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The wisdom of earnings: Why EAFE’s past holds lessons for its future

Sun, 31 Aug 2025 21:10:42 +0000

Robert Almeida

Knowledge is a process of piling up facts; wisdom is the ability to simplify those facts. Take the old adage about the tomato: Knowledge is knowing it’s a fruit; wisdom is knowing not to put it in a fruit salad. This distinction has never been more apt in a world where the constant and growing flow of information often obscures simple truths.

Consider the recent emphasis by market pundits that the last time the MSCI EAFE Index outperformed the US market was pre-global financial crisis (2008). This piece of knowledge, while accurate, often fuels unhelpful narratives; it’s not particularly relevant on its own.
Outperformance, whether by a region, asset class, industry or a stock, does not die of old age. Knowledge is knowing the extent of performance differentials; wisdom is understanding why and, more importantly, what can change.

The earnings-driven truth

The MSCI EAFE outperformed the S&P 500 from 2000 to 2008 because EAFE companies outearned their US counterparts (Exhibit 1).

Since a stock represents the residual value of a company’s assets and cash flows, EAFE’s superior earnings per share during this period was the source of outperformance versus the S&P 500.

Conversely, earnings are the same reason why EAFE stocks lagged over the past 15 years—weaker earnings (Exhibit 2).

After we exhaust ourselves analyzing index concentration, duration and magnitude versus past periods, the simple takeaway is it’s always about earnings. Index concentration and market cycles are merely symptoms of earnings, not causes.

While the specific conditions of these two vastly different periods in the past (almost) 25 years might seem irrelevant to the current moment, they offer valuable context:

2003–2008: The Global Growth Engine: This period saw the global economy in a robust growth phase, driven by the emergence of China and other developing markets, alongside a burgeoning US housing bubble. This fueled immense demand for capital, labor and commodities, which disproportionately benefited EAFE companies. Their businesses, relative to US companies, have a higher revenue multiplier to GDP, and when juxtaposed against a more fixed cost basis, generate greater profit torque to changes in economic growth. This works in reverse too when growth is slowing. This dynamic is much like how value companies often outearn growth companies during periods of rising growth — because they are more mature businesses that have greater revenue sensitivity to the economy versus those with secular growth characteristics seeking to take share from market incumbents. The economic environment enabled EAFE companies to outearn US companies, and stock prices followed suit.

Post–2008: The Era of Secular Stagnation: Following the 2008 recession, global banks curtailed lending, consumers tightened their belts, developed companies cut expenditures and shifted manufacturing to Asia, and China/emerging markets began a deceleration that combined for one of the weakest business cycles in over a century. This environment benefited companies, predominately US technology firms, less dependent on the overall economy or business cycle. These businesses were adept at taking market share from “melting icebergs and cubes” and evolved into massive oligopolies, monopolies and monopsonies, thriving and aggregating profits even amidst broader economic stagnation.

Outlook: The winds of change for earnings

Looking ahead, we believe that conditions are ripe for another shift.

GDP growth is fundamentally a function of spending and prices. Both are currently higher than during the 2009 to 2020 period and are likely to remain so as demand for tangible fixed investment should be higher versus the 2010s. For example, for years, global supply chains were increasingly prioritized for efficiency and return. However, COVID, a land war in Europe, fighting in the Middle East and, more recently, tariff policies have reprioritized resiliency over cost minimalization. Additional demands for capital stem from the buildout of artificial intelligence, increasing energy demands, national security, defense and more.

At the same time, an era of abundance has ended. Everything from capital, labor and goods needed for production costs more than it did in the post-2008 years.

While economic growth may decelerate due to other factors, the combination of new investment cycles across different sectors, higher input prices and new businesses emerging for market share combines for potential earnings headwinds for US businesses relative to EAFE companies. Together with the valuation discount, we believe this forms a compelling algorithmic case for EAFE outperformance.

Conclusion

The wisdom derived from the knowledge of past cycles points us squarely to earnings as the ultimate driver. As the global economic landscape shifts, so too will the fortunes of different market segments. In our view, investors focused on the underlying fundamentals — with a vast research infrastructure that can help differentiate between the growing avalanche of noise and financially relevant truths — will likely be best positioned to navigate the path ahead.

