The first product Certitude will bring to market is the Columbia Management Credit Fund (‘the Fund’) which has been seeded by a prominent family office. 
 
Columbia Management is one of the largest dedicated asset managers in the US and actively manages approximately US$341 billion in assets, including US$167 billion in global fixed income. Columbia Management is a wholly owned subsidiary of Ameriprise Financial, a leading US based firm with $708 billion in assets under management.
 
Certitude, a leading provider of global investment manager skill in Australia, will provide access to the Fund, to the local retail market including; research houses, platforms, dealer groups, financial advisers, family offices and multi-managers. 
 
A variation of the fund was previously only available to US investors. Managed by Tom Murphy, Senior Portfolio Manager, Head of Investment Grade Credit at Columbia Management, since 2002, the Columbia US Credit Fund has consistently outperformed its benchmark over the past 4 years, with a return of 10.32 per cent for 2012.  
 
The timing of the Fund launch complements the shift of Australian and New Zealand investors who are demanding greater international exposure in their portfolios. 
 
“We continue to see an increase in interest for global investment solutions throughout the region. Australian and New Zealand investors are beginning to understand that investing onshore only provides them with 2 per cent of the entire investment opportunities and it is time to go global. There are great opportunities out there and the Columbia Management Credit Fund has already proved this by sparking great interest from Australian Investors,” said Craig Mowll, CEO of Certitude Global Investments. 
 
Mowll continued: “Columbia has a great reputation and is a leading long term investment manager in the US and we believe that this will transfer well here. We believe the current market provides an opportune time to bring the Columbia Management Credit Fund to Australian retail and wholesale investors.” 
 
Certitude aims to identify the best active investment managers in the world and make them available to Australian investors. 
 
Tom Murphy, Head of Investment Grade Credit, Columbia Management said:
 
“Certitude represents some of the world’s leading investment managers and we are happy to join this partnership with the launch of the Columbia Management Credit Fund. Research shows us that Australian and New Zealand investors are looking for credit. Our in-depth knowledge of credit securities combined with our extensive experience in identifying investment opportunities for our clients globally continues to provide us with understanding around how to support retail investors.” 
 
“The Columbia Credit Fund provides access to a diverse portfolio of actively managed credit securities issued by mostly investment grade global corporates. We seek to deliver repeatable strong performance, with the underlying strategy delivering consistent results since inception.”

The post Certitude announces new fund to meet growing demand for credit appeared first on AdviserVoice.

• The average credit card balance is up just 0.2 per cent on a year ago. In smoothed terms, (rolling 12-month average) the average credit card balance is up just 0.5 per cent on a year ago – the slowest growth in 32 months.
• In smoothed terms (12-month average) purchases made with credit cards were up 7.0 per cent on a year ago – the fastest rate in 6½ years. Purchases made with credit cards were up by 15.5 per cent on a year ago.
• The number of transactions at ATMs in July was down by 3.6 per cent on a year ago. But cash-out only debit card transactions at retailers were up a record 32.7 per cent on a year ago.

What does it all mean?

• Aussie consumers pat yourselves on the back – you’ve mastered the plastic fantastic. People are using their credit and debit cards as much as they ever did, but smartly. Aussies are using their credit cards, but paying off the debt by the due date. And we are also smarter with our use of debit cards. Rather than getting cash out at the ATM, we are taking cash out when we go shopping for other things. Withdrawals at ATM are lower than a year ago while cash-out only debit card transactions are up almost 33 per cent on a year ago.
• Certainly if we are applying for a new card, it is a debit card, not credit card. Credit card accounts are up around 1.0 per cent on a year ago while debit card accounts rose 2.0 per cent just in July. Debit card accounts are growing at a 6.0 per cent annual rate. There are now 35 million debit card accounts in Australia and 15 million credit card accounts.
• Aussies are still using their cards. In fact purchases made with credit cards are growing at the fastest rate in 6½ years. Still, debit card transactions are still growing at more than double this rate.
• There is no sign of consumer conservatism coming to an end. And that is good news for consumers, retailers and the Reserve Bank. Living within your means is commonplace nowadays rather than the exception.

What do the figures show?

