“The GVI team has recently experienced some staff turnover, although the manager has been proactive in its recruitment efforts. Stephen Arnold, a senior analyst and equity holder is the most recent departure. New hires are Grant Cullens in a senior role and two junior equity analysts. Mr. Cullen’s appointment helps to diversify the portfolio decision-making process while enhancing the team’s macroeconomic considerations,” said S&P Fund Services analyst John Huynh.

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The arrangement will outsource Qantas Super’s FX trades for active global equities and alternatives to RIS’ global trading desk for efficient execution and settlement. RIS will manage operational risk and provide Qantas Super with comprehensive performance reporting tools.

Qantas Super’s Chief Investment Officer, Andrew Spence, said the agreement demonstrates Qantas Super’s commitment to enhancing member returns while adhering to strict FX governance processes.

“Implementation efficiency is a key focus for Qantas Super as we strive to deliver the best risk-adjusted returns to our members. We have undertaken extensive due diligence to quantify the costs associated with FX trade execution and to find a solution that delivers enhanced transparency and cost efficiency. Qantas Super believes RIS will be an ideal implementation provider given their depth of resources, expertise in agency FX and commitment to transparency around FX trading costs,” Mr. Spence said.

Ian Battye, Managing Director of Russell Implementation Services, said the costs of FX trading had been under the radar for too long. Russell’s analysis* of 40,000 FX trades shows the cost of FX transactions can be up to nine times higher than either investors or managers expect.

“Our research shows that many funds are unaware FX transactions can be so costly, and investors can’t assume FX trades are being executed efficiently by their investment manager. In Australia, we see Qantas Super as a leader in this space for first monitoring and then taking definitive action for a long-term solution to stop performance drag on members’ returns due to FX leakage. I’m glad Qantas Super is joining our other global agency FX clients in taking action to achieve best execution and enhanced transparency in FX markets,” Mr. Battye said.

Russell’s agency FX model has been operating since 2003 and is designed to cut FX transaction costs through a process that is a cost effective alternative to traditional FX execution services. The program has surpassed A$68 million in total savings on behalf of the Russell global equities funds as well as other institutional clients.

“The savings we have made across Russell Investments’ funds underscore that we practice what we preach. Implementing an agency FX program provides investors with a quick, clear and easy solution to the challenges they’re now identifying in the FX marketplace. Not only can this save them time and deliver lower costs, but it can also demonstrate their commitment to industry best practice,” Mr. Battye concluded.

Click to request a copy of the research “Are your FX fees too high?” .

*Russell analysed 40,000 FX trades executed by investment managers with custodians and other foreign exchange counterparties between January 2008 and December 2009 on institutional assets totaling approximately A$23 billion.

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Commenting on the review, Steven Tang said it was the largest sector review undertaken by Zenith as it includes all Global, Regional, Country (ex-Australia), Global Small Companies and Index funds.

The Zenith 2011 International Shares Sector Review appraised 180 International Shares products and confirmed:

• 12 were rated HIGHLY RECOMMENDED; and
• 39 RECOMMENDED.

The key changes to the Recommended List post the review include the addition of 7 new funds across various categories, 2 upgrades and 5 downgrades for existing funds.
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Steven Tang noted that it is often assumed that investors are willing to pay higher fees for active management based on the skill of the underlying manager and consequent presumed outperformance of a passive benchmark. However, it is logical to assume that this ability to outperform is contingent on the manager being truly active i.e. adopting positions away from the passive benchmark.
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“Zenith believes that the international share sector affords the greatest scope for active management, relative to all other sectors, given the size and breadth of the investable universe,” added Steven Tang.

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Global investment services firm Russell Investments is encouraging investors to think outside term deposits and cash and look for income alternatives such as high dividend paying shares which can boost returns, provide capital growth and be more tax effective.