By Robert Almeida, Portfolio Manager and Global Investment Strategist

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MFS launches Global Contrarian Equity Trust for Australian investors

Wed, 30 Apr 2025 21:05:26 +0000

MFS Investment Management^® (MFS^®) has expanded its equity product offering for Australian wholesale and institutional investors with the launch of the MFS Global Contrarian Equity Trust (Trust), which deploys an actively managed global equity strategy to target asymmetric investment opportunities.

The new Trust follows MFS’ Contrarian Capital global investment strategy, which employs a bottom-up fundamental approach to identify divergences between the price and value of large-cap companies experiencing controversy or in transition as they navigate such events as corporate restructuring, special situations, cyclical or structural adjustments, a temporary impairment of the business model or bad news not reflected in the fundamentals.

The Strategy generally selects between 30 and 60 securities using bottom-up fundamental analysis that is sector and region agnostic and benchmark unconstrained. Each security is screened for value and critically, for change, which is arguably more difficult to measure and requires a dedicated team of global analysts familiar with the businesses and industries involved. With an investment objective of long-term capital appreciation over a full market cycle, it invests in a diversified portfolio of global equity securities of companies located in developed and emerging market countries.

The Trust, available to Australian institutional and wholesale investors, is the latest to roll out locally, and provides exposure to the MFS^®Contrarian Capital Strategy, which was developed in response to demand from Australian investors. MFS based the trust on the popular MFS^® Contrarian Value Strategy, which became restricted to new investment in 2023 due to capacity constraints. The new trust has the same investment philosophy and leaders, co–portfolio managers Anne-Christine (AC) Farstad and Zahid Kassam, but offers a larger-cap investment mandate with substantial capacity.

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Shifting liquidity dynamics a potential US equity headwind

Wed, 23 Apr 2025 21:25:10 +0000

Robert Almeida

In brief

Shrinking liquidity exacerbates volatility and may help identify which equities are the most vulnerable if liquidity continues to tighten.
Since the global financial crisis, liquidity largely flowed into financial assets rather than the real economy.
The post-global financial crisis tailwinds of ample liquidity, globalisation and abnormally low interest rates are becoming headwinds at a time when tariffs may drain liquidity.

When volatility hits financial markets like it has in recent weeks, it’s often accompanied by a spike in demand for cash and a drain in liquidity. For example, while US equity volumes surpassed all-time highs in April, liquidity shrank, exacerbating price dislocations.

While the excessive gap between volume and liquidity may have been anomalous, it may help investors discern which equities are the most vulnerable if liquidity tightens.

Exhibit 1 illustrates the well-known outperformance of US equities since the global financial crisis. While superior earnings are always the primary performance driver, were there other factors at play?

Back in the early-2010s, deflation concerns were front and centre. Policymakers, particularly in the US, were desperate to prevent a negative feedback loop of falling prices and money velocity. The solution was liquidity creation, but the problem was how. Liquidity can be created in one of two ways, economic growth or borrowing.

With banks and households in austerity-mode and companies outsourcing tangible fixed investment to Asia, growth wasn’t an option. Debt creation through quantitative easing was the path chosen by the United States. The hope was that borrowed funds would drive spending, lift inflation and reignite economic prosperity. Exhibit 2 shows the growth of M2, a broad measure of money supply, for the US and other countries. As you can see, the US wildly outpaced all others. But the growth in money supply failed to produce economic growth because the transfer mechanism of liquidity to the real economy was broken because banks weren’t lending, consumers weren’t spending and companies weren’t investing.

Exhibit 3 is the combination of the earlier graphs, showing market capitalization divided by money supply. Viewed through this lens, the outperformance of US assets is more pronounced, particularly in the wake of COVID-era stimulus. Why might that be?

US Equities are longer duration

Partially because of the dominance of technology companies, we believe US companies have superior growth rates than the rest of the world. This manifests itself in higher terminal value and lower return of cash flows to investors as cash is reinvested in the business rather than distributed to shareholders. In bond parlance, US equities, particularly US growth and technology companies, are longer in duration than mature, lower-growth enterprises.

