both personally and professionally to advancing the interests of members is outstanding and she is leaving the fund in excellent shape,” NGS Super chair Dick Shearman said. “Laura will be greatly missed as both a leader, colleague and advocate for members and the fund and we wish her all the best in retirement.”
Sentinel Real Estate Corporation president Michael Streicker said the firm is proud to expand the partnership internationally and that PGGM’s commitment displays confidence in Australia’s build-to-rent market. “We’re committed to continuing to deliver high quality, sustainable and community-focused living that enhances the housing choices available to Australians.“Thisisparticularly important at a time where changes in the housing market and supply levels are front of mind for so many,” Streicker said. fs
The quote Laura will be greatly missed as both a leader, colleague and advocate for members and the fund and we wish her all the best retirement.in
“This transaction accelerates that vision and will see two high-quality businesses integrated to simplify and improve the member experience in the UK, with significant potential for growth.”
Andrew McKean Link Group has signed an agreement to acquire HS Pensions, expanding its footprint in the UK retirement solutions and pensions sector. HS Pensions delivers an end-to-end pension service and administers pensions for around 370,000 members. When combined with Link Group, the business will serve approximately 1.5 million members with assets under management (AUM) of over £4 billion. In a statement, Link Group said: “The acquisition will deliver immediate capabilities for Link Group’s Retirement & Superannuation Solutions division in core pension administration and a platform for the firm’s unique membercentric engagement technology.” The transaction is expected to be completed in the second half of 2022. Once completed, HS Pensions will integrate with Link Group’s UK Retirement and Superannuation Solutions business.
While the annual Your Future, Your Super performance test is focused on stamping out underperformance, its impact on industry consolidation is likely already shifting, according to KPMG. This year’s test saw five products fail, four for the second time. Last year saw 13 products fail, 10 of which have since merged or are in the process of doing so; the first iteration of the test achieved its intention, pushing smaller and underperforming funds to consider their future sustainability and members’ best interests. However, KPMG partner, actuarial and financial risk Platon Chris says the test now presents a challenge for APRA and trustees.Oneof the main reasons, he suggests, is because funds that have already undertaken substantial mergers or achieved significant size may not be looking to undertake any further merger activity. “Recent large fund mergers are likely to focus on getting the strategy, integration and operating models in place before they can be in a position to enter additional agreements with new funds,” Chris said. “Equally, the more stable mega funds can become more selective about how they grow their funds and the opportunities they pursue.” This would leave those funds in need of a merger partner with fewer options, possibly at the detriment of the members still within the underperformers.
Wright took over as chief executive when Anthony Rodwell-Ball resigned in March 2018, first in an acting capacity and then on a permanent basis, named in the role shortly before the fund’s merger with QIEC Super was finalised.Alsocommenting, the Australian Institute of Superannuation Trustees thanked Wright for her work in the profit-to-member sector and her commitment to achieving the best retirement outcomes for members, calling her a “passionate and inspirational leader”. In a 2019 interview with Financial Standard , Wright described her career path as “anything but standard”, having worked in her family’s hardware business in the early days before becoming a teacher at an all-boys school south of Sydney and joining the Independent Education Union. She then became the union’s first women’s officer and organiser, which would later lead to her joining the board of NGS Super. She described her appointment as NGS Super’s chief executive as “a huge privilege”, commending the fund on its culture of recognising talent, promoting internally and encouraging opportunities be embraced. Illustrating this, the NGS board has appointed chief risk and governance officer Natalie Previtera as acting chief executive. She has been with the fund since 2019, having joined from AMP where she was senior manager, trustee governance. She also held roles at Suncorp, Perpetual and Commonwealth Bank. NGS Super is currently recruiting for a permanent replacement. fs
A new suite of Financial Standard journals is out now, bringing you the latest news, cover stories and CPD-accredited whitepapers for Australian wealth management professionals. FINNACLE’s Daniel Thompson shares his innovative approach to advice delivery, proving it’s possible to provide accessible, affordable financial advice. Pollination Group partner Zoe Whitton is helping to accelerate the transition to a net zero, climate resilient future. She explains how financial solutions and natural capital can help bring systems change. fsadvice.com.au Promo code: AD0722 fssustainability.com.au Promo code: ST0722 fssuper.com.au Promo code: SU0722 Celebrating its 100th SuperannuationCommonwealthbirthday,Corporation’s Damien Hill reflects on the fund’s growth, the challenges it’s weathered in recent years and his plans for the year ahead, including its merger with AvSuper.
“With an existing network of leading investors and partners in Australia and New Zealand and an unmatched investment track record, I am confident that we are positioned to continue growing the firm’s client base and presence throughout the region.”
www.financialstandard.com.au 5 September 2022 | Volume 20 Number 17News10
Chant West to rate platforms
Craig Matthew has been appointed managing director for Australia and New Zealand for Pretium, heading up its first local office. It will maintain the firm’s focus on residential real estate, residential credit, and corporate credit. Matthew brings nearly three decades of experience in supporting and expanding client offerings for limited partners including high-net worth individuals and sophisticated institutional investors such as endowments, sovereign wealth funds, superannuation funds, and family offices. He joins Pretium from Asia Principal Capital and Morpheus Ventures, where he served as director in the private market investor relations group.Previously he was director of institutional relationships at Capital Group Companies, as well as serving in a variety of business development roles for Alliance Bernstein Commenting on his new role, Matthew said: “Joining an innovative, forward-thinking global investment platform like Pretium is an incredible opportunity.”
Following a review, Hostplus has retained Industry Fund Services (IFS) as its financial advice provider ahead of expanding its intra-fund and personal adviceHostplusservices.isplanning to roll out an updated financial advice and literacy model, including expanded intra-fund and comprehensive advice solutions and a range of new services to meet the growing needs of its broadening membership. These services will be delivered digitally, over the phone, and face-to-face, Hostplus said.
“Jayme and Craig bring deep expertise and local connection within the Asian and Austral ian markets to support our investors where they are,” Mullen “Followingsaid.our recent expansion into the Middle East, we are pleased to continue to grow our team with such talented and respected individuals to work with clients internationally.” fs Mullen chief PretiumexecutivePartners
The Spirit Super and Palisade Investment Partners Consortium has not proceeded with its Port of Geelong acquisition, withdrawing its request for merger clearance from the ACCC.
Also commenting, IFS executive manager, advice solutions Adrian Gervasoni said: “For the last couple of years, we’ve been increasingly focused on encouraging and supporting industry funds to take a more human-centred design approach to their advice models.” fs
The quote I am confident that we are positioned to continue growing the firm’s client base and presence throughouttheregion.
The platform ratings’ methodology focuses on five main criteria: adviser services, investments, fees, member services and organisational strengths, with the most important and heavily weighted feature being adviser services. “We consider adviser services the most important part of a platform’s offering. The benefit of a platform is that it offers greater efficiencies to advisers to enable them to focus on providing strategic advice to their clients, rather than spending time on platform administration. This is an important contributor to providing strong member outcomes for platform clients,” Fryer said. Under the system, five apples is the highest rating, ranking the platform as a ‘Highest Quality Platform’.
Four apples constitutes a ‘High Quality Platform’, while three apples is a ‘Fair Quality Platform’. fs
Spirit Super, Palisade consortium withdraws from port acquisition
“Common fund management and ownership that allow a degree of control or influence by minority interests have the potential to detrimentally effect competition,” Cass-Gottlieb said.
Meanwhile, Seoul-based Jayme Han will join Pretium as its managing director for Asia., heading up a new office there also.
The Consortium included a range of super and infrastructure funds, and the acquisition would have resulted in Palisade managing, on behalf of investors, 100% of the Port of Portland and 49% of the Port of Geelong. Additionally, the proposed acquisition would have resulted in some common ownership interests across the two ports.
The ACCC recently informed the Spirit Super Palisade Consortium that it continued to hold preliminary competition concerns needing more time to investigate and the Consortium subsequently decided to not proceed with the transaction.
Pretium Partners lands down under
Earlier this year, the ACCC released a statement of issues outlining its preliminary concerns with the proposed acquisition of the Port of Geelong by the Consortium. The corporate watchdog was concerned the acquisition may substantially lessen competition in Victoria for the supply of port services for long-term bulk cargo customers in Victoria.
Chloe Walker T he US-based investment manager is bolstering its business development capabilities in Australia, opening an office and appointing a managing director.
Prior, she was the head of alternatives at Tongyang Life Insurance, Korea’s fifth largest life insurer, and, earlier in her career, was hired as one of the founding members of the alternatives business, and its first dedicated real assets specialist, for the National Pension Service.
At the time, ACCC commissioner Stephen Ridgeway said: “We are concerned the acquisition may substantially lessen competition in Victoria for the supply of port services for bulk cargo.”“Ports play a critical role in the movement of goods in Australia’s economy and there is some ability for major port users to choose between the Port of Geelong and Port of Portland when making very substantial infrastructure investments at the ports. “Any substantial lessening of competition between ports therefore has the potential for significant negative impacts on a range of industries.”
Cassandra Baldini Chant West has expanded its apple rating scale to investmentPreviouslyplatforms.usedtoassess super and pension funds, Chant West will now use the rating service to review the features, services and investments provided to financial advisers and their clients by platforms.ChantWest general manager Ian Fryer explained the decision was made in response to market feedback for a comprehensive assessment that helped advisers compare platforms and assess their core features and capabilities in key areas.
“Parties proposing to acquire interests in critical infrastructure should expect the ACCC’s review will be careful and thorough. Such transactions may have long term consequences for competition. The ACCC conducts merger reviews with the rigour warranted by the complexity and significance of a transaction.” fs
ACCC chair Gina Cass-Gottlieb commented: “We were concerned the common fund management and ownership interests between the Port of Geelong and the Port of Portland would reduce competition for customers between the ports over the medium to long term.” Further, the ACCC cited that the issue of common fund management and ownership among competing firms, including via minority interests, has increasingly become a focus of economic regulators and most recently the subject of a Standing Committee on Economics Inquiry.
Andrew McKean
Hostplus expands IFS mandate Jamie Williamson
IFS is also tasked with selecting and assembling a team of vendors and subject matter experts to help deliver the new model. The expanded advice model is designed to benefit members’ financial interests and wellbeing, especially in retirement, Hostplus group executive, member experience Paul Watson said. “The fund’s decision to appoint IFS as its preferred financial advice and education services partner is another win for our members. Following an extensive vendor selection process, we chose IFS as our partner to continue to deliver this important service to our members, given its thorough and applied knowledge of Hostplus’ advice model,” Watson said.
Pretium founder and chief executive Don Mullen 01 said that the APAC region represents important strategic markets and opportunities for growth for the firm, as it continues to ex pand its client base globally.
Don01:
Following the review and update of SPS530 - Investment Governance, APRA now intends to update SPG531 - Valuation. It is expected that the update will address valuation governance, valuation methodol ogy (including independent assurances), frequency and monitoring of valuations and types of valuation risk.
A PRA’s recent commitment to update SPG531 – Valuation cannot come soon enough. The financial year-end per formance data has been met with suspicion from investors, advisers, and even between superannuation funds. The reality is the industry has come a long way in recent years. Many funds have clear valuation policies that involve exter nal valuation experts, asset revaluations are conducted during heightened periods of volatility to support member equity and many board valuation sub-committees have been established. But the debate over super annuation fund valuations of unlisted assets continues to rage. There’s no doubt that many superannua tion funds have embraced the use of unlisted assets. According to ASFA’s Superannua tion Statistics, on average MySuper funds hold over 20% of assets in unlisted property, infrastructure, and private equity. Given the inflow profile and investment time horizon of some super funds, these large allocations to illiquid assets have remained manageable. And from the due diligence data Morning star receives - the results for members have been impressive. Both AustralianSuper and Australian Retirement Trust’s private equity programs have generated returns in excess of 16% per annum over the last five years (as of 31 March 2022). But APRA didn’t undertake its recent Un listed Asset Valuation thematic review for nothing. The review highlighted “the need for considerable improvement in industry ap proaches to valuations and the need to con duct valuations proactively and regularly.’’
www.financialstandard.com.au 5 September 2022 | Volume 20 Number 17 Opinion 11
applies the same price consistently across market participants.
Whether the write-down taken by Frank lin Templeton is precisely right isn’t the point. The point is it was transparently dis closed. But under SEC regulations - Frank lin Templeton doesn’t have a choice. Reveal ing their holdings and valuations isn’t just good governance - it’s the law.
The answer became obvious in a recent Morningstar discussion with a large super fund about how private equity managers need to be more transparent in a world of heightened standards around environmen tal, social and governance (ESG) considera tions – transparent disclosure.
It’s doubtful many super fund members would be venturing in to check valuations, but it would certainly create enough indus try scrutiny around who was taking what write-downs, when, and using what meth odology that it would put to bed the cloud of doubt and suspicion that currently exists.
Annika01: Bradley director, manager research Morningstarratings
If we are really going to resolve this once and for all - funds need to be regulated to disclose their holdings at the security level and associated valuations following quar ter end. I’m not suggesting that this is a 10-business day post-quarter end proposi tion. But following an appropriate lag - this information should be made available to in vestors and the broader industry. This will be the only way to quell the doubt that exists. Instead, the industry remains un der a cloud of suspicion as to who really was the best performing fund of the year. fs
Australia’s own start-up success story, Canva, is the subject of the most recent un listed asset valuation controversy. According to US SEC “Statement of Investments” fil ing, Franklin Templeton Growth Opportu nities Fund have written down the value of their Canva investment by over 58% already this year. And this write-down has called into question the valuation responses of the Australian superannuation funds that also hold this investment through their private equity programs.
Sunlight: The obvious solution to unlisted asset valuation doubts
Here in Australia, Portfolio Holdings Dis closure at the security level for unlisted as sets isn’t required. Instead, the industry and media are trying to backsolve based on the inadequate disclosure currently required.
The quote If we are really going to resolve this once and for all - funds need to be regulated to disclose their holdings at the security level and quartervaluationsassociatedfollowingend.
For example, Aware Super have publicly stated they own Canva. But based on the Portfolio Holdings Disclosures posted on their own website the best you can do is guess that the investment is held through their Blackbird Ventures position. As to the carrying value of the investment - it is im possible to say. To be clear - Aware Super’s disclosure is compliant and more than ad equate under the current regulations. There seem to be lots of arguments against increasing levels of transparency – after all the Portfolio Holdings Disclosure regulations were watered down following significant industry criticism of the draft regula tions. But wouldn’t sunlight solve the ongoing suspicion in relation to unlisted asset valuations? It’s good enough for many of the large listed real estate investment trusts. Scentre Group clearly publishes West field Bondi Junction’s valuation. It’s good enough for our off shore counterpartsFranklin andwithvaluationpublishesTempletonCanva’salongDataBricks,itsotherlisted and unlisted assets. Now obviously, no valua tion is perfect - listed or unlisted, daily or otherwise.Weallknow that the listed equity market in the short run is a voting machine. But it is a transparent voting machine and one that
The quote Every extra dollar our members can add to their super can really make a difference when they retire.
