Given the roaring Australian dollar (A$), institutional investors should be buying good-value companies in the US, UK and Europe while they can and giving the so-called PIGS countries – Portugal, Ireland, Greece and Spain – a wide berth, said Wingate Asset Management’s CIO, Chad Padowitz. But, at the same time, the A$ was in a precarious place, he warned. “It has no enemies, and when someone has no enemies, that itself is the enemy. The A$ is loved by everyone, but they’re fairweather friends. They’re not here for the long-term story. “It’s the Dutch-tulip disease – the longer [the A$] stays up, the worse the crash will be,” Padowitz said.
Equity managers split on emerging markets tactics
Accessing emerging market themes through MSCI World stocks was a “blunt instrument” and unjustified given the improvements in the developing world’s corporate governance and sovereign risk, according to Martin Currie CEO Willie Watt. But Jeremy Podger, executive director of global equities at Threadneedle, argued that developed world companies which source much of their revenue from emerging markets provided investors with a cheaper way of benefiting from fast-growing markets such as China, India and Indonesia. The Edinburgh-based Martin Currie is only just bedding down a global emerging markets capability, which Watt admitted some investors were surprised to hear, given the firm’s well-known Chinese, Japanese, Asia ex-Japan and global equity teams.
Access consulting chief jumps to client
Access Capital Advisors (Access CA) appointed a new head of asset consulting after the incumbent left the business to take a senior investment strategist role with major client Cbus. Tim Ridley will depart next week after three years with Access CA, taking the senior role in Trish Donohue’s investment team at Cbus, the $13 billion industry fund, which holds a direct infrastructure mandate with the deal-making side of the Access CA business. The new head of asset consulting will be Ross Blakers, who had spent four years at Access CA after joining from the Australian Office of Financial Management, where he focused on credit and interest rate risk management, Alexander Austin, CEO of Access CA, said.
Sunsuper parks upsized EM allocation in ETFs
The $16 billion Sunsuper has allocated an additional $200 million to emerging market equities, but is achieving the exposure through exchange-traded funds (ETFs) selected by its transition manager as it investigates whether the approaches of any active managers “make sense” in the fast-growing markets, according to chief investment officer David Hartley. Combined with its existing allocation to AMP Future Directions’ multi-manager emerging markets vehicle, the $200 million boost would bring the emerging markets component of Sunsuper’s offshore equity exposure to approximately 20 per cent, Hartley said.
Keep friends close, but PPP consortiums closer
The major risk for equity investors in greenfield infrastructure is not their consortium’s ability to accurately forecast the patronage of assets, such as toll roads, but dealing with the conflicted interests within bidding parties themselves. Investors became exposed to “agency risk” as they engaged with investment banks and construction companies to develop bids to build public-private partnership (PPP) assets, Richard Hoskins, head of unlisted infrastructure at Hastings Funds Management, said. Since builders were incentivised to win the construction contract, and investment banks to earn fees on the transaction, they were driven by the prospects of more immediate payoffs than investors, which earn fees on committed capital over many years. “Australia is a builder-led market.
Funds face the perils of parity
Fiduciary investors claim to have learned their lessons from the Australian dollar’s freefall during the second half of 2008, and are prepared for the possibility of a dramatic retreat from parity with the US$. The chief investment officer of the $30 billion AustralianSuper, Mark Delaney, said the fund’s policy for some time had been to hold a 17 per cent foreign currency exposure within its default balanced fund. “We always review that number, but we’ve yet to see any reason to change it,” he said. “Hitting that $1 US mark, it’s obviously a high-profile figure but in practice it’s just the continuation of a long-term trend of US dollar decline.”
Sophie’s choice: East or West, has the die been cast?
The Economist newspaper, as the magazine likes to refer to itself, ran an online debate mid-August on the China model of communist capitalism. The starting argument ran: “The House believes China offers a better development model than the West.” The results were surprising, I thought, given that the debate took place in English rather than Mandarin or Cantonese, and given the demographics of the newspaper’s (there you go) readership. A total of 42 per cent voted in the affirmative. China has its problems. A lot of them seem insurmountable. However, the China Miracle is indeed a miracle and ‘insurmountable’ is probably not a word that should be used lightly with respect to China. Admittedly I’m only three weeks into a three-month stint in China. I’m here with my 22-yearold son who thinks of himself as an up-and-coming international DJ. I think of him as unemployed. My wife and daughter are safely ensconced in leafy Queens Park, Sydney.
SuperStream can modernise inflows
The SuperStream concept has the potential to save billions of dollars for fund members and bring superannuation payment processes up to speed with the electronic systems used by banks. This would also make paying contributions a hasslefree task for employers. The industry and government should waste no time in exploiting this opportunity, writes John Brogden, CEO of the FSC.
What lies beneath hedgies’ headline returns
The Australian hedge fund industry returned an average -1.2 per cent in the six months to June 30, 2010. But this headline figure masks the broad diversity in returns achieved by various managers, which has caught the attention of the market regulator.
CalPERS sharpens company engagement
The $US206 billion CalPERS will review the methodology of its investee company ‘focus list’ in the coming months as the latest study by Wilshire Associates, its asset consultant, shows the turnarounds from companies have generated an average return of 32.5 per cent in the past 23 years. The Wilshire review looked at the companies’ performance in the five-year period before and after CalPERS’ attention and found they retuned 12.7 per cent above their benchmark for the five years after their “initiative date”, or 2.4 per cent on an annualised basis, compared with 83.3 per cent below benchmark for the five years before CalPERS focus, or -30.1 per cent annualised.
AUSCOAL mines members’ data with DST
AUSCOAL Super has gone live with the Australian-developed DST Global Solutions Bluedoor platform for administration of its 65,000 member accounts. The fund, with $5.2 billion in funds under management from workers in the country’s coal industries, aims to save between 20 to 40 per cent of its administration costs and extend its member services through the Bluedoor solution. DST won the contract ahead of four competitors in a yearlong review because AUSCOAL was convinced that the software vendor understood its aims in administration, says Bruce Watson, CEO of AUSCOAL.