This matters in the context of market liquidity. While most market participants think about market liquidity as the ability to trade a security around the price quoted, we can also think about it through the lens of the time value of money. An asset’s liquidity beta is a function of market capitalisation compared with its duration. Through this lens, the greater the duration, the less liquid or more sensitive the security is to changes in market liquidity. Exhibit 3 illustrates this, as does underperformance of US equities in the past several weeks.

Why might this matter, looking ahead?

Tariffs reduce liquidity

While the situation remains fluid, I think it’s fair to assume we’ll face more tariffs in the foreseeable future than we did before, regardless of the rate.

Given that the US consumes more than it produces, tariffs are a tax on net importers, meaning companies who import goods to builds things, but also households. This tax, no matter the ultimate level, will pull money out of the real economy and threatens what we believe are elevated but unsustainable profit margins.

Conclusion

Shakespeare wrote in The Tempest: “What’s past is prologue.” While perhaps not exactly, the past can help inform us about the future.

The US runs a historic budget deficit, and the massive amount of liquidity created by US policymakers over the past 15 years has had a direct impact on long duration assets.

It’s always profits and cash flows that drive stock prices. And for much of this century, US companies have benefited the most from the tailwinds of globalization and artificially low interest rates, which resulted in historic levels of profitability. As I have written about extensively, those tailwinds are becoming headwinds. I believe that if liquidity is drained by tariffs, either slowly or quickly, it may also serve as an additional tailwind for further outperformance for non-US equities and for public assets over private ones.

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MFS Global Retirement Survey shows Australians more confident about retiring but expect to save more than planned

Tue, 17 Dec 2024 21:00:24 +0000

The study shows considerable room for improvement in how super funds and pension schemes communicate ESG detail to members.

Overall confidence in being able to retire has significantly risen in Australia, according to the 2024 MFS Global Retirement Survey. However, 75% of superannuation fund members agreed they needed to save more than planned.

More than 700 Australian retirement plan members and, for the first time, over 300 retirees were interviewed as part of the global study spanning similar cohorts in Canada, the United States and the United Kingdom to gauge pre- and post-retirement sentiment.

Australians more confident about retiring, but not at the age they want

One in two Australians contributing to their super said saving enough money for retirement was a major financial concern and was a factor that led one in four to change their retirement investments over the past 12 months.

However, the survey found that the number of Australians who no longer expect to retire significantly dropped, from 40% in 2023 to 28%. This shows a marked improvement in retirement confidence, but only 23% were very sure they’d be able to retire at the age they wanted, down from 26% in 2023.

Looking ahead 12 months, 49% of Australians said managing day-to-day financial obligations was their top concern, far more so than their global peers, which affirms that costs of living in Australia are being felt acutely, heading into 2025.

Retirement expectations and reality gaps

Confidence was higher among retirees drawing down on their super, with 38% very confident that their saved assets would provide sufficient cash flow through retirement. Predictability of payments continued to rank as the most important retirement portfolio priority, in line with global peers, yet the study found that 59% of local retirees spent less in retirement than they did during their working years.

While the Australian Government has recently announced a raft of measures aimed to improve the quality, affordability and access of advice, including within the superannuation segment, initial movements among superannuation funds to provide limited advice appear well received. 55% of all super contributors relied on information supplied by their super funds to make retirement decisions, followed by financial media (31%), a family member (30%) and a financial advisor (29%). Australian Millennials are most likely to turn to their super fund for advice, as well as use financial media. Almost one in five local Gen Xers said they don’t use any resources for financial advice.

Misconceptions passive versus active investing

The study affirmed that 51% of Australian contributing members believe long-term for retirement investing means 10+ years but revealed some stunning misconceptions around risks of passive investing. 65% of Australians agreed that actively managed funds can choose stocks and bonds that may generate better returns than the overall market, but 61% of Australians surveyed said passive funds are less risky than the overall market, and 29% said passive funds usually have better returns than the overall market.