Regal Funds Management launches private credit capability
Cassandra Baldini Regal Funds Management is entering the private credit market, offering solutions to Australian and New Zealand clients. The capability will be headed up by portfolio managers Jacob Poke and Gavin George.
Regal Partners chief executive Brendan O’Connor said many traditional lenders are becoming less flexible with their capital or fully withdrawing from parts of the credit market because of regulatory capital changes, concentration risks or ESG concerns.
HUB24 said its business footprint continued to evolve with the acquisition of Class Limited (Class), which provided further opportunities to leverage the group’s collective capabilities. Moreover, HUB24 stated that the Class acquisition would allow the group to deliver products and solutions that enhance value for existing and new customers, whilst increasing market share and growing the SMSF market. HUB24’s platform market share rose from 3.9% to 5.1% (a 31% increase). The company’s organic growth reached record levels during FY22 with the number of advisers using the platform increasing to 3486, up 14% from the prior comparative period. There were also 112 new distribution agreements signed. However, given the negative market movement experienced during FY22, the company did revise its FY24 FUA guidance to a range of $80-$89 billion. fs
Andrew McKean HUB24 reported underlying NPAT of $35.9 million, up 133% from the year prior.
“This policy change will give women’s retire ment savings a much-needed boost, helping to close the gender super gap, as women are cur rently much more likely to be the ones taking parental leave.” More than 80% of HESTA’s membership is female and, according to HESTA’s own re search, 90% of its total membership believes structural change is needed in super to improve women’s retirement outcomes.
Assets held on behalf of Australian investors fell 7.1% while assets held on behalf of offshore investors dropped 10.3%. Those held within Australia on behalf of offshore investors dropped 10.1%. J.P. Morgan retains the top spot, despite an 11.4% decline in assets. It now has $983 billion in total under custody for Australian investors.
Correspondingly, total funds under administration (FUA) grew by 12% to $65.6 billion.
Jamie Williamson
“The success of a private credit strategy of this scale relies on two things, a high calibre team and access to bilateral deal flow. The private credit market is a natural extension for Regal Funds Management, which has a successful track record in its pre-IPO and emerging companies capabilities.”
HUB24 delivers record profit
Assets custodyundertake a hit
www.financialstandard.com.au 5 September 2022 | Volume 20 Number 17News12
Debby01: Blakey chief HESTAexecutive
Calls to pay super onparental leave grow
Poke has 15 years of experience and worked across Goldman Sachs investment banking and special situations groups in Australia and New Zealand, most recently leading investments to companies within its asset management division. During his tenure at Goldman Sachs, Poke worked on several landmark transactions for the firm, most notably on AirTrunk, where he also served on the board for a time.
Releasing results, it also had an underlying group EBITDA of $70.4 million (up 92% on FY21) and an underlying platform EBITDA of $62.3 million (up 64% on FY21). HUB24 reported record platform net inflows of $11.7 billion, up 32% from the previous year.
George has over 20 years’ experience working across highyield and special situations markets in London, the US and Australia.Hemost recently led the Australian and New Zealand business for Sixth Street Partners, a global US$50 billion investment firm, where he oversaw origination, underwriting and portfolio management of credit investments.
The latest data from the Australian Custodial Services Association shows total assets under custody now sit at $4.3 trillion, reflecting difficult markets and adjustments to methodologies for some ACSA members. It also reflects increased consolidation of custody mandates, the association pointed out.
“Relative movements of ACSA member data in the June report also reflect consolidation of custody mandates in many cases,” ACSA chief executive David Travers said. “Looking ahead, ACSA members will continue to focus on their response to changing regulatory data reporting requirements, their evolving role in supporting institutional involvement in digital assets including cryptocurrencies, and the implementation of the ASX’s DLT-based replacement for CHESS. fs
figures assume they retire at 67, AWOTE of 3%, nominal investment returns of 6.5%, 32 weeks spent on parental leave per child, and that each child is born two years apart, be ginning aged 29. The modelling accounts for an average HESTA member per industry, assumed current balance, recent SG activity and other contribution activity, and insurance premiums. HESTA said, for someone working in aged care, introducing the measure could increase their retirement balance by 1.2% if they have one child, 2.6% with two children, and 4% with three. In community services, one child would potentially increase a super balance at retire ment by 1.1%, 2.3% for two children, and 3.6% forFinally,three.
Gender aside, 85% of HESTA members sup port paying super on parental leave; for those aged under 35, this increases to 91%. Other organisations calling for the reform include Women in Super, Australian Women Lawyers Association, Early Childhood Aus tralia, Australian Council of Social Service and Chief Executive Women.
The private credit arm will work closely with Regal’s equities sector specialists, who focus on mining, energy, industrials, technology, and healthcare across Asia. fs
Regal said it expects to accept investor capital in late 2022.
Looking at its membership, HESTA said a typical member in early childhood education and care with one child could see their super balance boosted by 1.4% at retirement if con tributions were made while on parental leave. If they have two children, this will increase to 2.8%, and three children would see it boosted byThese4.5%.
Meanwhile, Northern Trust is in second place with $679.3 billion, down 6.9%. Citigroup is third but saw the largest overall drop in assets, declining 17.5% to $678.8 billion. State Street and NAB Asset Servicing round out the top five with $625.4 billion and $509.4 billion, respectively. In NAB’s case, this was a decline of more than 10%. For the first time the data has captured Apex Group, which sits in 10th place with $25.8 billion.
“Parental leave is the only commonly taken form of paid leave that does not include super annuation, sending a clear message that caring work is undervalued,” Blakey added. fs
H ESTA has joined calls for superannuation to be paid on Commonwealth Paid Paren tal Leave entitlements, saying modelling shows it could see a mother of two retire with $14,000 more in her account. The super fund has joined a coalition of 18 or ganisations to advocate for the measure, saying it could be life-changing for women on lower in comes, of which many of HESTA’s members are.
“This means there is limited capital in Australia to back the high demand for credit and flexible capital solutions in the mid-market, particularly from managers with the institutional resources and market relationships of Regal Funds Management,” he said.
a typical HESTA member working in primary health would see their balance in crease by 0.9% with one child, 1.9% with two, and 2.9% with three. “Every extra dollar our members can add to their super can really make a difference when they retire,” HESTA chief executive Debby Blakey01 “Manysaid.HESTA members have lower account balances as they often work in casual, part-time or insecure work or in industries that are typi cally lower paid, like aged care and early child hood education. Achieving adequate super savings is then even harder as they’ll often also need to take long periods of unpaid time out of the workforce to care for others.
Interestingly, all three are Macquarie alumni, with Varley and Choudhury both serving as senior manager in Sydney and London, and Wood as an analyst and corporate development and strategy manager.
Nuveen names head of debt Dugald Marr has been announced as the real estate investment manager’s new the head of debt, Australia and New Zealand.
Welch previously held wealth management positions across Asia Pacific is currently executive director, financial intermediaries and wealth management at Credit Suisse. He was previously group head of capital markets and managed investments, wealth management at Standard Chartered in Singapore. Earlier in his career he was with Macquarie Bank in Australia and Hong Kong. He has also held roles with Citi and EY.
BlackRock appoints to new research role
FTI adds investment director Franklin Templeton named Richard Rauch investment director for Brandywine Global Investment Management, one of its specialist investment managers. Rauch will be responsible for establishing, maintaining and enhancing relationships in Australia and New Zealand with institutional clients, consultants and intermediaries.
The number of thisFinancialpublishedappointmentsexecutivebyStandardfortnight.
Adamantem Capital names managing directors
Previously, Varley was an investment director at both Arowana and Archer Capital, while Choudhury spent time in New York with Jefferies and H.I.G Capital. Wood has been with Adamantem since its inception in 2016. “We’re very excited to join the senior leadership team at Adamantem,” Choudhury said.
Raih began his career as an investment banking analyst at RBC Capital Markets, moving to Barclays before the merger with BlackRock. “Paul’s appointment as director of business development demonstrates our ongoing commitment to our clients,” said a QIC spokesperson.
The 22numbers
He will work alongside the broader Franklin Templeton team and report locally to its co-head of APAC Matt Harrison as well as Brandywines’ head of global sales and client services Tad Fetter. He has 20 years of investment experience across regions and markets. Prior to joining he held a role as investment director, senior investment specialist at First Sentier. fs
FIIG Securities appoints CEO FIIG Securities has appointed Alex Welch as its chief executive, taking over from founder and managing director Jim Stening.
Welch stepped into the role in late August and is based in Sydney while Stening will remain on the FIIG board as a non-executive director.
www.financialstandard.com.au 5 September 2022 | Volume 20 Number 17 appointmentsExecutive News 13
Elaine Wu has been appointed to the newly created role of managing director, APAC head of research for BlackRock Sustainable Investing (BSI APAC).
Padua appoints sales lead Padua Solutions has named Michael Lagudi as its new general manager, sales. Lagudi is based in Sydney and reports to Padua co-founder Matthew Esler. He joins from Challenger where he held the position of key account manager. Prior to that, he was the national sales manager at Morningstar and business development manager NSW and WA for Midwinter Financial Services. Lagudi will be responsible for propelling the sales effort at Padua, as well as developing strategic opportunities across the Australian market.
Credit Suisse hires head of infrastructure Timothy Foy will join Credit Suisse Australia as its new managing director and head of infrastructure Australia. With over 26 years’ experience, Foy joins from Jefferies where he also served as managing director and head of infrastructure. He has previously also held senior roles at RBC Capital Markets and Rothschild. In terms of previous deals, Foy advised on OMERS’s acquisition of a stake in Transgrid, AustralianSuper’s sale of a stake in Ausgrid and its acquisition of Optus Towers as well as Australian Tower Network’s acquisition of Axicom.
Adding over 14 years of experience in equity research, Wu will drive the research agenda for BSI APAC and oversee the firm’s sustainability research across the region. Based in Hong Kong, she will report to head of BSI APAC, Emily Woodland and partner with global sustainability research colleagues across investment platforms. She will also work closely with business and investment partners in APAC to strengthen research and analysis that focuses on the link between sustainability and financial materiality.
Marr has over 20 years of experience working in real estate investment and debt financings, with previous roles including managing director, head of real estate at Crédit Agricole Corporate and Investment Bank Australia. Prior to this, he worked at the Royal Bank of Scotland as director for structured real estate finance and as a real estate banking and finance Lawyer in Sydney, London, and Brisbane. In his new role, Marr will be responsible for expanding Nuveen’s Australasia debt portfolio.
Georgina Varley has been promoted to managing director at the Sydney-based investment firm. Varley has co-led the origination and execution efforts across Adamantem’s Fund I and Fund II, as well as contributed to the ongoing management and transformation of its portfolio businesses. She has been promoted alongside Katie Wood and Imran Choudhury.
Schroders executive departs for QIC Paul Raih has landed at Queensland Investment Corporation as director of business development.Raihjoinsfrom Schroders Australia, where he worked as an institutional sales manager for six years. Before that, he was at BlackRock for 11 years, most recently as head of global consultant relations for Australia and New Zealand.
Multi-asset ETFs INSTRENGTHNUMBERS
www.financialstandard.com.au 5 September 2022 | Volume 20 Number 17 14 Feature |
The diversified multi-asset ETF has evolved enormously over the last decade, but are advisers fully realising its capabilities or are they sticking to more traditional approaches? Andrew McKean writes.
Noting a huge uplift of self-directed inves tors through the pandemic buying individual stocks and looking at the recent troughs markets have been through, Giles estimates that many investors could’ve had better outcomes had they adopted a more diversified portfolio approach.
“We think it’s important that advisers and investors understand the benefits of diversifi cation as well as how each asset class works to gether,” she Illustratingsays.the merits of diversified multi-as set ETFs, BetaShares senior investment strate gist Cameron Gleeson 03 says that it’s also a very low-cost way of investing.
Wealth Planning Partners financial adviser Amanda Cassar05 believes that one of the prin cipal benefits of incorporating multi-asset ETFs into clients’ portfolios is the low costs.
On the other hand, from 12 months to March 2022, Rainmaker Information shows that multiasset ETFs total FUM increased by 86% to $3.5 billion. The market share of this product type also fattened to 2.6%, up 0.7% from a year prior.
Yet, despite being the fastest growing sector of the ETF market, Neiron contends the uptake of these products may be limited as investors and advisers alike tend to prefer setting their own“It’sallocations.aone-size-fits-all approach, so strategic asset allocations are with prescribed limits of the chosen asset manager and is leveraged off its investment philosophy and process which may
15Multi-asset ETFs | Featurewww.financialstandard.com.au 5 September 2022 | Volume 20 Number 17
“Firstly, the costs that you pay for brokerage.
In theory, you could go out and buy individual stocks or individual ETFs to replicate an asset allocation of a single diversified ETF, but you may well face higher brokerage costs as a result.
head of wealth Chantal Giles 02 elaborates that as an investment manager that’s been looking after multi-asset portfolios for over 30 years in Australia, BlackRock knows that for people to build better financial futures, they need to be invested in well-diversified portfolios.
Michael01: Miller financial planner Capital Advisory Chantal02: Giles head of BlackRockwealth Cameron03: Gleeson senior BetaSharesstrategistinvestment
Being able to access quality assets in a basket the way that ETFs offer is a massive bonus for people to be able to feel that they’re playing with the big guys, even when their portfolios are small. Amanda Cassar Discerning a similar point, VanEck chief executive and managing director Asia Pacific Arian Neiron 04 lauds multi-asset ETFs for pro viding ease of instant diversification across asset classes and notes the cost-effectiveness of such strategies.“Sincemulti-asset ETFs are managed by the fund issuer, there’s no need for investors to wor ry about rebalancing back to the strategic asset allocation periodically,” Neiron concurs.
Fund managers, financial advisers and shrewd investors alike have long understood the defensive benefits of diversification, in theory, shielded from the impact of any singular asset’s underperformance by effectively not putting all their eggs in one basket. But, more than just a risk management tool, a truly diversified portfo lio gives investors unfettered access to a gamut of opportunity and choice.
Diversified multi-asset ETFs give investors a wide scope of exposure across different types of assets such as stocks, bonds, real estate or cash, making investments more defensive without necessarily having returns eaten away. They’re also advantageous because it provides investors access to thousands of securities across geogra phies, country sectors and alike with a singular investment.Furthermore, the inclusion of a diverse range of assets in a portfolio helps smooth out per formance fluctuations because when one asset class falls, another might rise, compensating for losses and, by nature, ensuring portfolios are ro bust throughout the market cycle. The expected returns of multi-asset ETFs are also generally less volatile compared to investments that only have exposure to a single asset class. A First Sentier Investors multi-asset report highlights that over the last one hundred years, there have been large dispersions between re turns of various asset classes. While equities typi cally return more than bonds, albeit with much higher volatility, the report found no single asset class consistently outperforms year after year. So, diversification is then key to narrowing the return distribution on a portfolio level.
By a measure of funds under management (FUM), multi-asset ETFs are the third-small est asset class of its kind, surpassing only cash and currency. To boot, the asset class is dwarfed by equities ETPs which hold $109 billion, equivalent to 78% of the total market, of which two-thirds can be accounted for international equities and one-third Australian equities.