Russell’s High Dividend Australian Shares ETF (RDV), launched in May 2010, has just completed its first financial year. Despite a difficult market environment, RDV was able to deliver on its goal of earning a higher dividend yield than the broad market, while still maintaining an element of capital growth. It returned 6.2%, with a 5.4% dividend yield, or 6.6% yield once grossed up for franking credits. The yield for the broad market over the same period was 4.3% – over 100 basis points below RDV.

“RDV’s performance shows investors don’t have to sacrifice their capital growth to get a good income return and this should be a reason to diversify out of term deposits or cash,” said Scott Bennett, portfolio manager at Russell Investments. “RDV provides an income return and selects stocks which offer other desirable qualities such as capital growth, so investors can have their cake and eat it too,” said Mr Bennett.

The ETF is based on a specially constructed index, the Russell Australia High Dividend Index, which comprises Australian blue-chip companies with a bias towards those that have a high expected dividend yield but also meet other characteristics including: a history of paying dividends; dividend growth and consistent earnings.

Diversification and tax considerations key

Russell says investors should not only diversify out of cash but also make sure their equity holdings are diversified to reduce stock specific risk.
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“Investors are increasingly using ETFs as an anchor to a direct equity portfolio as it helps them diversify across stocks, sectors and industries. They then complement this with their own favourite stock picks or managed funds,” said Mr Bennett.
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Investors should also consider how they can take advantage of tax benefits such as franking credits as part of their investment strategy. For example, in the case of ETFs like RDV, franking credits are passed onto the investor. Equity ETFs, like RDV, have naturally lower turnover and can qualify for tax breaks under the CGT discount rules, meaning any realised gains made after a year may be one-third or one-half tax-free to investors. This is further enhanced by the fact the money investors would have used to pay tax each year may stay invested, adding to the growth potential of the investment.

Australian dividends catch eye of overseas investors

High dividend paying Australian equities are becoming popular with international investors who are relying on dividends to fund their income needs as yields from cash instruments in other developed economies remain low.
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“The fact international investors are scouring the Australian market for dividends shows how competitive the yields are in our market,” said Mr Bennett.
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“As we head into the new financial year we want investors to be aware of alternatives to cash investments which provide solid income but don’t require you to forgo other benefits such as capital growth,” Mr Bennett concluded.

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The value of ASX-listed stocks, as measured by the All Ordinaries Index, fell 2.7% during June 2011. Many other major markets also fell during the month including Hong Kong down 5.4%, the US down 1.8%, the UK down 0.7%, and Singapore down 1.2%. In contrast Japan was up 1.3%. Over the course of financial year 2011 (FY11), the All Ordinaries rose 7.7% following a rise of 9.5% in the previous financial year. Market volatility was slightly lower in FY11 (0.6% average daily movements compared to 0.8% in FY10). The rise in Australian equity valuation lagged behind many other major markets with the US up 28.1%, the UK up 20.9%, Hong Kong up 11.3%, and Singapore up 10.0%. This relative performance, in large part, reflected the strong rise in the Australian dollar over the financial year: 26.0% higher against the US dollar, 14.4% higher against the yen and 6.1% higher against the euro. Market conditions helped underpin continued strong secondary equity market trading and a further increase in initial public offering (IPO) activity during FY11. Secondary capital raising activity remained healthy in FY11, although lower than FY10 and well down on the record levels seen during FY09.

Measures of volatility in the Australian equity market were generally restrained during June:

• Current volatility (as measured by the average daily movement in the All Ordinaries Index) was 0.7% in June (May 0.8%).
• Expected future volatility (as measured by the S&P/ASX 200 VIX) rose on average in June to 19.6(compared to 18.4 in May).

Volatility in US markets (S&P 500 Index) rose sharply in June with average daily movements of 0.9% (0.6% inMay). Expectations of future volatility in the US also rose during June.

The value of daily cash market trading in June was steady compared to the previous month’s performance, with an average traded value of $5.3 billion a day. Activity in interest rate futures contracts continued its upward trend, with trading during the June expiry month in the four main contracts (3 and 10 year bonds, 90 day bank bills, and the 30 day cash rate) creating a daily average record of 525,536 interest rate futures contracts traded.