ESG sentiment falls for third consecutive year

73% of Australians were interested in seeing more ESG investments offered in their retirement plans, with most conviction coming from Millennials (78%). 2024, however, marks the third consecutive year of falling overall ESG sentiment. Australia’s Gen Z were only marginally more interested (75%) than their older Gen X peers (71%). Boomers remained least interested (62%).

The study also shows considerable room for improvement in how super funds and pension schemes communicate ESG detail to members. Half of Australian respondents said they didn’t know if their plan was doing an adequate job of considering ESG issues when making investment decisions on their behalf.

Josh Barton, Managing Director and Head of Australia and New Zealand, commented on the findings: ‘It is concerning to see in our survey results how few Australians rely on financial advice to manage their financial affairs. Whilst it is encouraging to see the government trying to address this blind spot and enable more advice to be provided within superannuation, there is clearly much work to do, and clarification needed. Meanwhile, critical understanding gaps are likely to persist, such as those discovered by our survey in relation to the risk and performance misnomers associated with passive investing. While more retirement plans appear to be within reach, advice remains key to achieving it, even more so today given investment markets have become increasingly complex and difficult to navigate.

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To find the bust, you need to find the boom

Sun, 29 Sep 2024 21:35:32 +0000

Robert Almeida

The capital cycle drives booms and busts

Capitalistic economies allocate resources in accordance with utility. The private sector pulls capital from industries with falling societal value and return on capital and allocates it to industries with rising returns and greater utility.

While the capital cycle drives innovation, progress and change, cycles are imperfect as evidenced by the repetition of industry and economic booms and busts. History has shown a tendency to flood high-return projects with capital, creating a boom. At first, supply meets demand, but eventually supply exceeds demand. Upon the broad realization that the industry or project has indeed reached a state of excess, returns on capital collapse and the bust is underway. Market forces often overshoot in the opposite direction until, ultimately, water finds its right level, equilibrium is achieved and returns normalize.

Many forecasts for a US recession in the last year have come up short, giving investors a renewed appetite for risk assets. But whether we’re in for a hard or soft landing, investor emphasis may be misplaced. I would offer that overallocation to industries with excess supply is a far greater risk to investors. Conversely, investments in industries in which supply is structurally constrained and returns on capital are sustainable may offer better outcomes versus trying to time markets based on highly uncertain economic and interest rate predictions.

In that spirit, I focus this edition of Strategist Corner on where the boom was and where the bust may be.

Where was the boom and why?

The business cycle following the 2008 global financial crisis (GFC) was long but weak due to the unwillingness of banks to lend and unwillingness of consumers and businesses to spend. When western enterprises weren’t repurchasing their stock or shifting manufacturing to China, they were allocating resources to software. This manifested in the software industry doubling its share of the S&P 500 market capitalization.

The spend was particularly acute across larger companies where the efficiency gains were the highest. Today for example, companies with more than 10,000 employees have on average 650 software applications. Although it’s hard to observe in aggregate stock prices, software spend has been in decline for the last couple of years. Why?

While companies provide numerous reasons, from economic concerns to budget constraints, in general, they are in a software digestion phase from years of spending. The more acute and potentially chronic factor, however, is wallet share take by artificial intelligence.

Technology is deflationary over time because it removes frictions from society. Replacing an old technology with a new technology allows not only for cost savings but greater and more efficient output, driving its value to society. When most people think of AI, they think of the benefits and positive impact to productivity. That’s true. But what about the revenue streams tethered to the technology AI is replacing? Many of those companies are driving the exhibit above and are facing collapsing returns.

Look in the right places

Investors are following cues from economists and policy makers, whose rear-view oriented models seek to assess future economic activity and interest rate levels. I think they may be looking in the wrong places. Much like generals tend to fight the last war, the next bust won’t come from where the last bust was. It will come from where the boom was.

The boom wasn’t in GDP, the labor market, household spending, etc. The boom was in software. And while that boom was justified by attractive return on capital and efficiencies for enterprises, AI can potentially do more at a fraction of the costs. We expect to see IT budgets shift from software to AI and for the number of software applications to fall. The question isn’t the direction of travel, but only the speed.