• Figures released from the Reserve Bank show that the average credit card balance fell by $69.00 (2.0 per cent) to $3,299.10 in July. It was the biggest fall in credit card debt for a July month in 18 years of records. The average credit card balance is up just 0.2 per cent on a year earlier.
• In smoothed terms (12-month average) the average credit card balance is up 0.5 per cent on a year ago – the slowest growth in 32 months and just above the slowest growth on record.
• The number of credit card accounts rose by just 1.1 per cent over the year to July to 15.063 million. The number of debit cards rose 2.0 per cent in just July to 35.2 million and were up 6.1 per cent on a year ago.
  Of credit cards attracting interest charges, the average outstanding balance rose by $6.30 to $2,441.30. The average balance accruing interest is up 1.0 per cent on a year ago.
• In smoothed terms (12-month average) the average credit card balance accruing interest is up 0.5 per cent on a year ago – the slowest growth on record.
• The average credit card limit fell by $4.10 to $9,180.60 in July. The average credit card limit rose by just 1.0 per cent in the year to July.
• The growth rate in the number of credit card cash advances was up 7.7 per cent in July after being down 7.3 per cent in June (value, up 2.1 per cent after being down 3.6 per cent in July). In smoothed terms, credit card advances are down 5.1 per cent on a year ago and have consistently fallen in the past five years.
• In smoothed terms, purchases made with credit cards were up 7.0 per cent on a year ago in July, the highest growth rate in 6½ years. Purchases made with debit cards were up 16.6 per cent on a year ago (in smoothed terms up 16.5 per cent).
• Cash-out only transactions with debit cards were up 32.7 per cent on a year earlier in July – the fastest rate on record.

What are the implications for interest rates and investors?
The Reserve Bank can become more confident about cutting rates in the knowledge it won’t lead to a spending boom.

The attitude of Aussie consumers has changed. CommSec is still factoring in the possibility of a rate cut by end year.
Retailers need not fear the new Aussie consumer. Provided prices are competitive, goods are high quality and there is a range of payment options, consumers will spend locally rather than on-line. But consumers will shop around for the best deal.

The post Biggest fall in credit card debt in 18 years appeared first on AdviserVoice.

Greg Michel, head of fixed income at INGIM said the global appetite for Australian bonds is likely to continue with investors drawn to current yields of 5% to 6%, outstripping available yields available from global alternatives.

“The Australian economy has proven to be resilient to the effects of the GFC and continues to expand at a robust pace. The bond market has been in a bear market phase since early 2009 and bond yields are now close to long term average levels,” he said.

Global bonds are a different story, and INGIM expects flat to negative returns in 2011.

While the major European economies are expanding strongly, aided largely by a weak currency and accommodative monetary policy, the peripheral Euro markets continue to be held down by the large levels of sovereign debt and associated funding challenges.

“On balance we believe the combination of improving economic growth and high sovereign debt levels will result in Euro bond yields continuing to head higher in 2011,” said Mr Michel.

Credit best performing sub-sector

Turning to fixed income sub-sectors, INGIM said credit is expected to be the best performing assuming the default cycle pans out as expected.  While underlying interest rates will rise, continued credit spread contraction should see credit perform in a relative sense.

“The rally we have seen in credit markets over the past two years has been strong, supported by improving fundamentals and monetary and fiscal stimulus in the economy.  That being said, there is a sense the rally has overshot the fair value mark and there are few catalysts to drive spreads tighter,” INGIM’s head of credit research, Scott Rundell said.

For issuers, Mr Rundell said offshore markets continue to be more competitive than the Australian bond market with some suggesting several large players are demanding unpalatable spread levels.

“It’s relatively easy for investment grade credit to issue long dated loans or bonds into the US market.  New issuance is likely to be low and we expect few first time local issuers in Australia,” he said.

Global government bond yields on rise

Looking to Australian government bonds, INGIM is expecting limited further tightening in monetary policy in 2011 and now expects government bond yields will remain at or near current levels for the rest of the calendar year. Demand for local government bonds will continue to be dominated by offshore investors.

Despite recent geo-political tensions in the Middle East and North Africa, global government bond yields are expected to continue to rise over the medium term.  US government bonds yields are also expected to continue their upward rise as the market prices in the recovery.