J005905 iShares ETF MultiAsset_PressAds_225x50-5_V3_MKTGH0822AS-2404203-11.indd 1 31/8/2022 12:48 pm
What’s the big deal?
For example, buying four separate ETFs at $10 each versus buying a single diversified ETF at $10. If you’re a low balance client that can add up,” Gleeson says. “Beyond that, diversified ETFs are typically designed to rebalance back to a target asset al location periodically so the underlying funds or ETFs held within the diversified ETF will be adjusted over time, that means investors don’t have to do that themselves and incur ongoing brokerage costs just to rebalance.”
D
espite their relatively small market share, multi-asset diversified products’ increasing rate of adoption is testament to their ability to afford investors low-cost, low-risk solutions that don’t incumber relative returns.
“Yes, if you were able to know which was the best performing asset class each year in ad vance, you could certainly have a much higher return by just picking out a single asset ETF and moving through year by year, but that’s prob ably a unicorn in terms of actually being able to deliverBlackRockthat.”
“Clients are getting access to quality assets that they couldn’t probably in their own name; being able to access quality assets in a basket the way that ETFs offer is a massive bonus for peo ple to be able to feel that they’re playing with the big guys, even when their portfolios are small,” sheAndexplains.itmust be a good feeling - recent BetaShares and Investment Trends research forecasts that the number of ETF investors in Australia will surpass two million by the end of this year as more people take advantage of the popular and familiar fund structure.
Capital Advisory financial planner Michael Miller01 echoes that investors only get that addi tional return out of the single-asset style if they continually keep picking the right asset class with the “That’stimes.the case for the multi-asset ETF, there’s not a lot of strong history of people who are able to consistently get those asset allocation calls right,” Miller says.
“Everything we do and think about in terms of product at BlackRock is centred on fulfilling our clients’ long-term needs in the context of their whole portfolio. A key part of this is the impor tance of building a well-diversified portfolio to achieve long-term investment goals,” Giles says.
“Anecdotally, we hear that when advisers do have these conversations around ESG and sus tainability with clients, they become much hap pier with the provided services, feeling an advis er has had a bigger impact on them as a client.”
Amanda05: Cassar financial adviser Wealth PartnersPlanning Kanish06: Chugh head
At present, ETF Securities doesn’t offer mul ti-asset ETFs, instead focusing on its line of in novative first-market products like its Australian first crypto ETFs and US Treasury Bond ETF. Though multi-asset ETFs are fast becoming an area for it to consider, expressly as Mirae As set’s Global X has acquired ETF Securities and hopes to expand the company’s ETF footprint into the Australian market.
16 www.financialstandard.com.au 5 September 2022 | Volume 20 Number 17Feature |
“I think the multi-asset ETFs I’ve seen today are very simplistic, and there’s nothing wrong with that for the appropriate investor - as long as an investor understands this is what the so lution is, and if they need to then access other exposures, whether it’s through ETF form or unlisted form to build a more robust portfolio.”
The report said the main reasons advisers are using ETFs in client portfolios are the costeffective diversification the offer, and the ability to access specific markets (69%). Further, the report showed that close to half of all advisers are now providing responsible investing advice said the most pressing ethical issues were weapons and welfare (37%) and en vironmental issues (33%).
BlackRock’s Giles’ says the investment giant has heard advisers want a well-diversified quality, lower cost sustainable option for their clients. As a result, in August iShares launched two multi-asset ETFs; iShares Balanced ESG ETF (IBAL) and the iShares High Growth ESG ETF (IGRO) in collaboration with NAB Private Wealth.
“Australian investors want simple, low-cost, holistic investment options that they can use to build a globally diversified portfolio of stocks and bonds. Additionally, we’re seeing they’d like to gain exposure to global technological trends that are otherwise more complex or costly to access.”
On one hand, for many investors and finan cial advisers, a multi-asset perspective strategy is a very easy solution that packages everything up into one offering that can potentially fit the entirety of their investment needs, but equally, they may be too simplistic sometimes as well.
“Multi-asset solutions can potentially be seen as a one-stop shop; yes, that’s great, but does it actually fit your investment needs? That’s prob ably the area which people need to consider. Do multi-asset ETFs become the core, and do you still allocate to other ETFs and other solu tions?” Chugh asks. “It’s not going to fit everything, it’s not go ing to provide your entire exposure, we’ve yet to see a multi-asset ETF that really provides true thematic tilts within that portfolio. For example, many of the multi-asset products I’ve seen don’t have any gold within them.
“We’ve really been focused on this area be cause of the increase in adviser adoption and the number of adviser queries we’ve received. Our role is to support advisers in how they have the conversation with clients,” Giles says.
In July, NAB Private Wealth and BlackRock partnered with the purpose of making ETF in vesting more accessible for Australian investors.
Cassar says many of her more involved clients are younger people who want socially responsi ble styles of investment and more tailored port folios. That generation’s adherence to rulesbased investing compounds in cases where ESG is seen as a priority. These clients want a more bespoke style of investment, rather than being put into a balanced index fund, checking in on an infrequent ad-hoc basis, she explains.
Cassar takes a similar stance to Chugh in that for highly engaged, sophisticated investors she thinks multi-asset ETFs might not be an all-en compassing solution. Instead, she is of the view that multi-asset ETFs are more aptly suited for clients that aren’t overly engaged and want to employ a set-and-forget approach.
By the same token, according to Neiron, ad visers may be using multi-asset ETFs for clients with small balances, or those new to investing.
Multi-asset ETFs
“At the moment, to be honest, when in multiasset, you’re probably making more of a choice on availability than a preference over the other,” MillerOfferingadds.up another perspective, Gleeson coun ters, explaining BetaShares ETFs which hold an underlying portfolio of index tracking ETFs, give people a lot of comfort in a down market.
The sustainability equation Much of the strong growth of ETFs has been driven by financial advisers, who despite their well-publicised declines in number, continue to play a critical role in helping many Australians build and protect their wealth.
As part of the extension of this relationship, BlackRock iShares will also create ETF-related education content to help nabtrade build out its dedicated ETF Centre.
bonds.stocksportfoliodiversifiedbuildtheyoptionsinvestmentcost,simple,investorsAustralianwantlow-holisticthatcanusetoagloballyofand
distribution ETF Securities Arian04:
“Where you see people start to panic is when they may have skewed their portfolio in one direction or concentrated positions in active managers who may have done well for a cou ple of years, but now have started to underper form,” Gleeson says. “If you’re tracking the market when things are going badly, well, that’s okay. It’s where you’re substantially underperforming and don’t know what’s going wrong, that’s where people often get cold feet and end up selling growth as sets right at the bottom. Often there is a benefit to taking a passive or broad market approach, particularly in a down market from an investor psychology perspective.” Investor psychology benefits from a simpli fied approach; with a core allocation that usu ally tracks broad market indices people are less likely to trade in and out of the market in periods of volatility. This is especially pertinent to less engagedMeanwhile,investors.ETF Securities head of distri bution Kanish Chugh 06 explains that although multi-asset ETFs have existed for some time in the unlisted space, they’re nonetheless a relatively recent development in the Austral ian ETF market. Despite multi-asset ETFs’ rapid proliferation, the asset class hasn’t fully matured and subsequently has ostensive limi tations, he suggests.
“As an example, generally multi-asset ETFs only invest in ETFs tracking market capitalisa tion indices so there are no active management or smart beta inclusions. Investors are also re stricted to the asset classes in which the ETF issuer has products.” For instance, he adds: “It’s common for large super funds to include alternative assets such as private equity and infrastructure in their strategic asset allocation but, some ETF issu ers overlook these asset classes in their multiassetWhileoptions.”notharbouring a specific preference for either active or index multi-asset ETFs, Miller notices that in terms of what’s being brought to market, it has been predominantly passive. There are some active products in the market, but it’s by far the smaller portion of what’s out there, he says.
A 2021 report from BetaShares and Invest ment Trends predicted 75% of financial advis ers would be using ETFs by the start of this year. At the beginning of 2021, it was estimated 67% were using them in clients portfolios.
Miller says ESG factors have ballooned in importance for the ETF market and notes that multi-assets have significantly expanded with respect to the constitution of product ranges.
Pitcher Partners executive director and rep resentative Sue Dahn 07 agrees that there’s a genuine place for multi-asset class products for investors seeking simplicity and, in the case of index investing, cost-effectiveness in building their“Thiswealth.isespecially the case for investors with a relatively small size of funds to invest. Rebalanc ing asset class weightings can be taken care of within the product though in volatile financial markets that may result in higher transaction costs and diminished tax effectiveness,” Dahn says.
“The products offer low-cost, well-diversi fied investment solutions to help Australians achieve their long-term financial and sustain able investment goals,” BlackRock states.
The challenge for them is finding multi-asset ETFs that align closely to their portfolio con struction philosophy and approach, he says. Though, as more providers have offerings or products they can leverage internally or even externally, expect to see more solutions around this space. As more investors start to adopt multi-asset ETFs, it will become more of an ac cepted tool within a portfolio and development activity will pick up, Chugh believes.
Chantal Giles of Neiron chief executive and managing director Asia VanEckPacific not match the investors’ differing risk-return profile,” Neiron says.
provide
If we are heading back to a period in which re turns in equities are harder to find, Doyle warns advisers against repeating strategies, like passive or index tracking, that worked well in liquiditydominated environments. This is because we’re now entering an environment where research and thinking about fundamentals will start to be rewarded again, he says.
“Today, a combination of stubbornly high inflation and the increasing prospect of slow er growth paints a challenging backdrop for most traditional assets, and our asset allocation framework suggests a defensive positioning.” fs
18 www.financialstandard.com.au 5 September 2022 | Volume 20 Number 17Feature | Multi-asset ETFs
Simon08: Doyle head of fixed income and Schrodersmulti-asset
Primarily, Doyle says that being a global house, operating in a whole range of different jurisdic tions that are each at varying stages of evolution and thinking with respect to ESG issues, comes with significant challenges. Schroders has chosen to focus on what out comes it wants to be able to achieve and work out how to articulate them well, he says. Moreo ver, the asset manager’s investment team intro spectively probes what it’s thinking, why it’s adopting certain approaches, how it’s measur ing its approaches, and being transparent about how it thinks through and measures ESG out comes as well as the best ways to tangibly report that to “Theclients.other discipline we have is a kind of internal accreditation process, where we have people making sure that each desk is genuinely thinking through and incorporating ESG, not using it as a marketing construct,” Doyle says.
Strategies like Schroders Sustainable Growth Fund also seek external independent accredita tion through the Responsible Investment As sociation of Australasia (RIAA) to validate its processes as well.
Giles believes the transcendence of cohesive and coherent definitions of what constitutes sustainability is an ETP consideration.
“I think there will be some things advisers have relied on or increasingly used in client portfolios that will come under some pressure in the environment going forward. I’m not sure repeating the strategies that have worked for the last five or 10 years will be as effective going for ward,” Doyle adds.
Allocations to a T To some degree, nearly every investor portfolio embodies the central tenants of multi-asset investing. Whether it’s cash in the bank, direct shares or rental income, it’s fair to assume most clients of advisers would be multi-asset. The key differentiation is who’s doing the portfolio construction.
“Our focus is on democratising access to sus tainability strategies, and we understand that clients are at varying stages of this journey. As sustainability tends to mean different things to different people, it is ultimately dependent on clients’ preferences. However, we are advocates for greater transparency as this is critical for advisers and their end clients to enable them to make more informed decisions,” she says. “We don’t want to push everyone into a box per se, because we want to encourage product innovation - that’s how the net zero transition will happen as well as democratising access. But clear labelling is what we should all be advocat ing for when it comes to sustainability.”
On the other hand, Waddington says: “If a downturn in the rate of growth occurs against a backdrop where inflation and real rates are also declining sharply, this typically reflects an envi ronment sufficiently weak as to simply be a step in a transition to GDP contracting.”
It’s unlikely a multi-asset can a
ETF
Steve09: Waddington co-deputy head of multi-asset strategy Insight Investment
“I think advisers will need to be thinking about their client portfolios, what works going into an environment where the rules are a little bitWhendifferent.”assessing asset allocation decisions, In sight Investment co-deputy head of multi-asset strategy Steve Waddington 09 says: “We use a framework that combines financial conditions, growth and inflation to help us deliver better in vestment“Combiningoutcomes.”these factors, and the interac tions between them helps to clarify not only what the prevailing environment means for an asset’s performance but also how those prospects may change as economic conditions evolve.”
For example, for equities, a shift from an en vironment where growth is accelerating to one where growth is moderating implies a move to a less impressive, though still solid, backdrop for equity returns. If growth is sufficiently robust to keep prices rising, then the risk-adjusted returns potentially on offer remain impressive – espe cially if the cost of capital [real rates] is falling at the same time.
encompass.ESGideaeachthatsolutionmatchesclient’sofwhatshould Arian Neiron
Sue07: Dahn executive director and PitcherrepresentativePartners
Not too long ago, he remembers investors who wanted multi-asset exposure were limited to passive fund providers that didn’t prove any sort of ethical overlay or assessment. “You probably don’t have to go too far back to when you had to make a trade-off and say you’ve got your multi-asset high growth, or you got your ethical and had to piece that together by a number of components,” he says. “Now there are many multi-asset, ethically managed funds available for investors, so if you want a high growth portfolio and want it to be ethically managed, but still desire that multiasset approach, you can get that.” BlackRock believes anyone can access these opportunities, and the underlying transforma tive trends, via an ETF, represents just how far we’ve come in making investing simpler, effi cient, and more affordable for everyone. Be that as it may, Neiron takes a swipe at mul ti-asset ETFs for offering very limited exposure to true “ESGESG.offerings are not consistent, for exam ple, there is no consistency of ESG approaches, between managers and index providers. Some parties offer multiple types of approaches. Some funds could be accused of greenwashing. Dif ferences exist between approaches in bonds and equities,” Neiron says. “It’s unlikely a multi-asset ETF can provide a solution that matches each client’s idea of what ESG should encompass. They will have to make too many compromises to find a multi-asset ETF that suits.” What’s more, given there is no universal ap proach, he worries that multi-asset ETFs could compound the greenwashing issue. Schroders head of fixed income and multiasset Simon Doyle 08 says ESG coherency is an issue the asset manager grapples with every day.
Unwrapping some of the challenges advis ers are currently wrestling with, Doyle wonders whether advisers will go for a traditional think ing approach if equity markets go up in the long run and since there’s been a pull-back return ing into equities. Alternatively, will they start to rethink portfolio structures to better navigate a world that we haven’t seen in the last 40 years, a world characterised by high inflation, uncer tainty, and higher interest rates?
“When growth is contracting, and the pace of contraction is worsening, this tends to be the worst possible environment from an equity perspective – historical returns and drawdowns have been particularly unappealing.
