Harvey Kalman

Equity Trustees (EQT) and its investment manager partner Dundas Global Investors (Dundas) have made the EQT Dundas Global Equity Fund available on the mFund Settlement Service, bringing the number of co-branded funds distributed through Equity Trustees to 15.

The mFund Settlement Service is an ASX initiative that allows investors to buy and sell units in selected unlisted managed funds (mFund), through a process similar to investing in shares.  They can be bought and sold through their ASX stockbroker online, in person or through a financial adviser who uses a stockbroking service on their behalf.

EQT Dundas Global Equity Fund invests in 60-80 leading global companies from developed and emerging markets with a minimum stock capitation of US$1 billion. The objective of the fund is to invest in stocks with high real book value growth and growing dividend income to generate greater compound returns with lower volatility.

The fund aims to deliver rolling five-year returns in excess of 2.5 per cent of the capital return of the MSCI All Country World Index (ex Australia) before fees.

The mFund Settlement Service offers a number of advantages over the traditional way that investors use managed funds, and, in the case of self-managed superannuation funds (SMSFs) in particular, mFund can help with improving portfolio diversification, says Harvey Kalman, Head of Equity Trustees’ Corporate Trustee Services.

“Of the $500 billion in the SMSF pot, $200 billion is already invested through the ASX. But by investing only in ASX equities, SMSF’s have limited the diversification possibility of their funds,” Mr Kalman says.

“With the addition of the EQT Dundas Global Equity Fund investors now have access to all asset classes through Equity Trustees’ co-branded funds including: international equities, fixed interest, Australian equities including large cap, small companies, franchise, dividend income and concentrated as well as global and Australian listed property securities,” Mr Kalman says.

Equity Trustees was one of the first foundation members of the service and, together with its investment manager partners, Dundas, PIMCO, EQT, LaSalle and SG Hiscock & Company, offers a diversified range of funds through the service for retail investors.

Funds available on the service from Equity Trustees and its investment partner managers are:

Equity Trustees:  

• EQT Wholesale Flagship Fund
• EQT Australian Equity Income Fund

Dundas Global Investors:        

• EQT Dundas Global Equity Fund

PIMCO Australia:    

• PIMCO EQT Wholesale Global Credit Fund
• PIMCO EQT Wholesale Diversified Fixed Interest Fund
• PIMCO EQT Wholesale Global Bond Fund
• PIMCO EQT Wholesale Australian Bond Fund
• PIMCO EQT Wholesale Australian Focus Fund
• PIMCO EQT Wholesale Unconstrained Bond Fund

SG Hiscock & Company:    

• SGH 20 (Australian equities)
• SGH ICE (Australian equities)
• EQT SGH Wholesale Property Income Fund
• EQT SGH Wholesale Small Companies Fund

LaSalle Investment Management:

• EQT SGH LaSalle Global Listed Property Securities Trust
• EQT SGH LaSalle Global Property-Rich Trust

“The mFund settlement service can provide portfolio diversification quickly and easily as with even one transaction with one mFund, investors can gain access to a range of underlying investments and asset classes that may have otherwise been out of reach,” Mr Kalman concludes.

The post International equities round out mFund offering appeared first on AdviserVoice.

The new IEQ review examined 43 managers. Lead analyst Nimalan Govender said this year’s group was a more competitive field of managers than in the previous review.
 
“Managers needed to show they had the ability to deliver returns in excess of the benchmark given the heightened risk of volatile market conditions going forward.” Mr Govender said.
 
This was reflected in the spread of ratings. Nine managers were screened from the review because they were not sufficiently competitive. Four managers received van Eyk’s top AA rating, whereas no managers received the top rating in last year’s review. Fifteen strategies received an A-rating but three previously A-rated managers had their ratings downgraded.
 
Mr Govender said that given central banks had shown they were prepared to continue to pump huge volumes of liquidity into the banking system in an attempt to sustain economic growth, there was a higher risk of market volatility and managers needed to have an investment process that could handle this.
 
This meant managers had to demonstrate a clearly articulated investment process and show a particularly thorough understanding of the stocks and industries they were investing in.
 
“You need managers who can see through this volatility and have the conviction to choose quality stocks for the long term and avoid the stocks that will get an undeserved lift from the effects of the  liquidity flood,” Mr Govender said. “If you don’t believe in your process you will chop and change stocks in this market environment.”
 
This kind of strong, “bottom up” research built investment ideas from the ground level and was more likely to lead to the original investment insights that enabled managers to find sources of return missed by the broader market. “These people don’t just pick up the Financial Times in the morning for their ideas,” Mr Govender said.
 
Managers which rated highly in the review had proven their ability in this area by delivering those excess returns and most with a level of volatility lower than the benchmark, he noted. A good example was the Platinum International Brands Fund, which has achieved annualised returns 5.41% in excess of its benchmark on a rolling 3-year basis.
 
Mr Govender said there was no clear majority view among the managers reviewed about the outlook for different regions. Some were underweight the US and overweight Europe while others had the opposite leaning. “It’s more a case of stockpicking rather than sector tilting among managers at this stage,” he said. “If there’s any trend it’s towards quality stocks with sustainable cashflows.”
 
van Eyk’s model balanced portfolio currently recommends an overweight exposure to international equities because their valuation is less than the long term average and they are better value than the Australian share market at the moment. However, van Eyk favours defensive stocks given the heightened risks in international markets.

The post Robust research vital for IEQ managers in risky, liquidity-driven markets appeared first on AdviserVoice.