Listings and capital raisings

• In June 2011 there were 13 new listings, 63% higher than the 8 in the previous corresponding period (pcp). There were 160 new listings in FY11, up 72% on 93 in FY10.
• Total listed entities at the end of June 2011 were 2,247, up 3% on the 2,192 a year ago.
• There was $3.3 billion of initial capital raised in June 2011, compared to $226 million in the pcp.
• Secondary capital raisings in June 2011 increased slightly, with $1.6 billion raised, compared to $1.5 billion in the pcp. There was also $1.1 billion of other capital raised, including scrip-for-scrip, in June 2011.
• Total capital raised in June 2011 amounted to $4.9 billion, up 186% on the $1.7 billion raised in the pcp.
• For FY11, total capital raised is down 18% on FY10, with capital raised from IPOs $29.4 billion and from secondary raisings $33.7 billion.

Trading – Cash markets (including equities, interest rates and warrants trades)

The All Ordinaries Index closed at the end of June at 4659.8 points, a fall of 2.7% over the course of the month. Theindex has fallen 3.9% in the calendar year-to-date but was 7.7% higher than a year ago.

• Total cash market trades for June 2011 were 12.8 million, up 8% on the pcp. Total trades for FY11 were 144.3million, up 9% on the pcp.
• Average daily trades for June 2011 of 610,193 were 8% higher than the pcp. Average daily trades for FY11 were570,440, up 9% on the pcp.
• Total cash market traded value was $111.2 billion in June 2011, up 2% on the pcp. The average daily value traded was $5.3 billion in June 2011, also up 2% on the pcp. Total value traded for FY11 was $1.3 trillion, down 1% on the pcp, corresponding to an average daily value of $5.3 billion, down 1% on the pcp.
• In June 2011 the average value per trade was $8,681, down 6% on the pcp of $9,266. The percentage of traded value crossed was 24% (28% pcp).

Trading – Financial derivatives markets

• There was a continuation of very strong trading activity in the benchmark interest rate contracts in June (an expiry month), including record monthly volume in:
  • 30 day cash rate futures (885,640 contracts), 8% higher than the previous record set in May 2011.
  • 90 day bank bill futures (2,879,948 contracts), 7% higher than the previous record set in August 2007.
  • 3 year treasury bond futures (5,365,381 contracts), 15% higher than the previous record set in March 2011.
• Volatility in the short end of the yield curve drove activity in the 30 day interbank futures and 90 day bank bill futures as the market’s view on future changes in the official cash rate by the RBA changed. At the beginning of the month, market expectations were for another 25 basis points increase in the official cash rate by mid next year. However,with economic data signalling a weaker domestic economy and concerns over the euro debt crisis deepening,market expectations turned to the probability of a rate cut in the second half of 2011.
• Equity derivatives volume (excluding the ASX SPI 200) for June 2011 was 16.2 million contracts. Measuring volumes on the prior contract size in order to allow for a meaningful comparison, results in equity derivatives volume (excluding the ASX SPI 200) for June 2011 of 2.5 million contracts. This represents a 26% increase in total volumes compared to the pcp, with a daily average of 118,559 contracts, up 26% on pcp. Total volumes for FY11(based on the prior contract size) were 23.1 million contracts corresponding to an average daily volume of 91,495contracts, both up 7% on the pcp.
• Total futures and options on futures contracts volume (excluding equity derivatives and CFDs) for June 2011 was a record 13.6 million, up 71% on the pcp, with a notional value of $6.6 trillion. Average daily contracts volume during June 2011 of 616,781 was also up 71% on the pcp. Total volumes for FY11 were a record 98.0 million contracts,corresponding to an average daily volume of 382,687 contracts, both up 29% on the pcp.
• A total of 5,937 ASX CFD trades were transacted in June 2011, comprising a volume of 15.3 million contracts. The total notional value of all CFD trades for June was $204.2 million, a decrease of 26% on the pcp, while the value of CFD open interest at the end of June was $87.1 million, a decrease of 27% on the pcp. Total ASX CFD trades in FY11 were 92,905, down 25% on FY10, comprising 176.5 million contracts, up 15%, and with a notional value of $3.5 billion, down 4%.