Admitting that there will likely always be debates on the subject, Doyle affirms that Schroders’ perspective is guided by research that’s well documented and by both internal and external validations. While its methodologies may not be for everyone, there is more and more focus on regulators clamping down on this issue, ensuring the bar is raised, making sure that the outcomes committed to investors are delivered, not left in limbo as green-oriented marketing ideas. A recent poll by Financial Standard found 65% of readers believe greenwashing is a serious issue in the Australian funds management sector.Comparably, Giles says accomplishing co hesion in sustainability is tough, as it means so many things to different people. Nevertheless, BlackRock focuses on providing transparency so that people understand what they’re invest ing in, she says. “We’re committed to providing investors with transparency to empower them to make in formed investment decisions. This means being clear in the naming and objective of our iShares suite so that clients understand what they’re in vesting in,” she says. “Our multi-asset ETFs aim to provide a well-diversified portfolio of stocks and bonds that also take into account sustainable considerations.”Firstandforemost, BlackRock’s approach begins with understanding what’s in the portfo lio and screening out the things that it believes most investors would prefer to see screened out in a sustainable ETF, then tilting to the good. In bonds, that means tilting towards green bonds and in equities it means tilting towards compa nies with a higher ESG score.
“We’re thrilled to be partnering with Qantas and CAE to deliver this custom-built facility, strengthening Qantas’ national flight training capabilities as international air travel recovers and Qantas’ aircraft fleet continues to expand,” LOGOS head of Australia & New Zealand Darren Searle said.
The Court also found that MobiSuper made misleading claims about being able to save fees by opening a MobiSuper account and having other existing super accounts rolled into it, and also failed to provide any Statements of Advice as required by law.
This judgment follows a previous decision by the Federal Court in mid-2021 that Tidswell Financial Services, as MobiSuper’s trustee, failed to adequately monitor MobiSuper in regard to the same issues, and failed to comply with Prudential Standard SPS 231 Outsourcing. Tidswell’s RSE licence was cancelled in June 2021. ASIC first launched its action against Tidswell, MobiSuper and ZIB in November 2019. The action also involved Andrew Grover, a director of MobiSuper and ZIB.
Cassandra Baldini Ampol said Charter Hall’s Retail REIT (CQR) will acquire a 49% interest in properties owned by its wholly owned subsidiary, Z Energy, for NZ$132 million.ZEnergy will keep a 51% stake and the transaction is expected to complete in October.
The trustee for MobiSuper is now Diversa. MobiSuper is a sub-plan of the Tidswell Master Superannuation Plan and, according to its most recent Member Outcomes Assessment, was due to be combined with Student Super’s Professional Super last Meanwhile,month.ZIB has been ordered to pay a penalty as the failures by MobiSuper suggest ZIB didn’t take reasonable steps to ensure such failures didn’t occur, ASIC said.
The property vehicle is also intended to remain ungeared and is expected to be consolidated for accounting and ratings purposes. The acquisition will be funded by the divestment of CQR’s its 52% interest in the Coles Distribution Centre, Adelaide (CDC) at book value to a Charter Hall managed fund. The $95.3 million proceeds are net of asset level debt and will be used to fund the acquisition of the Z Energy portfolio. The transaction is expected to settle at the end of October 2022.
MobiSuper and its licensee will pay a $250,000 penalty for breaching superannuation advice laws while promoting the MobiSuperMobiSuperfund.and ZIB Financial will pay the combined penalty after the Federal Court found MobiSuper representatives had phoned customers and provided personal advice without acting in the customers’ best interests and failed to warn those consumers that the advice was based on incomplete or inaccurate information. The phone calls in question took place in October and November 2017.
“This practice was not focussed on what was best for the consumer. ASIC will continue to work to ensure licensees comply with the law and correctly monitor their corporate authorised representatives to prevent poor promotional behaviour,” Court said. fs
The proposed training centre, if approved, will house up to eight flight simulators and will be operated by CAE under a 20-year lease over the site. It will also be designed and developed to achieve Green Star Certifications.
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Charter Hall buys Z Energy assets
Charter Hall Retail chief executive Ben Ellis commented that it continues to curate its portfolio and drive earning growth for investors. fs
“The Federal Court also found that ZIB did not comply with its obligation to ensure that the financial services covered by its licence, as provided by MobiSuper, were provided efficiently, honestly and fairly,” ASIC said.
ASIC deputy chair Sarah Court said ASIC took on this case because of concerns that personal advice was being provided without the relevant legal protections, and consumers were being misled into moving their superannuation to MobiSuper.
Jamie Williamson P rofits are down and expenses are up at Aus tralian Ethical, as it continues to implement its high growth strategy. Releasing its full-year results, Australian Eth ical recorded a 15% drop in net profit after tax to $9.6 million and a 7% decline in underlying profit after tax, coming in at $10.3 million. Expenses grew by 28% over the year as it looks to scale the business and invested in growth op portunities, the investment manager said. Its operating revenues increased by 21% to $70.8 million, driven by strong average growth in its funds under management. It started the year with $6.94 billion in FUM but market volatility and the loss of a $200 million institutional man date saw this drop to $6.2 billion by year end. Its merger with Christian Super, to be com pleted early 2023, is expected to add a further $2 billion to FUM. While it expects some mem ber attrition, Australian Ethical said its pro-for ma combined FUM should be about $8 billion upon completion. Integration costs of up to $4 million are expected to be incurred and Aus tralian Ethical expects to retain 10-15 Christian Super staff, the existing investment philosophy and options offered to members. Scale benefits of the merger are expected to enable an aggre gate fee cut of around three basis points, Aus tralian Ethical said. The merger aside, net flows for superannua tion hit a new record, coming in at $800 million for the year, up 22% on last year. Super mem bers grew by 16%. Meanwhile, net flows from the adviser channel were up 46%, Australian EthicalWhilesaid.these were positive, the group’s total net flows were down 8%, coming in at $0.94 billion.“Inline with our strategic roadmap, we will continue with disciplined investment in our business, balanced with careful cost manage ment. We are prudent stewards of capital, but we’re not afraid to invest for the long term when we see a change to further strengthen our ad vantages,” Australian Ethical chief executive John McMurdo 01 said. “Looking ahead, we expect the growth in net flows to continue in FY23, with further diligent investment in the business as we execute our strategic roadmap, balancing market volatility with the growth opportunity.” fs
“Located within a premium industrial precinct on the doorstep of Sydney airport, the St Peters site provides the ideal location for Qantas’ new training centre, and the long-term commitment provided by CAE reflects the unprecedented level of demand for industrial land stocks that we’re currently seeing.” fs
The quote We are prudent stewards of capital, but we’re not afraid to invest for the long term when we see a change to further strengthen advantages...our McMurdo chief AustralianexecutiveEthical
Australian Ethical sees profitsdrop, record super flows
A statement said Z Energy entered into an agreement for the sale of 51 freehold properties in New Zealand to an unlisted property vehicle. It added that the transaction is expected to deliver approximately NZ$126 million in net proceeds, based on a weighted average capitalisation rate of 5.5%. “The net proceeds will be used for general corporate purposes and in line with Ampol’s Capital Allocation Framework,” it said. Z Energy will maintain strategic and operational control of the sites and lease all sites back under long-term triple net lease arrangements.
MobiSuper, licensee to pay $250k penalty
Justice Charlesworth said ZIB’s conduct constituted “a serious departure from reasonable standards of performance of advice.”
Backed by the Abu Dhabi Investment Authority via the LOGOS Australia Logistics Venture, the planned facility spanning 7222 square metres will be developed by LOGOS in partnership with global aviation training provider CAE and Qantas. It is adjacent to a larger 13.8-hectare land holding that the same joint venture agreed to purchase last year from Qantas for $802 million.
News20 www.financialstandard.com.au 5 September 2022 | Volume 20 Number 17
John01:
LOGOS to develop Qantas facility
Chloe Walker The industrial and logistics developer has acquired a $100 million south Sydney infill site for a purpose-built Qantas pilot training centre.
Using client data to drive client engagement
Stuart01: Alsop head of intelliflosalesAustralia
Helping your clients understand where their fi nances are and where they need to be to meet their financial goals is increasingly important in the financial advice process. Feeding client data into cashflow planning tools brings that data to life, helping you build, stress-test and adapt the financial plan while visually engaging your cli ents, via interactive charts and graphs. Know ing their finances are on track will foster greater confidence in the advice process, making sure clients stick to the plan. However, such tools are only as good as the data you put into them – having access to ac curate information is crucial. Giving your clients a clear picture of their fu ture finances also helps demonstrate the value of your advice. A Vanguard study of US investors in 2020, found that three-fifths of the perceived value of traditional financial advice comes from functional attributes like the financial plan, on going monitoring, visibility of portfolio changes and maximising investment returns, while the remainder results from emotional factors such as trust and personal connection with the adviser. Creating an emotional connection between your client and the advice process through data visualisation can encourage greater engage ment with the plan while also helping to prove the value of your work.
Over the last two years, we have also seen both firms and clients engaging more frequently with intelliflo software, with huge increases in the number of secure messages sent and docu ments shared digitally as well as usage of the electronic signature tool DocuSign.
This switch to digital has also opened new op portunities for firms to make better use of the data they hold on clients. Here we look at three ways financial advice firms can use technology to help make sure the data you hold benefits both your clients and your business.
2. Driving engagement through data visualisation
Meeting digital expectations Following the restrictions of the pandemic, peo ple are now very comfortable interacting online, including managing their finances. Although the trend towards digital started long before Covid19, the crisis significantly accelerated the move, particularly in the financial services sec tor. Nearly two-thirds of Australians now use mobile banking apps on a mobile phone or tab let to access their bank accounts, up seven per centage points on a year ago, according to Roy Morgan’s latest research. Confidence around completing financial transactions online extends to wealth manage ment too. At intelliflo, the number of advised clients registered on our personal finance portal rose by more than 300% in the UK during the pandemic and this high level of usage has con tinued as restrictions have eased.
The quote By embracing the switch to digital, and using technology to exploit client data, firms can improve the client experience and drive business growth.
1. Ensuring accurate data via a client portal As well as giving clients the ability to see their portfolio valuation and information, client por tals can also help ensure the information you hold is correct by putting them in control of their personal data. This can support the ini tial fact-find and onboarding process as well as speed up the data gathering process in advance of regular meetings. Minimising errors will im prove the efficiency of your advice process and keeping accurate client records will also help you stay on the right side of the regulators. Putting the client in charge can also encour age them to provide a more complete picture of their finances, including linking to their nonadvised finances by sharing their banking data
As the importance of technology within the financial advice process continues to increase, these tips can ensure that firms are improving the overall client experience and driving busi ness growth by embracing technology and bet ter utilising client data. fs
via Open Banking. Since November 2020 Aus tralian bank customers can give permission to accredited third parties to access their savings and credit card data, and to access their mort gage, personal loan and joint bank account data.
www.financialstandard.com.au 5 September 2022 | Volume 20 Number 17 Opinion 21
3. Keeping data secure With data security a major concern for many people, providing your clients with a secure messaging functionality can offer peace of mind that you are taking your responsibilities around their information seriously. Secure messaging via a client portal enables you to store and share documents conveniently and safely and allows clients to sign and return them electronically. This streamlines the advice process and reduces costs, removing the need to print and post paper documents.TheAustralian Cyber Security Centre said it receives a report of cybercrime in Australia approximately every 10 minutes with estimated annual losses in the region of $300 million a year. In a recent survey of small and medium sized business, it found 62% of respondents had experienced a cyber security incident. With all the publicity surrounding around cyber-attacks, you would expect most businesses to have solid security practices, but the Cyber Security Cen tre survey found almost half of small to medium sized business surveyed reported they spent less than $500 on digital security per year. Advisers need to better understand the risk and impact of a cyber incident and to not underestimate the recovery period from a cyber incident.
W ith today’s 24/7, on-demand technology, clients are increasingly seeking more fre quent interaction with their finances digitally alongside face-to-face contact with their adviser at an annual meeting. By embracing this switch to digital, and using technology to exploit client data, firms can improve the client experience and drive business growth.
Remediation bills revealed amid call for adviser levy freeze extension Jamie Williamson
Yolanda01: Beattie
Correspondingly, Investment Trends’ Investor Intentions Index indicates investors’ average return expectations for domestic equities dropped below the psychological barrier of zero in June 2022, the first negative measure recorded since pre-COVID. fs
2017 as part of Macquarie Equities’ Enforceable Undertaking with ASIC, totalling $24.7 million.
Future IM/Pact connects Australia’s lead ing investment houses with women at univer sity and in their early career and informs them about a career in investing.
News22 www.financialstandard.com.au 5 September 2022 | Volume 20 Number 17
ATO data analysed in the report showed only 2% of top income earners gave a higher proportion of their income than people in lower income groups. fs
Six of the largest financial institutions have paid or offered a total of $3.6 billion in compensation to consumers over fees for no service and non-compliant advice. The new stats come as the Financial Planning Association of Australia calls for an extension to the adviser levy freeze. To date, NAB has overwhelmingly paid the bulk of the remediation regarding fees for no service, with its total bill to June 2022 coming in at $1.24 billion. This has been paid or offered to more than 772,000 customers.
Commonwealth Bank and NAB believe they will be finished by December, while NAB said it should be done by February 2023.
Cassandra Baldini U niSuper, Aware Super, Pinnacle Invest ment Management and TDM Growth Partners are the latest to sign up to the program founded by Yolanda Beattie 01 in 2018.
UniSuper chief investment officer John Pearce said the fund’s commitment to diversity, equity and inclusion is a key component of its talent management strategy. fs
The release of the data coincides with the Financial Planning Association calling for the freeze on the ASIC adviser levy, fearing the fees paid by financial advisers could increase substantially.
“Making financial advice more affordable for all Australians starts with making financial planning more affordable to practice,” FPA chief executive Sarah Abood said.
An ongoing criticism of the levy has been that all advisers are footing the bill for the institutions’ misconduct, paying for ASIC’s ongoing actions against them.
The quote Having 20 industry partners on board gives us more opportunities to share with our growing pool of female talent, more mentors to support their career journey...
Australia has the world’s second highest median level of wealth and the fourth highest average level of wealth, plus more than 1.8 million people have over US$1 million in wealth. However, this wealth is highly concentrated.
The levy is currently set at the 2018-19 level of $1142 per adviser. While a review of the industry funding model has been announced, the FPA said it’s not confident any changes can be made and implemented in time to impact this financial year.
“Currently we have around four times as many men as women apply for investment roles, and we are actively championing initiatives, so our industry focuses on attracting women to front-line investment roles.”
At the same time, the Centre for Social Impact research found giving by those in the Financial Review Philanthropy 50 list for 2022 had decreased 2.3% on the previous year.
Online numbersinvestortaper out Andrew McKean Retail investor numbers have dropped as pandemic-driven hype dampens according to an Investment Trends, 2022 First Half Australia Online Investing report. The report reveals retail online investor numbers have begun to ease. An estimated 1.47 million unique individuals placed (at least) one online trade on stocks of ETFs during the 12-month period ended in June 2022, down from 1.52 million for the year ended November 2021. Investment Trends head of research Irene Guiamatsia said: “The combination of interest rate rises, market downturn, and inflation have all contributed to this outcome.” The research highlighted two key engines of growth softened during the period; inflows of first timers continue to shrink towards pre-pandemic levels while surging dormancy rates persist. It was also identified that a prerequisite for many investors to start buying stocks is having “reached a desired level of savings.” That is, having enough money for day-to-day living expenses, plus some extra for rainy Subsequently,days.Guiamatsia said: “The ongoing cost-of-living pressures on households would no doubt contribute to delaying the assessment of readiness. At the same time, the vertiginous rise of interest rates has reinstated cash as an appealing instrument for yield generation.” Meanwhile, dormancy rates among those already investing have continued to climb. In the last reporting period, some 250,000 investors halted their trading activity, to which Guiamatsia commented: “It’s common to see market downturns induce a paralysis of sorts, as many opt for a wait-and-see approach in turbulent times.”