While software is saturated with too much competition, AI may not be able to duplicate mission- critical applications. Software and AI will work together, but the excess of sub-scale providers in undifferentiated categories needs to “recess.” Avoiding terminally value challenged companies while owning mission-critical software providers may prove a powerful recipe for outsized performance. That’s why I believe active management will be important after years of dormancy.

By Robert Almeida, Portfolio Manager and Global Investment Strategist

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Investors are seeking the right answers to the wrong questions

Sun, 28 Jul 2024 21:45:59 +0000

Robert Almeida

Key points:

Are investors asking the right questions?
Rate cuts are not a panacea for broken businesses.
What really matters are fundamentals.

Are these the right questions?

Following the inflation ambush in 2022, elevated inflation prints have fallen, as has the volatility of inflation, which has whipsawed investors.

In late April, I wrote about how the then-recent inflation readings were higher than market expectations, which was not a surprise to those who buy groceries or pay utility bills.

A similar pattern has played out in the last few weeks, but this time in the other direction, with direct and indirect inflation figures surprising to the downside. As a result, talk of US Federal Reserve rate cuts has been revived.

I am not dismissing the growing probability the market is assigning to a rate cut in September or the months after. But as the title of this piece suggests, I think investors may be asking the wrong questions. Are “When will the first rate cut be” and “How many times will the Fed cut in 2024” the right questions? Do the answers really matter? In 2028, when you’re digesting a five-year attribution analysis of a portfolio, will the timing of that first rate cut be a factor?

Better questions to consider

Perhaps a more relevant question could be why might the central bank need to loosen monetary policy? More importantly, if prices of goods and services are falling, whose revenue is being negatively impacted? Are their costs falling too? What will this mean for corporate profits compared with what has been discounted in stock prices?

So, while the market is happily applying a higher multiple to risk assets because of a potentially lower discount rate, it’s ignoring what mounting weakness may tell us about company fundamentals, and that’s what matters most to asset values.

Let’s look at what happened during the interest rate cutting cycle that followed the end of the technology boom in the 1990s.

In early 2001, fed funds peaked at 6%. Caught by surprise by a sharp growth slowdown, the Fed cut rates aggressively over the next 18 months to 1%. While the equity market troughed before the Fed’s penultimate cut, as profits had already bottomed and were poised to improve on the back of massive cuts to costs, the S&P 500 index fell almost 40%.

A pushback to this is that valuations aren’t as elevated today as they were then. Which is correct, and why I’m not suggesting we’re facing a drawdown of that magnitude. I’m merely pointing out that central bank interest rate cuts are not a near-term panacea for disappointing operating results. So, while valuations are not at 1990s extremes — which were the highest in US history — analysts’ expectations are for high, single-digit profit growth. Anything that comes in below that will prove disappointing to investors who have alternatives beyond the equity market.

We can also look at what happened during the rate-cutting cycle following the mid-2000s expansion and housing bubble, since stock valuations were not expensive heading into that recession.

As the chart below shows, fed funds peaked at 4.25% in early 2008 and then collapsed to 0% before the year was finished. At the same time, the S&P 500 was nearly cut in half.

What matters

Ever since 2022, inflation and central bank policy has been fresh on everyone’s minds. Or, arguably, even longer, dating back to the days of zero interest rate policy and quantitative easing, which produced a 5,000-year low in borrowing costs.

Recency bias, along with other cognitive biases, can be dangerous. In our brains, the biases can sometimes usurp, or at the least dilute, what is material, which in the case of investing, are fundamentals and future cash flows.

The right answers to the right questions, I think, rhymes with terminal value. What does the company do? How are they managing rising labor costs against falling prices for their goods? While artificial intelligence may bring efficiencies and savings, does it open the door to competitors with fresh entrants coming to market faster with equal or better products? Does AI introduce obsolescence risk to their business? How much debt do they need to roll in the next few years, and at what cost? Is that in equity analysts’ models?

I believe we’re careening toward the point where fundamentals drive valuations rather than discount rates or manoeuvres by policymakers. Central banks cannot fix businesses that are broken.