Trading – Energy and agricultural derivatives markets

• A total of 10,776 Australian electricity futures and options contracts were traded in June 2011, a decrease of 28% on the pcp. Total open interest was 46,360 contracts at the end of June 2011.
• The ASX grain futures and options market traded 33,518 contracts (670,360 tonnes) during the month, up 42% on the pcp. Open interest at the end of June 2011 of 108,774 futures contracts represents 2.17 million tonnes of Australian grain and oilseed. The total volume traded for FY11 was 483,273 contracts (9,665,460 tonnes), a record year representing 24% growth on FY10.

ASX CLEARING CORPORATION

Clearing

All on-market trades (equities and derivatives markets) are novated by ASX’s two central counterparty clearing subsidiaries, ASX Clear and ASX Clear (Futures), which act as counterparties to those trades and replace bilateral counterparty exposures.

• Total margins (including additional margins held against stress testing exposures and concentrated large positions)averaged $3.0 billion during June 2011 (including excess cash collateral but excluding equity securities lodged in excess of the margin requirement), with cash margins lodged averaging $2.5 billion.
• There were intra-day margin calls made on four separate days in June 2011 totalling $4.6 million compared to $2.9million of intra-day margin calls in May 2011.

ASX SETTLEMENT CORPORATION

ASX Settlement

There were no disruptions to the completion of batch settlement in the equities market during June 2011.

• Total equity settlement delivery fail rate averaged 0.65% per day during June 2011, a small increase on the 0.5% rate for May 2011.

Austraclear Settlement

There were no disruptions to the Austraclear settlement sessions during June 2011.

• The levels of total debt holdings in Austraclear decreased over the course of June by $14.7 billion to $1.2 trillion. During June electronic certificates of deposit decreased by $6.9 billion, treasury bonds decreased by $5.1 billion,semi-government bonds decreased by $3.6 billion and corporate bonds decreased by $3.5 billion. Treasury notes increased by $4.3 billion and all other holdings increased by $0.1 billion in total in June.

A separate ASX Compliance activity report for June 2011 has also been released today.

The post ASX Group Monthly Activity Report – June 2011 appeared first on AdviserVoice.

Australian Institutional Specialist Hired to Head Sydney Office

The Sydney office will be managed by Australian Ian Webber, Director, Institutional Investments (Australia & New Zealand), who joined Artio Global in June of 2011. Mr. Webber has extensive experience providing investment solutions to institutions, most recently as Co-Head of Australia/Head of Sales and Marketing for AXA Rosenberg Investment Management. He also served as Director, Institutional Business for Salomon Smith Barney/Citigroup Asset Management. He holds a Graduate Diploma in Applied Finance and Investment from the Securities Institute of Australia and a Bachelor of Economics from the University of Newcastle.
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Tony Williams, Chief Operating Officer of Artio Global said, “We believe that we offer a well-differentiated and compelling perspective on global investing that will resonate with Australian investors. Ian’s background and experience working with local institutions provides a strong base for us to make inroads into this important market.”
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Artio has offices in New York, Los Angeles, Toronto and London. The Sydney office will be part of the firm’s strategy to increase its distribution into Asia. “We have been looking to expand our global network and Australia, with its appetite for a variety of strategies and large pool of superannuation capital is a logical early opportunity,” concluded Mr. Pell.

For more information, please visit www.artioglobal.com.

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ING Investment Management Australia’s business provides a number of investment strategies and products directly to the Australian institutional and wholesale markets.

The business had EUR 24.8 billion (AUD 34.0 billion) in assets under management as of 31 March 2011, the majority of which is managed on behalf of ANZ’s wealth management business, OnePath.