This is followed by Westpac which has paid or offered more than $942 million to 117,018 customers. AMP has paid or offered $627 million to 331,994 customers, while Commonwealth Bank has paid or offered more than $290 million to close to 145,000 customers and ANZ’s figure sits around $217 million and has been paid or offered to more than 65,000Finally,customers.Macquarie has the smallest bill at $4.6 million paid or owed to 1105 customers. When it comes to non-compliant advice, NAB also has the biggest bill at $104.7 million. This has been paid or offered to 2727 clients. This is again followed by Westpac at $58.7 million.
Future IM/Pact is a movement that recruits and fosters young women in Australia’s invest ment“Australia’ssector. most influential investment lead ers are recognising the positive impact of diver sity across their investment teams, signing up to a proactive movement to attract, recruit and foster young women in Australia’s $4.4 trillion investment sector the $105 billion UniSuper, $150 billion Aware Super, $83 billion Pinnacle Investment Management and $2 billion TDM Growth Partners,” Future IM/Pact said.
“To address imbalances such as Australia’s 14.1% gender pay gap and its resulting erosion of women’s retirement security, we recognise the need for a wide range of experience and perspec tives to make the best investment decisions for our more than 1.1 million members,” he said.
On the above data, ASIC noted that the term ‘customers’ broadly refers to individuals, couples and SMSF trustees. It also said some customers may have been double counted as they may have been involved in more than one remediation program.
In terms of fees for no service, ANZ and Westpac said they expect remediation to be completed next month.
FuturefounderIM/Pact Super giants, investmentfirms join Future IM/Pact
ANZ has paid or offered $44.7 million to 2123 customers, while AMP has paid or offered $42.5 million to more than 2800 customers. Finally, Commonwealth Bank’s bill comes in at $9.4 billion for 626 customers. Macquarie’s figures weren’t included by ASIC as its remediation for non-compliant advice was completed in June
Beattie said more super funds and investment management firms recognise the importance of working across industry to build the pipeline of female“Havinginvestors.20industry partners on board gives us more opportunities to share with our growing pool of female talent, more mentors to support their career journey and more funding to inspire a passion among more women about a career in this hugely influential industry,” she said.
“There are activities that we’re aware ASIC undertakes that have nothing to do with financial planners yet are funded by financial planners in the current model. The government has had to intervene twice in the past five years because the model isn’t working as intended.” fs
Aware Super chief investment officer Damian Graham said as one of the nation’s largest super funds, Aware not only acknowledges the link between diversity and stronger investment out comes, but is committed to redressing the gender super gap through a holistic diversity strategy.
Giving lags wealth growth: Report
Collectively, the top 200 individuals on the AFR Rich List for 2022 hold 3.8% of Australia’s wealth ($555 billion of an estimated $14.68 trillion). What’s more, the wealth held by the top 200 for 2022 grew by 15.7% on the previous year.
The Centre for Social Impact’s report investigating trends in Australians’ income and philanthropic giving has found that although top-end wealth has grown, giving has lagged.
“As the first step in a reform agenda, Treasury will prioritise ‘token mapping’ work in 2022, which will help identify how crypto assets and related services should be regulated. This hasn’t been done anywhere else in the world, so it will make Australia leaders in this work.” fs
Aware overhaulsSuperfees
Aware Super is removing trustee charges and management fees from its products, which will simplify the structure for more than 1.1 million members.
23www.financialstandard.com.au 5 September 2022 | Volume 20 Number 17 News
Treasurer Jim Chalmers, minister for financial services Stephen Jones and minister for competition, charities and treasury Andrew Leigh have announced that work is underway on crypto asset reforms. “The Albanese government will improve the way Australia’s regulatory system manages crypto assets, to keep up with developments and provide greater protections for consumers,” Chalmers, Jones and Leigh said.
Aware Super said members will save an average of $348 a year on fees, resulting from an overall reduction of 0.12 % per year for the diversified investment options, and a reduction of 0.03% per year for the single asset class investment options. These fee changes will come into effect on September 30, a welcome relief for members as the cost of living increases, the fund said.
Evidently, in 2020, AustralianSuper participated in 40 capital raisings and invested an additional $550 million with its portfolio companies. Further, throughout the pandemic from March 2020 to June 2022, the fund provided $2.6 billion to 74 companies.
“Australians are experiencing a digital revolution across all sectors of the economy, but regulation is struggling to keep pace and adapt with the crypto assetThesector.”ATOestimates more than one million taxpayers have interacted with the crypto asset ecosystem since 2018. However, more distended, YouGov research commissioned by Swyftx claimed 25% of all Australians owned cryptocurrency, nationally one of the highest levels of crypto ownership in the developed world. As it stands, the crypto sector is largely unregulated, and the government has said it needs to work on getting the balance right between embracing new, innovative technologies while safeguarding consumers.
The changes will reduce fixed fees for nearly 98% of its membership who are in pension mode, TTR or in the accumulation phase.
Crypto underwayreforms
But more than just cushioning Australia’s economy from recent shocks, Samardzija believes that the growing pool of capital in Australia’s super system provides workers with enormous economic support and opportunity.
“The FRAA expects that the implementation of these recommendations will require a cul tural shift in the way that ASIC approaches its work and engages with its regulated population and broader stakeholders. If achieved, ASIC at all levels should have the confidence to engage openly with its stakeholders, communicate with clarity and certainty, assess itself continually and identify opportunities for improvement, without compromising its role to apply and en force the law,” it said.
Joe01: Longo ASICchair Latest ASIC capability review released Cassandra Baldini T he Financial Regulator Assessment Au thority (FRAA) reviewed ASIC and said its generally effective and capable but there are still some important opportunities to enhance performance.TheFRAA released its report, Effectiveness and Capability Review of the Australian Securi ties and Investments Commission (ASIC), and as sessed the regulator’s effectiveness and capabil ity across strategic prioritisation, planning and decision-making as well as surveillance and licensing.Itmade four recommendations for ASIC and said, if implemented, it should enhance the as sessed areas. It first suggested ASIC requires a substan tial uplift in its data and technology capability, which will involve cultural change and should have a stronger focus across the organisation on enhancing the quality of its engagement with stakeholders.It’salsorecommended ASIC enhance its abil ity to measure its own effectiveness and capa bility and communicate the outcomes of such assessment transparently. It concluded ASIC should continue to broad en its mix of skill sets to ensure it can meet the current and future needs of the organisation.
Aware Super chief executive Deanne Stewart said these savings were just some of the benefits that the fund’s size and scale could provide to members. “Two years on from the mergers of First State Super, VicSuper and WA Super, Aware Super members are already seeing first-hand some of the benefits that come from the scale of the fund,” she“Assaid.we grow, we use our scale to drive down costs for members, maintain a record of strong, long-term returns, and expand the range of products, guidance, advice and education services available to members.” fs
Citing Byres’ comments, at an event where the report was launched, ISA senior policy adviser Tina Samardzija said: “We were able to determine that in 2020 as Covid first hit Australia, we saw industry funds support Australian companies to raise equity.”
A strong super system cushions the economy: ISA
“I think the reason our venture capital funds have been so attracted to working with Australia’s super funds, particularly industry funds, is because of that stable patient nature of the capital. Venture capital is a risky investment, you have to wait to see over time if it’s paid off, you can’t be looking in the first year as to whether or not you’ve got returns when investing in early stage, innovative companies.
The regulator responded by commenting that it welcomed the report and its chair Joe Longo 01 said: “We need to keep pace in an environment of accelerated change in order to be a confident and ambitious regulator. I welcome the FRAA’s recommendations which align closely with my priorities for ASIC.”
The quote We need to keep pace in an environment of accelerated change in order to be a confident and ambitiousregulator.
Explaining venture capital and super funds’ relationship, Tech Council of Australia deputy chief executive Tom McMahon said: “I think in many ways we’ve seen the maturity of Australia’s venture capital scene and tech sector go alongside the growing maturity of Australia’s super system.”
Andrew McKean
She added that funds were also increasingly looking to capture value for members by helping commercialise Australian ideas and innovations through venture capital and start-ups.
“You need to be patient and industry funds by virtue of their scale and their appetite to invest over long-term horizons are able to be good partners for venture funds.” fs
“Our government is ready to start consultation with stakeholders on a framework for industry and regulators, which allows consumers to participate in the market while also better protecting them,” Chalmers, Jones and Leigh said.
An Industry Super Australia (ISA) report has called the pool of national savings created by the super system a key strength of the Australian economy and the envy of the world. According to the report, in periods of economic uncertainty and market volatility, the long-term focus of industry funds allows it to provide capital that supports individual companies navigating short-term challenges. “From a macroeconomic perspective, this ability to buy when everyone is selling (countercyclical investment) stabilises the economy and provides much-needed capital to help businesses weather financial market shocks,” the report said. “It helps support economic activity and employment while creating value for super-fund members.” it maintained that counter-cyclical investment helps avoid prolonged economic downturns while also upholding job security.APRA chair Wayne Byres said: “When it comes to equity finance, the super system is a key provider to the Australian industry. That was never more evident than in the depths of the Covid crises when many companies sought to bolster their balance sheets.”
ASIC said it has several initiatives underway that align with the FRAA’s recommendations including implementing multi-year data and digital strategies that focus on uplifting its tech nology systems and data capabilities.
Implementing a multi-year people strategy to help deliver ASIC’s organisational priorities, implementing regulatory efficiency initiatives to make changes to the way ASIC administers the law and making it easier for stakeholders to interact with ASIC. This is in addition to taking steps to enhance how it measures and reports on its effectiveness and capability. fs
“In Singapore, Australia, Hong Kong, and Taiwan, there are likely to be more millionaires on a relative basis than in the US, with Korea, and New Zealand coming close, even by the end 2030,” it “However,said.only around 4% of adults in mainland China, and less than 1% of adults in India, are likely to be millionaires by our definition.” The report further revealed the number of adults with wealth of at least US$250,000 in 2021 and said Australia came in number one with 12.7 million. It further added economies that grow faster naturally accumulate wealth at a quicker pace. Projections based on trend nominal GDP growth for all Asian markets, as well as the US showed; aggregate financial wealth in Vietnam and India looks set to rise by at least 150% by the end of the decade, while it is likely to expand far more gradually in more developed economies like Japan, Taiwan, and the US.
The fund’s equity investments returned -17%; technology stocks returned -28% with some of the biggest losses coming from Meta and Apple, while consumer discretionary returned -24.9%.
Rachel Alembakis
It’s estimated that Singapore will have the highest adult population of millionaires by 2030, overtaking Australia by 7%.
$250bn loss
fs
In December 2021, DeSantis and the two other SBA trustees internalised proxy voting authority from external managers. The policy passed provides “guidance to the SBA employ ees now responsible for proxy voting and in vestment decisions.”
“It is a huge honour to lead a team entrusted with managing the retirement savings of over 100,000 Kiwis as well as the assets of endowments and foundations which enhance millions of lives throughout New Zealand’s communities,” Brown said.
Meanwhile, fixed income investments were -9.3% and unlisted renewable energy infrastructure returned“Technology-13.3%.companies produced the period’s weakest return... The surge in demand during the pandemic for digital advertising, e-commerce and semiconductors has normalised. Growing fears of recession have also impacted particularly on tech stocks,” the fund’s report reads. “Consumer discretionary were the secondweakest sector in the first half… These stocks had a difficult start to the year, with investors anticipating weaker demand from households in response to rapidly rising prices for essentials such as energy, housing, and food.
“Industrials were the third-weakest performers with a return of -21.8%. A weaker economy and fears of recession tend to reduce demand for industrial goods and services.”
As at June 30, 68.5% of the fund was invested in equities. Fixed income accounted for 28.3%, unlisted real estate 3% and unlisted renewable energy infrastructure was 0.1%. Known as the oil fund, it said the only sector to see a positive return was energy, which returned 13.2% on the back of increased oil, gas, and refined product prices, and the conflict in Ukraine.Theresult is in stark contrast to last year, which saw the fund return its largest profit to date at 14.5%.
Mercer NZ names investment chief Chloe Walker Padraig Brown has been permanently appointed as Mercer New Zealand’s chief investment officer, having acted in the role since May.
Governor DeSantis, who is facing re-election in November and is seen as a rising national leader in Republican Party politics in the US, said that “corporate power has increasingly been utilised to impose an ideological agenda on the American people through the perversion of financial invest ment priorities under the euphemistic banners of environmental, social, and corporate governance and diversity, inclusion, and equity.
“We are in an extremely challenging period for investment markets with macro dynamics that we haven’t experienced in recent decades, and we are ensuring that these risks are prudently managed.” Mercer Pacific’s chief investment officer Kylie Willment said it was clear throughout the recruitment process that Brown stood out from the talent“Paddypool.has been a key leader in the Pacific Investments team and a great partner for our clients for many years,” Willment said.
The fund is valued at about $1.87 trillion.
Norwegian wealth fund records
And said size of the population, in addition to wealth distribution and the level of economic development explains the large number of millionaires in some of these economies.
The SBA manages over 30 funds, but 95% of the assets under management fall into the Florida Retirement System Pension Plan, the Florida Retirement System Investment Plan, Florida PRIME, and the Florida Hurrican Catastrophe Fund. fs DeSantis Governor, Florida www.financialstandard.com.au
Jamie Williamson Norges Bank Investment Management announced the Government Pension Fund Global lost 1.68 trillion Norwegian krone, which is the equivalent of almost $250 billion AUD in the first half of this year, largely driven by equity returns, primarily technology stocks.
The fund is known as the oil fund as it was created in 1969 after oil was discovered in the North Sea. The fund was established to shield the economy from ups and downs in oil revenue. It also serves as a financial reserve and as a long-term savings plan so that both current and future generation benefit from that oil wealth. fs
5 September 2022 | Volume 20 Number 17
“With the resolution we passed today, the tax dollars and proxy votes of the people of Florida will no longer be commandeered by Wall Street financial firms and used to implement policies through the board room that Floridians reject at the ballot box. We are reasserting the authority of republican governance over corporate domi nance and we are prioritising the financial se curity of the people of Florida over whimsical notions of a utopian tomorrow,” he said.
International24 Singapore to be millionaire capital Cassandra Baldini
HSBC issued its report The rise of Asian Wealth and revealed 13.4% of Singapore's adult population will be millionaires, beating Australia withHong12.5%.Kong came in third with Taiwan following and the US sitting in firth place. The report explained Asia surpassed the US during the late 2000s, following the GFC.