By Robert Almeida, Portfolio Manager and Global Investment Strategist

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A different paradigm

Tue, 23 Apr 2024 21:40:42 +0000

Robert Almeida

It’s returns (on capital) that matter

The market value of equities, whether public or private, represents a range of assumptions about future returns on capital. When profit forecasts change, market values adjust accordingly. The adjustment can be quick in public markets or slow in private ones, but they’re inevitable.

Looking back at the remarkable period of wealth accumulation enjoyed by investors since the end of the global financial crisis, the catalyst was significant net income growth by companies regardless of region or style. While some materially out earned others, such as US large-cap growth companies, return on capital and stock prices were relatively high and faced minimal interruption.

Leaving aside the COVID-lockdown-stimulus-driven quarters, a global savings glut and falling fixed investment helped drive years of economic stagnation that weighed on corporate revenues. Yet many businesses around the world were still able to generate remarkable return rates thanks in part to falling capital and operating costs.

While that’s how we got here, what matters now is where we’re going. Since 2022, both capital and operating costs have risen. Below we explain why we don’t expect them to revert to prior lows and what that could mean for risk assets.

Two important – and intertwined – factors

In a remarkable feat, the Bank of England has compiled a 5,000-year history of interest rates. In it, we’re told that the year 2021 marked the all-time low for rates. To put that into perspective, for those, like me, born before the early 1980s, our lifetimes comprise a period when interest rates hit both 5,000-year highs and lows.

Three years later, and despite a tight labor market and a quarter-million new jobs being added monthly, market participants continue to discount a loosening of global monetary policy. While that may prove true, and I’m not suggesting otherwise, the more important consideration is what happens to yield curves and long rates down the road.

While overnight and short rates will likely fall before long, too many investors seem to be counting on a collapse in long rates and a resurgence in cheap capital costs. In my view, any reduction in short rates is more likely to result in more positively sloped yield curves than in precipitous declines in long-end borrowing costs. More important, I think borrowing costs, whether for the consumer, enterprises or government entities, are unlikely to revisit all-time lows because aggregate demand is too high, labor too scarce and the need for capital investment too strong.

A question I’m often asked when I share this view is, “In the event of market stress, won’t policymakers want to manipulate yields curves?” Sure. However, wanting to do something and having the ability to do it are two different things, and it was a lot easier to manipulate yield curves when savings were high, spending was low, labor was plentiful (thus possessing little bargaining power), and growth and inflation were weak.

What’s changed?

Today, what’s changed is that household savings are now being spent on food, shelter and energy and companies are spending to shorten supply chains (more on this later) at a time when labor is expensive and in short supply. All this spending is growth- and inflation-accretive. Also, inflation today isn’t only higher but more volatile than in the slow growth, low inflation paradigm, while budget deficits are far larger than in the recent past. This has led to policy constraint being dictated by the bond market, as we saw in the United Kingdom during the LDI (Liability-Driven Investment) crisis 18 months ago. This matters for risk assets because the hurdle rate to generating positive net income has gotten a lot higher.

Another factor is globalisation. Globalisation and just-in-time inventorying were tremendous catalysts for profit growth because warehousing goods is costly. Less inventory on hand means more working capital and higher operating and profit efficiencies. Low-cost manufacturing, particularly in Asia, meant many western conglomerates could slash labor expenses. The outsourcing of manufacturing meant that multinationals could decrease tangible fixed investment. All else equal, when capital intensity declines, profits rise. But when globalization allowed developed market companies to become asset-light businesses, it also ushered in a decade of economic stagnation in the 2010s. Thus, globalization isn’t without risks, and more of those risks have been exposed during the pandemic and the ongoing Russia-Ukraine war and conflicts in the Middle East.

Changing face of globalisation

A prerequisite for just-in-time inventorying and globalization was global peace. Ships got bigger and could hold more containers because the oceans were made safe by post-World War II alliances. Corporations needed to be sure goods would arrive exactly on time, and they were. As that confidence grew, and the benefits of economies of scale accrued, the percentage of the world’s traded goods via the seas more than doubled. At the same time, shipping costs deflated and profits soared.