The survey of more than 100 advisers also found that almost 70 percent of advisers will increase their clients’ allocation to international equities in the next six to twelve months; and that 75 percent of those will do this via managed funds.  

Patrick Noble, Senior Investment Strategist – Zurich Investments, said the results were significant given the trend towards cash and direct, local shares that has dominated investment behavior in the past several years. 

“With the huge number of Australians facing retirement in the next few years, advisers need to find strategies that do not rely solely upon cash rates or a rise in local markets to provide income for the future.  Importantly, they need to do this at a time when investor confidence remains subdued. 

“We believe it is significant therefore that, advisers are now turning their attention to international markets and that they recognise the value a specialised investment manager can deliver.” 

According to the survey, the majority of advisers are expecting positive returns from international shares over the next 12 months with 54 percent expecting single digit returns.  Just three percent believed international shares would deliver negative returns. The results show a bias towards international over local shares when compared to a Zurich survey from June 2012. 

Mr Noble said the strong Australian dollar is almost certainly a factor in why international markets are more attractive, it could also be about the increased familiarity Australian investors have with international companies and markets. 

“According to the survey, almost 70 percent of advisers believe the Australian dollar will be above or at parity with the US dollarover the next 12 months. A strong dollar is definitely beneficial, but Australians are also more familiar with both offshore markets and companies such as Google and eBay.” 

Mr Noble said the search for income did not mean Australian investors had to rely upon Australian share dividends, as skilled managers could implement strategies for achieving income from internationalshares.  

“We recently launched the Zurich Investments Global Equity Income Fund, which provides investors access to global equity markets, with enhanced levels of income and reduced downside risk.  The Fund is typically comprised of a portfolio of 30 – 50 income-producing, international stocks across a range of sectors and geographies.  The Manager utilises innovative options and currency strategies to help reduce downside risk.” 

“Advisers know that staying in cash over the long run is not going to deliver the returns or income investors need for a comfortable retirement.   And funds such as this, have the potential to deliver income, yet with a decreased level of risk.”

The post Adviser appetite for international funds on the rise appeared first on AdviserVoice.

According to Andrew Bird, executive director of online share portfolio management specialist Sharesight, so long as DIY investors have done their research and set themselves up properly, geography should pose no barriers.

“With relatively strong performance, not to mention the much broader choice of companies and industry sectors to invest in, it’s understandable that Australian investors may be looking further afield. And, should they decide that investing offshore is right for them, there are a number of issues for them to consider,” said Mr Bird.

He went on to explain that of the available options, each has its pros and cons.

First is trading through a local, Australia-based broker – and most major players now offer an overseas trading service. This is relatively straightforward – especially if you are used to trading with that provider – and you can generally pay for trades from your existing broker cash account.  Brokerage fees are higher than for Australian shares  and there can be additional fees for things like custody and foreign exchange which can eat into returns if you make a lot of trades. But for those investors looking to trade infrequently overseas this can be a good option.

A second option is to open a trading account directly with on overseas online broker, which does require some initial paperwork but is simple to run once you’re set up. The benefit of this approach is significantly reduced brokerage fees and, according to Mr Bird, it may be a good option for an investor who has already tried an Australia-based broker and begun to trade more heavily overseas.  Foreign exchange costs can also be controlled more easily by transferring funds to an overseas account in larger tranches.

Option three is to choose a pooled investment vehicle such as an international Exchange Traded Fund (ETF), which is traded on the ASX, or a managed fund.  These allow you to buy whole markets with one stock or have a professional manager choose for you in the case of an active managed fund.

“There are some quality overseas ETFs now available on the ASX that cover the major overseas indices. These offer investors the benefit of exposure to a wider range of shares than they might be able to access directly, are cost effective and are listed on the local exchange, so can they can be traded through your local broker or online trading service,” said Mr Bird.  “A traditional managed fund which focuses on overseas shares can also provide offshore exposure, with associated expenses dependent on the manager.”

It’s important to note that ETFs are generally unhedged with regard to currency so the local value will be determined by the performance of the index it covers, like the US S&P 500 as well as the currency movement between the Australian dollar and the currency in which the index is denominated.  Managed funds are often available in hedged or unhedged options, enabling investors to decide how to address the potential positive or negative effects of currency fluctuations on the value of their investments.

Once the decision on where and how to invest is made, it’s a question of making sure you administer the portfolio properly, to ensure you address factors such as currency shifts and the offshore taxation requirements.

“That’s where using a portfolio management system that’s been set up to administer international as well as local equities comes in,” said Mr Bird. “At Sharesight, for example, we offer date on five international markets, including the NASDAQ, NYSE, London Stock Exchange and New Zealand Stock Exchange. This helps keep investors up to speed with the latest in dividend information, corporate updates and so on, just as they would expect from their local Sharesight data.”

Two other significant international investing bugbears: currency conversion, which is automated for the user so they can see at a glance their true Australian dollar position; and the taxation issues, are also addressed by the Sharesight system.

“Some offshore markets impose a withholding tax that can be increased if overseas investors don’t properly register with the relevant authority,” he explained. In the US, for example the withholding can be 15% or 30%.

“Once they do register, which the broker will facilitate, Sharesight captures that information so the investor can be sure to record the correct tax credit.

“What it all comes down to is, if you’ve done the research and believe there are benefits to be found offshore for you, investing overseas need not be difficult.  But it’s crucial to keep accurate and timely records so that the paperwork doesn’t detract from the benefits.”

The post Time to invest offshore? appeared first on AdviserVoice.