“I have every confidence that our New Zealand funds will reach new heights under his direction.” fs
F lorida Governor Ron DeSantis 01 and the trustees of the US$253.1 billion State Board of Administration (SBA) have banned ESG from considerations of the state's fund management practices. DeSantis and the two other trustees of the SBA, state chief financial officer Jimmy Patron is, and state Attorney General Ashley Moody, have directed their fund managers to invest “without considering the ideological agenda of the environmental, social and corporate govern ance (ESG) agenda.” The resolution specifies that the SBA's in vestment fund managers and advisors priori tise the highest return on investment and states that "ESG considerations will not be included in the state of Florida's pension investment management practices.”
Ron01:
Florida bans ESG from state pension investments
The appointment also sees Brown promoted to partner. He’s been with Mercer since 2011, initially in the Sydney office before relocating to his homeland in New Zealand in 2018.
The world’s largest sovereign wealth fund reported the record loss as part of its first half results overnight, returning -14.4% for the period.
The quote With the resolution we passed today, the tax dollars and proxy votes of the people of Florida will no longer be commandeered by Wall Street financial firms...
Previously, Brown held roles with Blackrock, JLL and Credit Suisse in London.
In July, Governor DeSantis also unveiled proposed legislation that would amend Flor ida's Deceptive and Unfair Trade Practices statute to prohibit discriminatory practices by large financial institutions based on ESG so cial credit score metrics.
Equipsuper JANA Investment Advisers Partners Group Australia Development Capital 34 Hostplus Superannuation Fund JANA Investment Advisers LGT Capital Partners International Private Equity 11 Hostplus Superannuation Fund JANA Investment Advisers Other International Private Equity 6 Hostplus Superannuation Fund JANA Investment Advisers Flexstone Partners International Private Equity 108
StateofficerinvestmentInvestments www.financialstandard.com.au 5 September 2022 | Volume 20 Number 17
Care Super JANA Investment Advisers HarbourVest Partners, LLC Private Equity 6 Care Super JANA Investment Advisers UBS Asset Management (Australia) Ltd Private Equity 300 Care Super JANA Investment Advisers Impax Asset Management Group plc Private Equity 215 Construction & Building Unions Superannuation Frontier Advisors Other Active Private Equity 216 Energy Industries Superannuation Scheme - Pool A Cambridge Associates; JANA Investment Advisers Resolution Life Australia Pty Ltd Private Equity 55
Spirit Super PATRIZIA Advisers HarbourVest Partners, LLC Private Equity 21 Spirit Super PATRIZIA Advisers AMP Capital Investors Limited Private Equity 10 Spirit Super PATRIZIA Advisers Other Private Equity 15 Spirit Super PATRIZIA Advisers ROC Capital Pty Limited Private Equity
"Through our diversified portfolio of cor porate leveraged loans, asset-backed securities and real estate debt, we will work to meet State Investments' desire for a consistent income stream and capital stability," QIC head of mul ti-sector private debt Phil Miall said. Miall's team was established in February this year to provide "a combination of broad and deep origination networks; institutionalgrade investment governance; and extensive credit, ESG and structuring experience." State Investments chief investment officer
Latest private equity investment mandate appointments
Australian Retirement Trust Willis Towers Watson Neuberger Berman Private Equity 1,858 Care Super JANA Investment Advisers HarbourVest Partners, LLC Private Equity 15
Spirit Super PATRIZIA Advisers ROC Capital Pty Limited Private Equity 92 Spirit Super PATRIZIA Advisers Intermediate Capital Australia Pty Limited Private Equity 10 Spirit Super PATRIZIA Advisers StepStone Pty Ltd Private Equity 191 Spirit Super PATRIZIA Advisers Lexington Partners Private Equity 36
QIC multi-sector private debt team wins mandate
Rainmaker Mandate Top 20 Appointed by Asset consultant Investment manager Mandate type Amount ($m)
Between the lines 25
"The strategic alliance will identify and offer mutually beneficial services to the CIW and MT investor communities, including multi-modal education forums, access to stock market and macro insights and professionally managed investment solutions," Clime said. The alliance follows Clime being introduced to Marcus Today by the principals of MTIS Wealth Management, the wealth firm Clime announced it was acquiring in May. MTIS was formerly known as Marcus Today Investment Strategists, a joint venture between Investment Strategists and Marcus Today. The acquisition of MTIS did not include Marcus Today and the strategic alliance is separate to the MTIS deal. The acquisition was completed on August 17, with about $380 million in funds under management and about $3 million in total gross revenues being added to Clime's. Marcus Today is an online stock market newsletter service which provides general investment knowledge and education to investors. Its founder, Marcus Padley, is a regular contributor to Money magazine which, like Financial Standard, is published by Rainmaker Media. fs The quote In this current volatile and landscape,inflationaryweneedaholisticprivatedebtofferingwhichhasscopetomoveuptheriskspectrumwhenopportunitiespresentthemselves.
"In this current volatile and inflationary landscape, we need a holistic private debt of fering which has scope to move up the risk spectrum when opportunities present them selves," she said. "History suggests investing in periods of dis location can be attractive, yet we needed con fidence in a manager's expertise in investment selection and structuring to navigate this envi ronment and avoid borrower distress." She said the team's focus on debt origina tion, supported by QIC's other capabilities, and its commitment to ESG integration makes it a strong addition to the State Investments portfolio."Weare privileged to continue to deliver strong risk-adjusted returns for Queensland government clients through our broad and dis tinct offering," Miall said. fs chief
Jamie Williamson T he multi-sector private debt team that QIC introduced in February has won a $500 million plus mandate to invest in Aus tralia and New Zealand. The mandate comes from Queensland's State Investments and is a three-year commitment. The team is tasked with originating loan in vestments in Australia and New Zealand, rang ing in size from $20 million to $75 million.
Allison01: Hill
Allison Hill 01 said she is confident the team can deliver attractive risk-adjusted returns, capital preservation and low volatility.
Source: Rainmaker Information
Australian Retirement Trust Willis Towers Watson Makena Capital Management Private Equity 170
Clime, Marcus Today form alliance Clime Investment Management has entered a strategic alliance with Marcus Today to manage the latter's $70 million managed accounts portfolio. Under the deal, Clime will manage Marcus Today's managed accounts portfolios under the Ralton Asset Management SMA service. It will also provide licensing services.
Candriam Sustainable Global Equity Fund 82 -6.8 13 9.1 3 10.0 8
Source: Rainmaker Information funds26 Size 1 year 3 years 5 years Fund name $m % p.a. Rank % p.a. Rank % p.a. Rank Size 1 year 3 years 5 years Fund name $m % p.a. Rank % p.a. Rank % p.a. Rank ENDING – 30 JUNE 2022
By Alex Brumbie
Franklin Global Responsible Investment Fund 20 -4.2 8 9.0 4 Perennial Better Future Trust 94 -13.4 35 9.0 5 16.2 1
Robeco Global DM MF Equities Alpha Fund 19 1.0 2 8.9 6 Australian Ethical Emerging Comp. Fund 199 -24.5 40 8.3 7 10.3 7
State Street Climate ESG Int. Equity Fund 313 -7.9 16 8.2 9 10.5 4
So, if a super fund’s ESG investment strat egy isn’t working, maybe the problem isn’t that it’s ESG but how it’s implemented. Blaming ESG for this is intellectually weak. This exemption is also crazy because it’s trying to fix the wrong problem. If the test is flawed or not working fairly or properly, sure ly, rather than giving failed funds a ‘Get Out of Jail’ pass, the smarter thing to do is to fix theMoreover,test. giving a free kick to these prod ucts smacks not of eradicating discrimination, but of introducing positive discrimination.
BT Multi-Manager High Growth Fund na -9.2 19 4.0 9 6.6 6 MLC Wholesale Index Plus Growth 287 -7.2 7 4.0 10 Sector average 411 -8.1 3.8 5.8
And let’s remember that if anybody in Aus tralia wants to voluntarily invest into strategies that deliberately underperform, they are free to do so. Just don’t do it with universal super and SG contributions. Giddyup. fs
This will happen because any super fund seeking such exemptions is in essence admitting that its ESG investment framework has failed. Moreo ver, it’s an admission it expects it’s incapable of satisfying the Best Financial Interests Duty. Putting all this together, this policy is a solu tion in search of a problem.
Managed Funds GROWTH IOOF MultiMix Growth Trust 678 -4.4 2 5.9 1 7.7 1 Ausbil Balanced Fund 95 -5.6 4 5.5 2 7.6 2
Any case, what’s evidence that ESG MySu per products, let alone faith-based MySuper products, have underperformed? Sure, the just-gone financial year was tough perfor mance-wise and many ESG products delivered weak returns. But so did the others. Indeed, ESG products came out slightly ahead.
IOOF MultiMix Moderate Trust 575 -2.6 6 3.9 1 5.4 1 Allan Gray Australia Stable Fund 339 2.8 1 3.3 2 4.0 2
/alexdunninwww.twitter.com.com.aufinancialstandardalex.dunnin@Dunnin
IOOF MultiMix Conservative Trust 577 -2.2 3 2.7 3 3.9 3 Perpetual Conservative Growth Fund 181 -2.4 5 2.4 4 3.8 6 MLC Index Plus Conservative Growth 397 -5.9 19 2.3 5
First, it’s pointless. There aren’t any faithbased MySuper products still standing, at least stand-alone ones. So, it’s hard to figure out what problem this policy is trying to solve. Catholic Super combined into Equipsuper a few years back. Australian Catholic Super is joining UniSuper, Christian Super is joining Australian Ethical and Lutheran Super has just announced it is formally rolling into Mercer. It may be meant to help Crescent Wealth, but that’s not even a MySuper product. Second, it’s inequitable. Giving faith-based super funds a free pass to deliberately under perform, meaning their fund members will probably retire with less and need to draw a higher Age Pension than they would otherwise, simply kicks the can down the road.
Forcing other people to pay higher taxes simply so some other arbitrary fund member can enjoy their own particular lifestyle choices, causing the people who’ll be funding these subsidies to have less money themselves, is about as selfish in super as it gets. Surely this is not what faith-based super funds, their leaders and their members want.
MLC Horizon 3 Conservative Growth 1,184 -5.5 14 2.3 6 3.8 4 Pendal Active Moderate Fund 135 -5.5 15 2.1 7 3.7 7 Morningstar Balanced Fund 131 -5.8 18 1.9 8 3.5 8
This returns similarity also applies in equi ties. For FY22, the Rainmaker combined ESG equities index delivered -8.5%, and the regular equivalent index delivered -8.1%.
Vanguard Int. Shares Select Excl. Index Fund 339 -6.7 12 8.0 10 10.4 5 Sector average 212 -10.2 3.7 6.1
Note: The performance figures for diversified funds are net of fees, performance figures for sector specific funds are adjusted for fees.
BALANCED Orbis Global Balanced Fund 6 1.1 2 6.4 1 4.5 19 Perpetual Balanced Growth Fund 396 0.2 3 6.0 2 6.5 2 IOOF MultiMix Balanced Growth Trust 1,841 -3.1 9 5.4 3 7.0 1 Allan Gray Australia Balanced Fund 117 1.9 1 4.9 4 5.4 7 Perpetual Diversified Growth Fund 92 -1.0 4 4.2 5 5.2 10 Pendal Sustainable Balanced Fund 776 -5.1 11 4.1 6 5.2 9 BlackRock Global Allocation Fund (Aust) 458 -13.2 39 4.0 7 4.1 25 Pendal Active Balanced Fund 357 -4.8 10 3.9 8 5.2 11 Morningstar Growth Real Return Fund 421 -2.0 7 3.5 9 4.4 21 Maple-Brown Abbott Diversified 201 -1.5 5 3.5 10 4.6 17 Sector average 923 -6.7 2.9 4.6 CAPITAL STABLE
PERIOD
Illustrating this, the Rainmaker MySuper Index’s -3.9% was actually worse than the -3.6% delivered by the Rainmaker ESG Di versified index. But the fact they pretty much matched each other is the point.
Reinforcing these points, the Rainmaker June 2022 performance league tables for de fault and MySuper products show nine of the top performers to be ESG leaders.
The government’s proposal for so-called faith-based MySuper products to be given an exemption to the performance test if they fail it has to be one of the most absurd superannua tion policy proposals ever presented. Coming from a government that, apart from this policy thought bubble, has gotten off to what is widely regarded as a great start, the faith-based free kick is hard to fathom.
First Sentier Wholesale High Growth Fund 372 -10.8 23 4.9 3 7.4 3 Vanguard Diversified High Growth Index ETF 1,745 -9.0 14 4.7 4 Vanguard High Growth Index Fund 4,829 -9.0 15 4.7 5 7.2 4 Pendal Active Growth Fund 88 -4.9 3 4.6 6 5.9 9 MLC Wholesale Horizon 6 Share 356 -7.6 8 4.6 7 7.0 5 MLC Wholesale Horizon 5 Growth 706 -7.1 6 4.0 8 6.0 8
Dimensional Global Sustainability Trust (H) 347 -13.3 34 8.2 8 8.4 12
Third, what super fund would want such a moniker that boldly and proudly says, ‘We failed’?Fourth, it will set back the ESG sector decades.