“We’re now seeing ongoing evidence of a broad based economic recovery in the US and government bond yields are set to continue to rise through 2011 as the global economic recovery gathers pace,” said Mr Michel.

World issues cause headwinds

Meanwhile European sovereign debt challenges will continue to cause headwinds for fixed income. In particular, forced losses (or ‘haircuts’) on Irish senior bank debt could create contagion risk to other EU banks, causing the cost of bank funding to spike.

“We also advise monitoring changing bank regulatory regimes and structures as they will impact capital flows and the cost of credit in general,” Mr Rundell said.

Other world factors to watch include Chinese growth and demand for raw materials and the impact of recent events in the Middle-East and North Africa on oil prices.

“The management of many global companies may look to appease shareholders who have experienced negligible growth with capital initiatives aimed at increasing their returns. This could also be a negative credit event,” Mr Rundell said.

The post Credit shines and bond yields to head upwards, says INGIM appeared first on AdviserVoice.

• Private sector credit rose by 0.3 per cent in November to stand 3.6 per cent higher than a year ago.
• Housing lending to owner-occupiers stands 7.3 per cent higher than a year ago – the weakest reading in records going back 20 years (since 1990).
• Business credit fell for the fifth straight month, easing 0.2 per cent. Business credit growth stands 2.2 per cent lower than a year ago and has been consistently falling for 17 months.

What does it all mean?

• In 20 years of records, lending to home owners has never grown at a slower pace. It is a remarkable statistic, highlighting the impact that rate hikes have had over 2010. The Reserve Bank was determined to lift rates to “normal” levels but it has come at a cost. Not only have home prices weakened over 2010 but so has construction activity, pointing to weaker times ahead for builders, tradespeople and real estate agents alike.
• Overall the modest uptick in overall lending is encouraging, particularly the pickup in consumer loans. But the old adage of ‘one swallow does not a summer make’ is clearly appropriate. Lending will need to pick up further in coming months to get retailers and other consumer-focussed businesses more excited about the road ahead.
• Businesses are still cutting debt at a faster rate than new loans are being taken out. Overall this is a good reason to remain cautious on the outlook for the economy.

What do the figures show?

Private sector credit

• Private sector credit (lending) rose by 0.3 per cent in November after edging just 0.1 per cent higher in each of the previous three months. Credit growth is up 3.6 per cent on a year ago.
• Housing credit grew by 0.5 per cent with both lending to owner-occupiers and lending to investors up 0.5 per cent. Housing credit is up 7.5 per cent on a year ago – the weakest annual growth in 15 months. Owner occupier housing credit is up 7.3 per cent on a year ago – slowest pace in records going back 20 years. Investor housing lending was up 8.0 per cent on a year ago, down from 8.1 per cent in October.
• Personal credit rose by 0.5 per cent in November after rising by 0.2 per cent in October. Personal credit was up 2.4 per cent over the year – still below the rate of inflation. Business credit fell for the fifth straight month in November, easing by 0.2 per cent. Business credit is down 2.2 per cent on a year ago and has been consistently contracting for the past 17 months.

What is the importance of the economic data?

• Private sector credit figures are released by the Reserve Bank on the last working day of the month. Credit is separated into three categories – housing, other personal and business. Private sector credit is effectively the amount of loans outstanding in the economy. If growth in lending is strong then it suggests that credit from financial institutions is freely available, underlying demand for assets such as cars and houses is firm and that the price of credit (interest rates) is attractive.

What are the implications for interest rates and investors?

• There are glimmers of hope for consumer-focussed businesses in the latest credit data. On balance consumers seem to be taking on a bit more debt, albeit very cautiously. The runs aren’t on the board but it is a trend worth watching.
• The softness in housing lending and home prices gives the Reserve Bank more reason to stay on the interest rate sidelines. We argued that the Bank was slightly too aggressive in lifting rates in 2010 and that is borne out by the weakness in recent economic data.
• Not even in the past recession was lending to home owners this weak – it clearly shows a re-assessment by young Aussies about whether to buy or rent.

The post Slowest housing lending growth on record appeared first on AdviserVoice.