International investing: Your guide to emerging markets and the new world economy by netwealth

Trend Hunter Series

International investing: Your guide to emerging markets and the new world economy Emerging markets have been growing rapidly in recent years, transforming from the producers of goods for developed countries to large economies with burgeoning middle-class consumers. In this session, Zenith, InvestSense and Oreana Portfolio Advisory Service explore some opportunities they are seeing in developing countries, and why international investing is not just the US.

1st September 2021 This document is for general use. Modification of content is prohibited unless you have Netwealth’s express prior written consent.

Before we get started

The views expressed in this presentation are those of the author and presenter and do not necessarily reflect those of Netwealth Investments Limited’s. It is a general summary only. It is not advice nor an endorsement of any product or service. Netwealth Investments Limited (Netwealth) (ABN 85 090 569 109, AFS Licence No. 230975) is a provider of investment products and services and information contained in this presentation is of a general nature which does not take into account yours or your client’s individual objectives, financial situation or needs. Any person considering a financial product or service from Netwealth (or its related parties) should obtain the relevant disclosure document at www.netwealth.com.au and consider consulting a financial adviser before making a decision and before deciding whether to acquire, dispose of, or to continue to hold, an investment in any Netwealth (including its related parties) product. Whilst reasonable care has been taken in the preparation of this presentation using sources believed to be reliable and accurate, to the maximum extent permitted by law, Netwealth and its related parties, employees and directors are not responsible for, and will not accept liability in connection with any loss or damage suffered by any person arising from reliance on this information. This presentation is for general use. Modification of content is prohibited unless you have Netwealth’s express prior written consent.

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Housekeeping

1 CPD point available • Must have attended for >40 minutes • CPD details will be included in the postwebinar email

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This webinar is being recorded • Slides will be sent to you after the webinar via email

Enter your questions in the questions of webinar toolbar • We will get to them at the end of the webinar

Showcasing managed accounts

70 retail managed accounts

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300+ private label models

45 investment managers

Almost $10billion FUM

Why managed accounts? More than four in 10 (42.5%) advice firms use managed accounts today. Source: AdviceTech 2021

Professionally managed

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Investment customisation

Investment Transparency

Tax optimisation

Improved business efficiency

Meet today’s Trend Hunters

Steven Tang

Head of Consulting

Zenith Investment Partners

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Isaac Poole

Jonathan Tolub

Oreana Portfolio Advisory Service

InvestSense

CIO

Director and Investment Committee Member

Zenith Investment Partners Steven Tang

Head of Consulting

Zenith Investment Partners

Chart Title

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Oreana Portfolio Advisory Service Isaac Poole CIO

Oreana Portfolio Advisory Service

Emerging markets and the new world economy. Dr. Isaac Poole, CIMA® September 2021

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Introducing Oreana Portfolio Advisory Services

Our Medium-Term Global Outlook

5 themes for 5 years – with a focus on Asia.

Strategic themes for the medium-term Why should I consider Asian debt? 1) Asian yields trade at wide spreads above developed market bonds, relative to history. 2) We see strong fundamentals where accommodative fiscal and monetary policy will drive an economic recovery. 3) Default rates should be at low levels with the improving economic environment and domestic consumption boosted by reopening in 2022.

Strategic themes for the medium-term How can I gain access to the growth of China? 1) Make China exposure a conscious decision, not an unintended omission.

2) Use active management where possible.

Strategic themes for the medium-term Why Asia for sustainability? 1) ESG is not just a western phenomenon. 2) Asia’s focus is driven by domestic policy. 3) International investors are adding pressure. 4) Sustainable practices are a potential source of alpha.

Rich opportunities for active management November 2019: Chinese equites overvalued

June 2020: Chinese equites offer significant value

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Our dynamic asset allocation process looks out over 5-years to identify opportunities to add value. Our process has identified periods of over-valuation and extreme undervaluation. 25

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Access to our best ideas on Netwealth Our range of 15 SMAs, across three separate series, are available on Netwealth. Active Alpha: Multi-asset, multi-manager portfolios using our SAA, DAA and manager research capabilities, including a range of alternatives to increase diversification. Active Beta Plus: A traditional core-satellite approach blending our best ideas in a fee-constrained portfolio. Active Beta: Predominately index-based portfolios, with our SAA and DAA processes driving performance. Extremely low cost and suitable for a range of clients.

Tailored consulting The Portfolio Advisory Service has its roots in institutional asset consulting and portfolio management. We are working with a range of clients to provide outsourced CIO services, including: • • • • •

Bespoke portfolios Private label managed accounts Governance support Manager research and APL management Economic and market research

InvestSense Jonathan Tolub Director and Investment Committee Member InvestSense

This document is for general use. Modification of content is prohibited unless you have Netwealth’s express prior written consent.

International investing: Your guide to emerging markets and the new world economy September 1st, 2021

The case for EM: the Valuation argument

Methodology: Gordon Growth Model

Equities

Dividend Yield

Likely Growth

+/-

Cheap or expensive

Proof of concept: US

+ Dividend Yield

1.4%

+ Estimated Growth

5.0%

+/- Valuation

-7.4%

Total Implied Return

-1.0%

EM expected return + Dividend Yield

2.0%

+ Estimated Growth

5.0%

+/- Valuation

-0.6%

Total Implied Return

6.4%

Is that attractive relative to other markets?

How does it compare to its own history?

A word on current events

• China needs to catch-up on regulations: • consumer protection • anti-trust • Short-term negative for earnings, long-term positive

• CCP’s hold on power rests on content citizens • China doesn’t prioritise shareholders • especially foreign ones…

• Demographics: • Remove disincentives to having more children

Conclusion • Ignore short-term market noise

• Or entrust an active manager to shift through it?

• EM is more attractive than most other equity markets • EM is not expensive relative to its own history EM offers one of the most compelling long-term investment opportunity available today

Contact Jonathan Tolub jtolub@investsense.com.au

InvestSense Pty Ltd Level 24, Three International Towers 300 Barangaroo Avenue Sydney, NSW 2000 www.investsense.com.au

© 2021. This publication is subject to copyright of InvestSense Pty Ltd. Except for the temporary copy held in a computer’s cache and a single permanent copy for your personal reference or other than in accordance with the provisions of the Copyright Act, no part of this publication may, in any form or by any means (electronic, mechanical, micro-copying, photocopying, recording or otherwise), be reproduced, stored or transmitted without the prior written permission of InvestSense Pty Ltd. This document has been prepared by InvestSense Pty Ltd ABN 31 601 876 528 Authorised Representative of Sentry Wealth Pty Ltd AFSL 408 800. The information contained in this report is obtained from various sources deemed to be reliable. No representation or warranty is made concerning the accuracy of any data contained in this document and should not be relied upon as such. To the extent permitted by law, no liability is accepted for any loss or damage as a result of any reliance on this information. This presentation provides general information only and has been prepared without taking account the objectives, financial situation or needs of individuals. Before making an investment decision, investors should consider the appropriateness of this information, having regard to their own objectives, financial situation or needs or consult a professional adviser. This document is for Financial Adviser use only. Past performance information given in this presentation is given for illustrative purposes only and should not be relied upon as (and is not) an indication of future performance.

Questions and answers

Thank you Trend Hunters Series – Coming up • Thu 2nd Sep at 1pm - How to build sustainable investment portfolios • Fri 3rd Aug at 1pm - How green innovation is changing the world for the better, and some investment options • Thu 9th Sep at 1pm - Making an impact: The breakdown of impact investing and why you don't need to sacrifice returns

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