Faith-based free kick is a bad idea
Managed
Dimensional World Allocation 50/50 Trust 799 -8.6 29 1.7 10 3.8 5 Sector average 354 -6.3 1.2 2.8
ESG BetaShares Global Sustainability Leaders ETF 1,945 -11.3 29 13.6 1 15.8 2
Dimensional Global Sustainability Trust 378 -8.1 18 9.3 2 11.0 3
Looking at three-year returns reveals eight of the top 10 performers to be ESG leaders.
www.financialstandard.com.au 5 September 2022 | Volume 20 Number 17
Morningstar Balanced Real Return Fund 165 -2.4 4 1.9 9 3.1 12
STABLE INVESTMENT OPTIONS
CAPITAL
Super funds 27 GROWTH INVESTMENT OPTIONS Qantas Super Gateway - Glidepath Take-Off 0.2 2 7.4 1 8.2 1 AAA PSSap - Aggressive -3.5 24 6.7 2 8.0 4 AAA HESTA - High Growth -2.2 12 6.7 3 8.1 3 AAA Military Super - Aggressive -3.6 25 6.7 4 8.0 5 AAA ADF Super - Aggressive -3.5 22 6.7 4 8.0 5 AAA Hostplus - Shares Plus -4.4 34 6.5 6 8.0 7 AAA Hostplus - Balanced 1.4 1 6.3 7 7.5 12 AAA Aware Super Employer - High Growth -3.8 28 6.1 8 7.7 10 AAA Lutheran Super - High Growth -1.5 7 6.1 9 7.5 13 AAA Vision Super Saver - Growth -4.7 38 6.1 10 7.5 14 AAA Rainmaker Growth Index -5.3 4.4 6.2 BALANCED INVESTMENT OPTIONS Hostplus - SRI Balanced 2.1 2 7.0 1 7.3 1 AAA LGIAsuper Accumulation - SR Balanced 2.4 1 6.8 2 7.1 3 AAA Qantas Super Gateway - Glidepath Altitude 0.2 5 6.3 3 7.1 2 AAA Energy Super - SRI Balanced -0.4 7 5.9 4 6.6 7 AAA Qantas Super Gateway - Glidepath Cruising 0.8 4 5.6 5 6.4 13 AAA CareSuper - Sustainable Balanced -1.1 10 5.4 6 6.7 6 AAA Christian Super - My Ethical Super 0.1 6 5.4 7 5.9 24 AAA AustralianSuper - Balanced -3.0 32 5.4 8 7.0 4 AAA Christian Super - Ethical Balanced Growth 1.2 3 5.3 9 AAA Lutheran Super - Balanced Growth - MySuper -1.8 19 5.3 10 6.4 11 AAA Rainmaker Balanced Index -4.1 3.6 5.2 CAPITAL STABLE INVESTMENT OPTIONS Qantas Super Gateway - Glidepath Destination 1.5 1 5.0 1 5.7 2 AAA Vision Super Saver - Balanced -2.8 42 4.0 2 5.5 3 AAA Spirit Super - Sustainable -3.0 47 4.0 3 5.7 1 AAA Christian Super - Ethical Conservative Balanced 0.0 7 3.9 4 4.5 16 AAA Spirit Super - Quadrant Defined Benefits fund -1.4 25 3.8 5 5.3 4 AAA AustralianSuper - Conservative Balanced -3.1 50 3.7 6 5.3 5 AAA Prime Super (Prime Division) - Income Focused 0.1 6 3.7 7 4.6 10 AAA Australian Catholic Super Employer - LO LifetimePrime -0.3 8 3.5 8 AAA Australian Catholic Super Employer - Conservative -0.4 10 3.4 9 4.4 18 AAA State Super (NSW) SASS - Balanced -1.0 15 3.4 10 4.6 14 AAA Rainmaker Capital Stable Index -3.7 1.8 3.2 GROWTH INVESTMENT OPTIONS Qantas Super Gateway Inc. Acc. - Aggressive 0.2 3 8.1 1 9.0 2 AAA Hostplus Pension - Balanced 1.8 2 7.7 2 8.6 6 AAA CSC retirement income - Aggressive -2.8 16 7.3 3 8.8 3 AAA Hostplus Pension - Shares Plus -5.1 30 7.3 4 8.8 4 AAA Telstra Super RetireAccess - Lifestyle Growth -1.5 8 7.1 5 8.1 12 AAA Lutheran Super Pension - High Growth -1.8 9 6.8 6 8.4 8 AAA Vision Income Streams - Growth -5.2 31 6.7 7 8.4 9 AAA Cbus Super Income Stream - High Growth -6.1 40 6.7 8 8.7 5 AAA AustralianSuper Choice Income - High Growth -4.5 24 6.7 9 8.5 7 AAA TransPension - High Growth Option -4.4 23 6.5 10 7.7 18 AAA Rainmaker Growth Index -5.7 4.9 6.8 BALANCED INVESTMENT OPTIONS Hostplus Pension - SRI Balanced 2.2 1 7.9 1 8.2 1 AAA Qantas Super Gateway Inc. Acc. - Growth 0.2 5 6.9 2 7.8 2 AAA LGIAsuper Pension - SR Balanced 1.0 3 6.6 3 7.4 6 AAA CareSuper Pension - Sustainable Balanced -0.3 8 6.2 4 7.6 4 AAA Qantas Super Gateway Inc. Acc. - Glidepath Cruising 0.9 4 6.1 5 7.1 10 AAA Energy Super Income Stream - SRI Balanced -1.1 10 6.0 6 7.1 9 AAA AustralianSuper Choice Income - Balanced -3.2 29 5.8 7 7.7 3 AAA Christian Super Pension - Ethical Balanced Growth -0.1 6 5.7 8 6.5 20 AAA Telstra Super RetireAccess - Lifestyle Balanced -1.2 11 5.7 9 6.8 12 AAA Cbus Super Income Stream - Growth (Cbus Choice) -4.0 37 5.5 10 7.4 5 AAA Rainmaker Balanced Index -4.6 3.9 5.7
6.4 2 AAA Vision Income Streams - Balanced -3.4 43 4.5 2 6.1 3 AAA Prime Super Income Stream - Income Focused 0.3 5 4.3 3 5.4 7 AAA Australian Catholic Super RC - Conservative 0.1 6 4.3 4 5.3 8 AAA Christian Super Pension - Ethical Conservative Balanced -0.6 11 4.2 5 5.0 15 AAA AustralianSuper Choice Income - Conservative Balanced -3.6 46 4.1 6 5.9 4 AAA CSC retirement income - Income Focused -1.5 18 3.8 7 5.1 12 AAA Cbus Super Income Stream - Conservative Growth -4.4 55 3.8 8 5.7 5 AAA Qantas Super Gateway Inc. Acc. - Conservative 1.0 3 3.8 9 4.7 19 AAA Aware Super Pension - Balanced Growth -1.6 20 3.8 10 5.5 6 AAA Rainmaker Capital Stable Index -3.9 1.9 3.5 * Rainmaker [RM] quality assessmentPERIOD ENDING – 30 JUNE 2022 Source: Rainmaker www.rainmakerlive.com.auInformationNotes: Please note that all figures reflect net investment performance, i.e. net of investment tax, investment management fees and the maximum applicable ongoing management and membership fees. 1 year 3 years 5 years RM % p.a. Rank % p.a. Rank % p.a. Rank Quality* 1 year 3 years 5 years RM % p.a. Rank % p.a. Rank % p.a. Rank Quality* Workplace Super Products Retirement Products Leading intelligence, market opportunities and SPS 515 compliance for super www.rainmaker.com.aufunds RML_Strip ad_225x55.indd 1 16/2/2022 12:19 pm www.financialstandard.com.au 5 September 2022 | Volume 20 Number 17
Qantas Super Gateway Inc. Acc. - Glidepath Destination 1.6 1 5.5 1
Economics28
Source: Industry Super Australia Source: APRA Figure 1. Consumer Sentiment Index 140120100806040200
1975JUL 1979JUL 1983JUL 1987JUL 1991JUL 1995JUL 1999JUL 2003JUL 2007JUL 2011JUL 2015JUL 2019JUL INDEX labour market, the positive wealth effect from the rising stock and property markets and vaccine optimism combined to restore consumer confidence at that time. The Westpac-Melbourne Institute index of consumer sentiment de creased by a further 3% in July 2022 to 83.8. Confidence is now down 19.7% since December 2021. This marks the seventh consecutive monthly fall. The Index is at levels that, since the beginning of the survey in 1974, has only been seen during periods of major disruption in the Australian economy in cluding: the COVID pandemic; the Global Financial Crisis; the reces sion in the early 1990s; the slowdown in the mid–1980s and the recession of the early 1980s. fs Source: FactSet, Rainmaker
2.
$100 invested 10 years ago is now worth... 140120100806040200 PROPERTYLISTED PROPERTYUNLISTED INFRASTRUCTURELISTED INFRASTRUCTUREUNLISTED UNLISTED EQUITY $BILLION 2014 2022 $357 $315 $277$277 $231$242$248
Nation building is back, baby
International equity (unhedged) Unlisted infrastructure Listed infrastructure International equity (unhedged) Australian listed InternationalUnlistedAustralianpropertyequitypropertylistedproperty International fixed interest Australian fixed interest Cash
But in his scene-setting speech on the day, Chalmers did say: “We also see trillions of dol lars in workers’ capital, government budgets heaving with debt, and obvious needs for invest ment in areas like housing and energy.”
Definition The Westpac-Melbourne Institute index of con sumer sentiment is derived from a telephone sur vey, of around 1200 randomly selected Australian households and is aimed at measuring changes in the level of consumer confidence in the country. The headline index is derived from a simple average of five component indices: Current fam ily finances compared with a year previous; family finances over the next 12 months; economic conditions over the next 12 months; economic conditions over the next five years; and the time to buy a major household item. Consumers are surveyed about their expecta tions for house prices and unemployment, buy ing conditions for cars and dwellings, the wis est place for savings and news recall – which is designed to provide additional insight into any change in confidence and may include, but is not limited to, recollections of economic, politi cal and geopolitical events. The report also seeks views on policies such as taxation, where consumers would invest and what they think about economic news like infla tion and employment numbers. Sentiment index readings above 100 indicate that optimists outnumber pessimists and vice versa. Market implication Because household consumption accounts for around two-thirds of the Australian economy, it is important to understand the outlook for consumer spending. The state of consumer confidence provides an early indication of the direction of consumer expenditures. Equity investors want to see rising consumer confidence because this translates to increased household spending which, in turn, raises busi ness sales and profitability and stock prices. The bond market would be alarmed if persistent gains in confidence generated stronger spending and, therefore, overall growth that led to rising inflation. In the current situation lower confidence is associated with realized rising inflation. However, Australia’s current economic cycle shows that the correlation between consumer sentiment and retail spending appears to have broken down in the years following the global financial crisis of 2007-08. Retail spending had been weakening despite the flattish (albeit soft) trend in consumer sen timent due mainly to stagnant wages growth and high household debt. The Westpac-Melbourne Institute index of consumer sentiment plunged to a record low reading of 75.6 in April 2020 after the Austral ian government enforced social restrictions and a nationwide lockdown in March to contain the spread of Covid-19. Fiscal and monetary policy countermeas ures, Australia’s relative success in managing the spread of the virus, the recovery in the
It must be said though, that this was preceded by him saying: “We won’t be directing funds into asset classes.” Although he later said he wants “To nut out the opportunities in areas like energy and housing, perhaps impact investing as well.” “To bring together super funds and other institutions like banks, venture capital funds, and the like. But also to work out the best place for the government’s own co investment funds – for energy transmission, clean energy, housing, advanced manufacturing and supply chains, northern Australia – and the Future Fund.”Inaremarkable coincidence, Industry Super Australia released a second edition of its land mark report that tries to tabulate the economic impact of the industry super fund sector that it said now invests nearly $1.1 trillion. The report is noteworthy because it details swathes of investments by industry super funds into unlisted infrastructure, small-to-medium businesses, private equity pharmaceutical startups, agribusiness, residential housing projects, renewable energy projects, direct lending and First Nations projects. According to APRA, in frastructure and private equity amount to 11% of total superannuation assets. In this context we should also note Chalmers saying: “We see the lack of a legislated objec tive of super as a source of ambiguity which left the gate open for early access – and so we will legislate one…The interests of members, funds, the economy and the country are inseparable.” This collision of economics, politics, invest ment management and super policy make it vital that the Sole Purpose Test and Members’ Best Financial Interest Duty continue to reign supreme. fs
Alex Dunnin In a fateful week in August 2022 the superan nuation sector’s narrative turned on a dime.
Figure 1. $195 $119$129$136
The trigger point was a Superannuation Lend ing Roundtable hosted by the AFR that was spearheaded by Treasurer Jim Chalmers. Showing the gravitas of the occasion, at the Roundtable were luminary leaders of some of the nation’s biggest super funds and compa nies. But one of the stars of the show was with out doubt the superannuation godfather, Paul Keating.Theway the summit has been reported and the buzz created around it gives the unequivo cal impression its theme was about conscript ing Australia’s $3 trillion superannuation sector into the noble cause of nation building. The treasurer, who himself holds a PhD in political science and international relations and who has authored and edited several books while also having had an extensive career advis ing senior Labor Party politicians, is too shrewd to get succoured into playing that card, however.
www.financialstandard.com.au 5 September 2022 | Volume 20 Number 17
Figure Superannuation FUM in selected asset
classes
Westpac-Melbourne Institute index of consumersentiment
The report stated that other reasons for optimism include a broadly benign regulatory environment and the need for superannuation funds to invest their ever-increasing capital base.
Andrew McKean T reasurer Jim Chalmers 01 and employment minister Tony Burke said they are pleased to see strong wages growth but noted it’s still well short of Australianinflation.Bureau of Statistics (ABS) data shows the Wage Price Index rose 2.6% in the year to June, the highest annual rate of wages growth since 2014.
Sharing her outlook, ASPL Group chief ex ecutive Kris Grant said with the tight labour market, pressure on salaries is building, sub sequently she expects the Wage Price Index to climb towards 6% per annum by the year’s end.
The current earnings season in the US has been generally positive, alleviating investors' immediate concerns of inflation's effect on corporate profitability, according to Principal Global Investors. However, the macroeconomic backdrop is still likely to deteriorate further.
Principal’s chief global strategist Seem Shah said topline results from the second quarter earnings season have generally surprised to the upside, but there are pockets of weakness. “S&P 500 earnings growth stands at 8.8%, slowing from 11.4% in Q1. Also, 78% of earnings beat expectations and were 6% above estimates. The sectoral breakdown, however, reveals index strength was driven mostly by the energy sector,” she said.
Energy, benefitting significantly from elevated oil prices, had the highest earnings growth of any sector at 296.8%. Excluding energy, EPS growth was outright negative at -1.8%. Industrials growth was strong at 31.5%. By contrast, financials, challenged by market volatility and elevated interest rates, were a much weaker performer, with -19.1%. Consumer discretionary, reflecting consumer inflation concerns and demand pay-back, declined by -12.6%.
www.financialstandard.com.au 5 September 2022 | Volume 20 Number 17
“Additionally, embedded in company earnings releases were multiple mentions of challenges to growth—and since overall revenue growth (13.7%) was stronger than earnings, it confirms the growing cost pressures,” she said. fs
“There is also a decline in the net number of small to medium businesses looking to implement price hikes in the coming quarter. This is further evidence that momentum is slowing,” he added.
Inflation is not currently on an upwards trajectory, with further signs that momentum is significantly slowing, according to Insync Funds Management. In a new whitepaper, portfolio manager John Lobb said the incredible rate of money creation during 2020 and 2021, of 20-30% p.a., has dramatically slowed to the average of the historic range of 5-6%. “Excess money was chasing an interrupted supply of goods and services,” he said. Lobb also said that inflation of the price of goods leaving the gates of Chinese factories, which was running at 13-14%, has now dropped back to 4%.
Also notable, private sector wages grew more than public sector wages (2.7% and 2.4% re spectively). The reason for this being the public sector has a large proportion of jobs paid under multi-year enterprise agreements which tend to be less reactive to labour market conditions.
Earnings positive but challenged Jamie Williamson
“Once equity market conditions stabilise and some initial IPOs are successfully executed and trade well, institutional managers will make returns and investors will get confident in the IPO market again,” he said. fs
Alongside MinterEllison capital markets partners Daniel Scotti, James Hutton and Nicole Sloggett, the group comprised ASX acting group executive listings Blair Beaton, NobleOak Life chief executive Anthony Brown, Rothschild & Co managing director Stuart Dettman, MA Moelis managing director Amelia Hill, Next Capital partner Bing Jiang, Pinnacle Investment Management general counsel Calvin Kwok, Wilsons director Will Lawrence, Metrics Credit Partners managing director Andrew Lockhart, Brookfield Asset Management managing director Michael Ryan and IDP Education non-executive director Greg West.
"Despite volatile macroeconomic conditions, successful capital raisings are still taking place in the market, though for many, the tactics and approaches have changed since this time last year," Scotti said.