Shipping is still cheap, but its cost is rising. More concerning, a global pandemic, two hot wars and a cold one have reduced the certainty that a critical part will arrive just in time. Meanwhile, labor arbitrage with Asia has ended because manufacturing in Asia is no longer cheap and hiring people is difficult almost everywhere.

Globalisation isn’t over and neither is just-in-time inventorying. But I’m arguing supply chains will become less stretched, cost more or both.

It’s time to be selective

Societies, like economies and financial markets, are cyclical. Throughout history, tough times have produced tough people. Those tough people, through the adversities they face, create soft times. Soft times create soft people. Those soft people ultimately produce tough times, completing the cycle.

In my view, the policy response to the global financial crisis and the pandemic purposely created a soft- business operating environment that produced high returns for owners of capital. Life, business and investing aren’t easy. Yet investing was recently made easy by the overwhelming policy response.

Conclusion

We believe the primary driver of capital returns over the past several years has been falling costs, not growth.
Costs are no longer falling. They’re inflecting upward while growth isn’t keeping pace.
Risk premia, across stocks and corporate bonds, is relatively low and leaves little room for error.

Portfolio returns will likely become more leveraged to business fundamentals as the aforementioned dynamics play out. We believe securities of companies positioned to successfully navigate the new higher-cost paradigm should comfortably outperform those who aren’t ready.

As the societal, economic and market cycle works to completion, the current, soft business operating environment will change. Adversity will rise but the new paradigm is not likely to allow policymakers to soften the blow this time. And that’s why I think discretion regarding what portfolios you own is advised.

By Robert Almeida, Portfolio Manager and Global Investment Strategist

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MFS Investment Management bolsters Australian institutional sales team

Thu, 22 Feb 2024 20:35:02 +0000

MFS Investment Management has announced the appointment of Negin Khamsi as Relationship Director, Institutional Sales for Australia.

Negin brings 15 years of industry experience in investment management client relations and business development. She joins MFS from Capital Group where she was Director, Financial Intermediaries, having held senior business development and client relations roles over nine years with the firm. Before that, she worked at Deutsche Bank, where she played a key role in building its dbSelect platform across Asia.

Based in Sydney, Negin will be responsible for fostering awareness of MFS’ broad range of fixed income and equity solutions and promoting the adoption of those solutions by institutional investors. She will work alongside Harry Green, who joined MFS in November from Frontier Advisers as a Relationship Director.

While consolidating MFS’ strong equity market position, Harry and Negin will collaborate with local and global relationship management teams, focusing on the firm’s suite of fixed income strategies, lesser-known contrarian value and global REITs, and listed infrastructure strategies. Both will report to Josh Barton, Managing Director and Head Of Australia And New Zealand.

Commenting on Negin’s appointment, Josh said, ‘Negin’s exceptional experience, and her passion for understanding and anticipating client needs, is well aligned with MFS’ client-centric approach and complements our dedicated and diverse team of relationship managers. We’re delighted to have her join us.

‘Australia’s investment sector is delivering robust capital returns that are durable, risk-managed and aligned with desired outcomes and values. This is a complex and challenging task that requires partners who share and demonstrate a sense of stewardship.’

Commenting on her appointment, Negin said, ‘MFS is globally renowned for its deep and long-term relationships with investors. I’m excited to be part of a great team dedicated to supporting Australia’s world-leading institutional investment community.’

MFS has a long track record of working with clients in Australia and New Zealand and services approximately AU$29 billion of client assets. It has AU$919.7 billion of global assets under management as of 31 January 2024.

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Retirement Survey shows inflation has eroded retirement confidence in Australia

Wed, 29 Nov 2023 20:40:07 +0000

Josh Barton

The current inflationary environment has prompted more than half of Australians to rethink their retirement, with potential consequences for Australia’s $3.5 trillion superannuation sector and future workforce, according to the 2023 MFS Global Defined Contribution Survey.

In step with global investors, 59% of Australians surveyed said that inflation had prompted them to change their thinking about retirement in the past 12 months, with 54% opting for a more conservative investment approach. The vast majority (74%), said they would now need to save more than they previously planned, 61% said they would need to work for longer and 40% no longer see themselves as retiring at all.

