This vintage of recessionary buyouts in private equity will be memorable – but for all the wrong reasons. High interest costs and deal prices are not at the low levels of previous fire-sales, and this vintage is not going to deliver returns that are twice those of more-normal vintages. PHILIPPA YELLAND reports.
Shorten’s Sell – Pitching the new Superannuation Bargain
AFTER SCRAPING HOME IN THE 2010 FEDERAL ELECTION, THE GILLARD GOVERNMENT HAS THE OPPORTUNITY TO UNDER-PROMISE AND OVER-DELIVER IN PUBLIC POLICY, SAYS BILL SHORTEN, the former unionist and new Minister for Financial Services. And one of the key policy platforms it aims to reform is superannuation. Speaking with industry executives in an exclusive roundtable convened by Investment Magazine and sponsored by Aberdeen Asset Management, Shorten charted his plan to rally support in the push for a 12 per cent superannuation guarantee, remove conflicted remuneration structures from the industry and restore consumer confidence. SIMON MUMME reports. Shorten's Sell – Pitching the new Superannuation Bargain
AFTER SCRAPING HOME IN THE 2010 FEDERAL ELECTION, THE GILLARD GOVERNMENT HAS THE OPPORTUNITY TO UNDER-PROMISE AND OVER-DELIVER IN PUBLIC POLICY, SAYS BILL SHORTEN, the former unionist and new Minister for Financial Services. And one of the key policy platforms it aims to reform is superannuation. Speaking with industry executives in an exclusive roundtable convened by Investment Magazine and sponsored by Aberdeen Asset Management, Shorten charted his plan to rally support in the push for a 12 per cent superannuation guarantee, remove conflicted remuneration structures from the industry and restore consumer confidence. SIMON MUMME reports. Benchmarks are not asset allocation tools
Standard cap-weighted benchmarks have taken a caning recently. There’s no real renewal of interest in absolute returns funds, for several reasons, but there’s certainly more interest in looking at new ways to measure the performance of various parts of a portfolio. The main target in this benchmark beating is the MSCI All Countries World Index (ACWI), along with the more popular MSCI World Index. But even though new indexes, which reflect other, more fundamental values, are being widely discussed they have not really taken off anywhere as yet. The big problem for the world indexes is not so much that they are backward-looking, which we have always known and most funds attempt to counter with rebalancing and tactical or medium-term asset allocation adjustments, but rather because they do not actually reflect the real world.
Keep watch for 2011’s tectonic shifts
In one year, the superannuation system will be structurally different. There are imminent forces of change at play. The Cooper Review has pushed for better administration and a universal low-cost default fund, while financial services Minister Bill Shorten is campaigning to upsize the rate of super contributions to 12 per cent. Shorten has backed Cooper’s SuperStream and MySuper proposals, and after making his formal response to the review before the close of 2010, he will undertake broad consultation with industry stakeholders – “because a good idea is most vulnerable at the implementation stage,” he says – in the new year. Facing up to parity curveballs
Four fundamental drivers are pushing investors, but the parity curve-ball is skewing macro-trends, according to a major investor. At present, it is extraordinarily difficult to predict macro-trends, said Fidelity Investment Management’s portfolio manager, Kate Howitt. “Fidelity is focussing on individual companies,” she said, and “we’re nervous of buying because of parity.” That said, Howitt identified four drivers for investors: a buoyant China; QE2 liquidity; small is beautiful; and the re-emergence of M&A. Due to a buoyant China, “miners are back, particularly the small miners,” she said.
Australia gets a new taste of quirky China market
Hong Kong-based hedge fund manager Marco Polo Pure Asset Management, which specialises in the China ‘A’ shares market, has appointed an Australian third-party marketing firm to make its offering available to super funds. The marketing firm, ASF Balmoral, was new to the industry, being part of a Perth-based listed company with a history in resources and China-Australia trade. Sally Humphris, the investment director, heads up the funds management side of the business. Marco Polo, which was launched in 2003, was a QFII (the quota afforded foreign investors for China ‘A’ shares) specialist with a long-biased strategy that could go up to about 70-80 per cent short and 30 per cent cash in extreme conditions.
Expanding the ESG universe
Following its acquisition of RiskMetrics, MSCI has begun expanding its sustainability research to emerging markets. But as it gains more experience in the sector, it has begun to look for more disclosure not only from companies but their institutional investors too. MSCI has begun extending its environmental, social and governance (ESG) research into emerging markets companies to enable investors benchmarked to global indexes – such as the MSCI All-Country World Index – to better incorporate ESG risks in their portfolios, said Remy Briand, global head of index and ESG research. But as the company focused on unearthing market-sensitive ESG information from companies, Briand urged asset owners who had committed to sustainable investing to dramatically improve their reporting on their ESG programs.
Think global for Aussie resources
Australian fiduciary investors are well-acquainted with the resources sector. They have to be. But Duncan Goodwin, a resources specialist based in Edinburgh, believes he can make it a bit more interesting for them. Goodwin is the director of global resources for Martin Currie Investment Management, which has managed a global resources long/short fund since 2003 and a long-only version since 2006. He is a strong believer in looking at the sector from a global rather than regional perspective. “We believe that margins play out globally,” he said. “We think it’s the right thing to be diversified through the various sub-sectors we look at.
Divide and conquer: ipac’s bond revolution
The $13 billion multi-manager ipac has divided its $2.8 billion fixed income portfolio into six sources of risk, in an attempt to assert more control over them, and has signed four new mandates in the process. In the restructure, ipac moved to disaggregate the various elements of credit risk – real rate, term, credit, inflation, currency and liquidity risks – and seek exposure to these factors discretely in attempts to meet the return objectives of its diversified portfolios. Jeff Rogers, CIO at ipac, said the overhaul should enable the multi-manager to “take more ownership of the strategic positioning” of the portfolio.
State Street tackles correlations of the unusual
State Street Global Markets has developed a series of “turbulence” indexes to measure volatility and the unusualness of returns. Will Kinlaw, managing director of portfolio and risk management group at State Street Global Markets in Cambridge, said the indexes were risk management tools that can be used by funds managers in all asset classes and by pension funds at the total portfolio level for stress testing. He said turbulence was a statistical measure of unusualness – the extreme relative to investors’ expectations – or the correlation of the unusual.