Capital raisings remain possible: MinterEllison
The report reflects the viewpoints of a group of capital markets experts, as they discussed trends and the outlook ahead for equity capital markets at a recent MinterEllison roundtable in Sydney.
Meanwhile, Hill observed that because cycles shift quickly, a period of “consolidation and digestion” is inevitable after any shock.
The fund said inflation has been abnormally low. “Insync is not alone in its view that as the current level will indeed retract, it's likely that it will settle around its longer-term norm. This is not bad for equity markets,” it noted.
Chloe Walker While headwinds are challenging capital markets globally, MinterEllison’s latest report suggests that the Australian market remains resilient.
However, Chalmers and Burke say there is no sugar-coating the fact that real wages have gone backwards.“Theharsh reality is that even with this stronger outcome, real wages growth will take some time to return,” Chalmers and Burke said. Analysing the data, ABS head of price sta tistics Michele Marquardt commented that the expanding demand for skilled jobs over the last 12 months has continued to build wage pressure across a broader range of industries and jobs, reflected in increasing sizes of pay rises.
“In many cases, we are seeing salaries rise in the private sector by 15% to 20%, such as in the finance and technology sectors, where candi date shortages are acute,” Grant said. “That will put more pressure on wages costs over the remainder of the year.”
“Yet once governments had acted to stabilise the economy following lockdowns, investor education roadshows recommenced two months later.”
The quote The harsh reality is that even with this stronger outcome, real wages growth will take some time to return.
Reinforcing their commitment to address ing some of the biggest challenges facing Aus tralia’s labour market and economy, Chalmers and Burke imparted that wages growth would be a key topic of discussion at the Jobs and Skills Summit in Canberra. fs
Strong wage growth lags inflation: ABS data
News 29
Still, readily rising wages suggest labour mar ket strength is now flowing through to wages, which should keep the Reserve Bank of Aus tralia (RBA) confident that wages will support household income, Barclays upheld.
For Lawrence, “it’s a momentum game.”
According to the report, the speakers expressed longer-term confidence in the Australian market’s distinctive ability to rebound.“Theroundtable participants noted that while fundraising had become more difficult, it was a reflection of the cyclicality of markets and prevailing macroeconomic conditions,” it said. “In fact, investor support for recent raisings indicates that quality businesses will continue to raise funds. This bodes well for a broad-based recovery once sentiments turns.”
Jim01: Chalmers Treasurer
Though, annual wage growth varied by in dustry, from 3.4% for the construction industry to 2.2% for the mining and electricity, gas, wa ter, and waste services industries.
Meanwhile, defensives were mixed, as healthcare led with strong pricing-power with 8.6% growth. Real estate grew by 13.0%, reflecting market under-supply and upward revaluations. Staples were challenged in passing costs to consumers and grew 1.8%, while utilities, burdened with higher energy costs, shrank by -3.7%.
“It took one to two years for the IPO market to rebound after the GFC. Even in March 2020, following the initial market dislocation caused by COVID-19, we were all tearing up our IPO pipelines and shutting up shop for the year,” she said.
Meanwhile, Barclays commented that growth in the Wage Price Index was steady in Q2, albeit slightly slower than the consensus forecast.
Looking at the core drivers of inflation, Insync said: “It's hard to see price rises continuing as has been the case in the last year. Should the core drivers’ prices stabilise, inflation next year would drop dramatically.” fs
"For now, the general observation seems to be that companies are waiting for volatility to settle before resuming activity.”
Inflation already slowing: Insync
“We continue to expect three more 25 basis point hikes by the RBA,” the bank said.
The GICS itself is a four-tiered hierarchical classification system and companies are placed in different sectors according to their primary business activity. On the top level are Com munication Services, Consumer Discretionary, Energy, Financials, Health Care, Industrials, Information Technology, Materials, Utilities.
Figure 2. Proportion of super fund options that underperformed, 21-22
90%80%70%60%50%40%30%20%10%0% AUST EQ INT EQ 90%80%70%60%50%40%30%20%10%0% OVER 12-MONTHS OVER 3 YEARS OVER 5 YEARS OVER 10 YEARS OVER 15 YEARS Figure 2. US GICS performance over 20 years Figure 1. US GICS performance June-July 2022 Sector reviews30 Australian equities Prepared by: Rainmaker Information International equities Prepared by: Rainmaker Information Source: FactSet, values in local currencies & returns in local currencies Source: Rainmaker, S&P Indices Versus Active (SPIVA) report www.financialstandard.com.au 5 September 2022 | Volume 20 Number 17 -10%-15%-20%-5%0%5%10%15%20%25% 500S&P SERVICESCOMM. DISCRETIONARYCONS. ENERGY FINANCIALS CAREHEALTH INDUSTRIALS TECH.INFORMATION MATERIALS UTILITIES 30/6/2022 31/7/2022 $200,000$160,000$120,000$80,000$40,000$0 2002JUL 2004JUL 2006JUL 2008JUL 2010JUL 2012JUL 2014JUL 2016JUL 2018JUL 2020JUL 2022JUL GROWTH OF $10,000 S&P UtilitiesMaterialsInformationIndustrialsHealthFinancialsEnergyCons.Comm.500ServicesDiscretionaryCareTech.
What was interesting to note was that Consumer Discretionary made such huge gains in July following a June when it lost 8.3%. This was a switch between most people in the US fearing a recession was upon them, and feeling more confident for the future when energy prices (primarily the price of gasoline) started to fall. fs
GICS helps analyse equities
For example, the S&P500 index, representing the largest 500 public companies based in the US, returned 9.2% in July after losing 8.3% in June (in US dollars). When the market is split according to industries, the returns ranged from lows of 3.3% (in Consumer Staples and Health Care) to highs of 18.9% in Consumer Discretionary.
Why such a difference between Consumer Staples and Consumer Discretionary? After all, aren’t they both dependent on the consumers spending? The Consumer Staples sector is less sensitive to economic cycles. It contains many of those businesses selling food and services that consumers have to buy whether they have spare money in their pockets or not. In other words, it is non-discretionary. These are the businesses that are sometimes described as recession-proof. Consumer Discretionary, on the other hand, is very sensitive to changes in the economy. When consumers are confident and have spare money they can buy new cars, change out their household whitegoods for new items, buy new clothes, go to restaurants or spend more on holidays. When they are not so confident they stop spending on these items, and this effects the bottom line of Consumer Discretionary companies.
Alex Dunnin
Recall that while the S&P ASX 200 total re turns index delivered -6.5% in 2021-22, the En ergy index delivered 30.1% and the Utilities in dex delivered 35.9%. fs
The international equities picture isn’t as rosy. Rainmaker research shows 83% of these investment options run by super funds in FY 2021-22 underperformed the benchmark – yet again showing how difficult it is for super funds to add value in this asset class. It’s too early to tell if these short-run outper formance results are a sign of good things to come. But maybe it tells us something else. Like perhaps that as the market turned there was ac tually an active management premium albeit when the returns are as weak as they were in the FY, the effect is too small to notice. But it may also show us that not as many in vestment managers and super funds got outflanked by the surge in energy and resources stocks as popular commentary has suggested.
Because sectors are effected in different ways by changes in the economic environment, such as changes in interest rates, the price of energy (oil and gas) and consumer spending, any analy sis of stockmarket returns should typically indi cate the performance of individual GICS sectors.
John Dyall I n 1999, MSCI and S&P Dow Jones - got together and developed the Global Industry Classification Standard (GICS). Its purpose was to efficiently capture the breadth, depth and evolution of industry sectors.
Figure 1. Proportion of Australian equities funds that underperform
T
he S&P Indices Versus Active (SPIVA) report for the state of play at end 2021, released in June this year, revealed that 73% of Australian equities managed funds underper formed the S&P ASX 300 over three years. The short-run 12-month underperformance was significantly better at only 42%. Over 15 years, 84% underperformed. But before we think it’s an exclusively Austral ian phenomenon, the December 2021 SPIVA report revealed that over three years the man aged funds underperformance ratio was 67% in the US, 62% in Europe and 80% in MENA being the middle east and north Africa. It was even worse in some South American countries. With investment managers having track re cords like this, Australia’s super funds must be dreading the results of the 2022 Your Future Your Super performance test. But maybe they should hold fire because only 18% of super fund Australian equities investment options under performed the benchmark through 2021-22. Over three years the underperformance ratio was also mild at just 23%. The five-year under performance ratio was, however, as high as it’s always been at 73%.
Australian underperformanceequities improved
To request a demonstration, call +61 2 8234 7500 or visit aspirecpd.com.au Gain CPD hours for reading Financial Standard ’s economic news Login or subscribe at aspirecpd.com.au Available for individual and corporate subscribers Administrators can upload exams and build training plans FASEA reporting functionality Access to hundreds of hours of FPA and CPE accredited content Content from Australian and international thought leaders Claim CPD from events Track your progress via the live dashboard Device-friendly user interface Access to whitepapers, video, audio and event material Access to FS TechZone, your technical resource library Australian equities CPD Questions 1–3 1. According to the SPIVA report, what proportion of Australian equities managed funds underperformed through the past 15 years to end Dec 2021? a) 42% b) 43% c) 80% d) 84% 2. What proportion of Australian equities investment options offered through super funds underperformed in 2021-22? a) 18% b) 23% c) 30% d) 35% 3. Among international equities investment options offered through super funds in 2021-22, 83% underperformed. a) True b) False www.financialstandard.com.au 5 September 2022 | Volume 20 Number 17
Profile32
“We had an asset-based fee model, strong investment capabilities which put us in good stead, but the advice business was out of date so during that time we did everything you possibly can to transform an advice business,” he says. Jacobsen spent a decade at Perpetual, also serving as general manager, practice manage ment and general manager, new segments and strategy. He says a big insight was the difference a great leadership team makes. “Despite doing some great work, we didn't have the right people in leadership positions. When Geoff Lloyd came in as chief executive and Mark Smith as an executive, we achieved more in those 18 months than we had done in three years,” he says. “It’s a great lesson; if you don’t have the right people around the table, it's very hard to get the right results.” In 2018 he felt it was time to run a business and a re cruiter put him in front of HUB24 and he was offered the role of manag ing director of grand,Paragem.“Itsoundsbutit Diverger managing director Nathan Jacobsen has steered the ship both figuratively and literally. After a career in the Australian Royal Navy, he has risen through the corporate ranks, leading teams with lessons learnt at sea. Cassandra Baldini writes. Nathan Jacobsen was drawn to the military from a young age, a passion passed down from father to son. “My dad was a senior pilot in the Australian Air Force, and we bounced between his posts in Canberra and England before settling in Queensland,” he explains.
“I was employed as a senior consultant, it’s funny,” he says, shaking his head. “I said I would never end up wearing a suit.” He became a business analyst, earning half
www.financialstandard.com.au 5 September 2022 | Volume 20 Number 17
was a small business with about $3 million in revenue, but it was mine and I had to run it and I had to grow it,” he says. He did just that and, working closely with the HUB24 board, looked for ways to continue the growth.In2021, HUB24 divested Paragem to Eas ton Investments, becoming a substantial share holder in Easton in the process. Easton was then rebranded to Diverger. Following the acquisition, Jacobsen was ap pointed managing director of Diverger and now sits across the business, managing its wealth arm while remaining accountable for growth andInstrategy.linewith that, in June Diverger made moves to acquire Centrepoint Alliance. While the bid was rejected, Jacobsen says Diverger remains in terested in supporting industry consolidation and delivering scale benefits to its adviser network.
“The industry infrastructure is way behind the curve; there is very little machine learning or digital advice solutions that deliver meaning ful impact. It's still, fundamentally, a humandelivered endeavour,” he says. “It’s a cottage industry, so what we're try
“There can be this complaint in the corporate world around people feeling disconnected to purpose. In the military, you know why you’re there. It isn’t to harm, it’s to defend your coun try; an addictive feeling,” he says.
“I only had one ambition; I just wanted to fol low in dad's footsteps.” A career pursuit that sent him back to Can berra, it was there he studied a Bachelor of Sci ence, majoring in mathematics at the Australian Defence Force Academy. In 1992 he joined the Royal Navy and went to sea for a little over eight years. For a shy kid from the Sunshine Coast, the initial culture shock was tough. “The only collared shirt I owned was a polo and the only pants, stonewashed jeans. That was the height of my sophistication,” he laughs. “It’s a very different life and an incredible learning curve; the military gives you a lot of responsibility very quickly.” At the tender age of 21, when most of his peers were enjoying their days at university, Jacobsen was navigating billion-dollar ships through the South China Sea. “I had interactions with Chinese warships, rescuing refugees and dealt with smugglers,” he“Thererecalls. was a time when my patrol boat ap prehended an illegal fishing boat, then left me behind while they disappeared to pursue other fishing boats. I stayed back alone and just waited in the middle of the ocean with a sidearm hop ing not to run into any trouble.” He describes it as an environment of constant change and one that led him to grow up quickly. In time, he qualified as a seaman officer be fore moving up to executive officer, the cap tain's second in command. In the absence of the captain, the officer keeps an acute awareness of location while monitoring risks and the proxim ity of those sharing the open water; a great re sponsibility. However, heading into his late 20s, it was time to set his sights on a new horizon.
“Our vision is to build the scale of our busi ness and invest in the industry’s infrastructure so we can help advisers lower the cost of advice over time,” he says. By bringing institutional scale to smaller firms, the hope is that more consumers will seek financial advice.
Six months in he began working on a particu lar case within the financial advice business where something had gone pear-shaped, providing his first exposure to the world of financial advice. While working on the project and closely with the AMP senior leadership team, he realised he no longer wanted to be a “hired gun”.
“I decided to travel, and on my return I want ed to work in experiential training,” he says. “Unfortunately, I encountered a bit of a prob lem in thinking money didn't matter until I re alised how poorly paid you are in experiential training.”Following that, he spent six months in the Navy Reserve and then tried a few jobs that were “great lessons in what he didn’t want to do.” At the time technology consultant BearingPoint ran a defense program, so he picked up the phone and convinced its partner to give him a job.
Nathan Jacobsen the salary he had in the Navy while doing “rock bottom, basic stuff.” He moved quickly through the ranks and grew to understand hypothesis-based problemsolving.After having some dealings with technology consulting, he finished a Master’s in Business Systems at Monash University and joined AMP as a senior IT consultant. “I set up an internal consulting business and, frankly, moved to financial services because it paid better,” he explains.
Our vision is to build the scale of our business and invest in the overtheadviserssoinfrastructureindustry’swecanhelplowercostofadvicetime.
“I’d always felt at the pointy end of the navy leading the charge and not a support person, so I really didn't want to be the project guy any more, I wanted to reconnect to purpose.”
A chance meeting in the streets of Sydney would steer him in a new direction once again. “I bumped into an old navy friend, [former Centrepoint Alliance chief executive] Angus Benbow and at the time he was Perpetual Pri vate’s head of strategy. He said, ‘You were pretty scary in the navy and I need someone like you’,” JacobsenJacobsenrecalls.joined Perpetual Private as head of business transformation and, four months in, the Global Financial Crisis hit.
MAKING WAVES