The effects of inflation were found to have had a greater impact on retirement confidence than the market events of the past three years, including COVID, with 35% citing the latter as among the reasons for no longer believing they will ever retire.

The 2023 MFS Global Retirement Survey, which interviewed 1,000 Australian superannuants as part of a global survey spanning members of retirement plans across Canada, the United Kingdom and the United States, found that only 26% of local respondents were confident they would be able to retire at the time and age of their choosing.

According to the findings of the survey, the age Australians expect to retire remains unchanged, 66 years, with most (68%) envisioning a more gradual transition in which they reduce hours or switch jobs and some (15%) expecting a hard stop as they cease working for a salary.

Australians want in-person advice and online support for retirement saving and planning

Family and friends remain key to the search for advice, cited by 36% of respondents as a source for advisor introductions. Twenty-eight percent turned to their employers to find an advisor.

In terms of preferred advice delivery, 33% of Australians want in-person or video contact with a human advisor. But online tools such as retirement calculators are popular, cited by 27%, and there is increasing interest in online financial publications, videos, and podcasts. Responses show that pure robo-advice is struggling for traction at 5% while 13% are not interested in any form of advice.

Demand for ESG in investments offered within retirement plans has waned but remains high

Australians are still interested in seeing more ESG investments offered in their retirement plans, though demand has waned to 76% from 81% in 2022. ESG demand continues to be inversely correlated with age, with most demand being driven by millennials, a persisting global trend.

Joshua Barton, Managing Director and Head of Australia and New Zealand, commented on the findings: ‘While the loss of retirement confidence in Australia is in line with global peers, it highlights the role that effective advice can play in helping investors meet their retirement objectives. We need to continue to open pathways to advice across the superannuation system, including through superannuation funds and employers and new technologies to support Australia’s sophisticated yet smaller advice market. This is particularly important as the industry readies for superannuation’s historic transition from savings accumulation to income drawdown; we must embrace the regulatory and legislative relief changes geared towards delivering better financial outcomes that can help insulate retirees, current and future, from market cycle stress.’

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MFS Investment Management adds to Australian Institutional Sales Team

Tue, 14 Nov 2023 20:50:50 +0000

Harry Green

MFS Investment Management has announced the appointment of Harry Green as Relationship Director, Institutional Sales for Australia.

Harry will assume the sales and client responsibilities formerly managed by Josh Barton, who became the Head for Australia and New Zealand, effective 1 September 2023.

He will be responsible for developing opportunities to promote MFS’ broad range of fixed income and equity capabilities to major institutional investors in Australia, contributing to the firm’s overall growth in the region.

With over 10 years industry experience, Harry joins from Frontier Advisors, where he served as a Principal Consultant based in Melbourne. Before that he was based in London and spent four years with Lane Clark & Peacock working as a Senior Investment Consultant. Additionally, he held an Investment Analyst role at Willis Towers Watson and was a Financial Planning Adviser with Fisher Investments.

Based in MFS’ Melbourne office, he will report to Josh Barton, and will work closely with him and the wider Australian sales and relationship management team.

Commenting on Harry’s appointment, Josh said, ‘Harry’s extensive knowledge and wealth of experience will be invaluable as we continue to promote our capabilities to institutional clients and consultants in Australia. This is an important hire for us, and I believe he will offer a fresh perspective on our institutional offering to ensure we are meeting the ever-changing needs of our clients’.

‘The team is focused on consolidating on our strong current position with our global equity range, while diversifying into other strategies, such as fixed income which is coming back as an asset class after years of being out of favour with many investors. We are also seeing interest in some of our lesser-known strategies such as contrarian value and global REITs’, he added.

Harry said, ‘I am pleased to join MFS, and I look forward to collaborating with Josh and the team to ensure that we meet our growth ambitions for the region’.

MFS has a long track record of working with clients in Australia and New Zealand and services approximately AUD$29.1 billion of assets across the region as at 31 October 2023. The firm’s assets under management for the same period stand at AUD$829.32 billion.

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