In a letter announcing the sale, CEO Steven Billiet writes “the  transaction supports ING‘s objective to actively manage its capital and portfolio of businesses to ensure an attractive and coherent combination for the announced potential IPOs of its insurance and investment management activities.

“ING has previously said it plans to divest its insurance and investment management operations by the end of 2013 through a base case of two IPOs: a European-led IPO including the European and Asian insurance and investment management businesses, and a U.S.-focussed IPO.

“With a strong presence in Europe, the Americas, and nine Asian countries, ING Investment Management remains well-positioned in relation to the attractive Australian market.
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“We continue to manage an array of off-shore strategies in our various international investment centres, which are available to our clients domestically, regionally, and globally.
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“The transaction is subject to regulatory approval by the Dutch government and is expected to close in the fourth quarter of 2011. ING IM will be working with UBS Global Asset Management to ensure a smooth transition for all clients, but there will be no changes to client relationships or the way funds are managed in the short-term.
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“We understand that you will likely have questions or need additional information and we remain committed to keeping you updated on developments. In the meantime, our focus remains on delivering superior investment returns and servicing the needs of our clients.”

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Standard & Poor’s Fund Services has placed 15 funds managed by ING Investment Management (Australia) Ltd. (ING IM)  ‘On Hold’ following today’s announcement that UBS Global Asset Management has entered into a binding agreement to acquire ING IM. The acquisition is expected to close in October 2011 subject to Dutch Central Bank approval.

ING IM had A$34 billion in assets under management as of March 31, most of which is managed on behalf of ANZ’s wealth management business, OnePath. ING IM has stated that it will be working with UBS Global Asset Management to ensure a smooth transition for all funds and that there will be no changes to the way these funds are managed in the short term.

There are no changes to the ratings on funds managed by UBS Global Asset Management at this time.

“In S&P’s view, the uncertainty surrounding the ongoing management of the funds managed by ING IM has led us to place these funds ‘On Hold’. We will seek to resolve the ‘On Hold’ status for these funds when we have gained further clarity on the structure following the integration,” said S&P Fund Services head of research Leanne Milton.

The OnePath OA IP-OnePath Income Plus EF/Sel and ING Wholesale-ING Global Bal Emerg Mkts funds were already ‘On Hold’ before today’s announcement and remain ‘On Hold’.

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Zenith’s report states that Greg Matthews, portfolio manager of the All Star IAM Australian Share Fund, “is well supported by a team of senior portfolio managers who also maintain analyst responsibilities. In Zenith’s view, the investment team is highly experienced and their long history of successfully working together gives us further confidence in their abilities.”

The Fund has, according to Zenith, “displayed the ability to consistently outperform the index in all market conditions… consistent with its style agnostic approach and philosophy to navigate through market changes” noting that: “This has resulted in an information ratio well above the target and the median manager, indicating the generation of superior risk adjusted returns. We are confident that the process will continue to generate strong performance in the future.”

All Star Funds was conceived to provide investor access to consistent, high alpha asset management capabilities which would otherwise not be available to the retail investor.

“When we select an investment manager, we look for consistent out-performance, irrespective of market cycle,” said Mulligan,

“Greg (Matthews) and his team have a long-standing track record as a top performing Australian share manager; some of his team have worked together for over 15 years.”

The All Star IAM Australian Share Fund has delivered approximately 3.6% above benchmark after fees on an annualised basis since inception (data to end May 2011) and is ranked number one over 5 and 7 years against peers (1). The rating follows a pleasing, top ten ranking debut in the Plan for Life net inflows survey for All Star for the March quarter(2). Mulligan believes that this reflects the high quality of investment managers in the All Star stable, as well as the support of financial planners who need to be confident in recommending investment products to their clients which will deliver to their investment needs.

The All Star Maple-Brown Abbott Listed Property Fund and All Star Nomura China Fund have also recently been given ratings of “Recommended” by Zenith.

1. Morningstar May 2011 survey, Australian shares sector specialist funds.
2. Plan For Life March 2011 survey table retail net flows – marketer’s & administrator’s view, ex CMTs.
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