Kevin Toohey

International equities (unhedged), Australian equities and international equities (hedged) are the clear winners among the varying asset classes in the 2022-23 financial year, according to the asset consultancy firm Atchison.

At the conclusion of the financial year, international Equities (unhedged) increased +19%, Australian equities rose +15% and international equities (hedged) +10%.

Commenting on Atchison’s latest winners and losers report, Principal Kevin Toohey says: “It was a tumultuous year across the board, with 12 Reserve Bank interest rate increases pushing the cash rate from 0.10% to 4.10%, causing many asset classes to underperform.”

Toohey also stated “On the other end of the spectrum, the award for the worst-performing asset class went to commodities with a -21% decline. A contributing factor to its poor performance was crude oil sliding 26%. Gold managed to contribute +6%, but that performance was insufficient to keep commodities in the black for the financial year.”

Sitting alongside commodities as the losers within the financial year, sat GREITS with -7% and fixed income credit -3%.

Aside from inflation and a rising cost of living, the geopolitical crisis playing out in the Ukraine persuaded many investors to seek safer havens in 2022-23, with those exposed to defensive assets such as cash and gold benefitting from market volatility.

Some emerging markets also benefited from strong investor interest with Brazil returning +32%, Poland +39% and Mexico +38%. On the downside, China and South Africa went backwards, returning a -16% and -2% respectively.

On a global scale, US firms played a large role in the outperformance of international equities, either hedged or unhedged. Not surprisingly, technology and artificial intelligence stocks led the charge, with Apple, Google, Microsoft, and Nvidia leading the way. Tesla also held a spot with the leading technology stocks in the latter part of the financial year up 133%, but also fell 51% during the first half of the financial year.

For the year ahead, Toohey concluded: “The Reserve Bank surprised many this week with a ‘hawkish pause’ on rate hikes at 4.1%, but investors need to be wary as there could still be more interest rate rises in the pipeline with the monthly CPI data for May still sitting at 5.6%, well outside the bank’s 2-3% inflation target.”

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Kevin Toohey

Direct Property has been the best performing asset class over the past 20 years. It has returned an average 10.2 per cent between 2003-22, edging out Australian equities at 8.9 per cent, according to research by the asset consulting firm Atchison.

The findings, which encompass debt, equity, and property securities, as well as commodities and cash, also highlight how 2022 was the worst annual period in the last 20 years for the number of asset classes that were able to deliver a positive real return, being a return above inflation.”

Even in 2008 at the epicentre of the Global Financial Crisis, six asset classes – three bond assets, cash, direct property, and commodities – outperformed the CP.

Aside from commodities and direct property, which returned 17 per cent and 11 per cent respectively, only cash was in the black in 2022 with a one per cent return. The other 12 asset classes were in the red with G-REITs (-24 per cent), hedged international equites (-22 per cent) and A-REITs (-20 per cent) bringing up the rear. Nine asset classes notched double digit negative returns.

However, Australian equities and unhedged insertional equities held up better than most – both notched a minus one per cent return – especially when compared with fixed interest classes with long durations.

2022 was the second consecutive year that commodities have headed the list and the third time in the past five years, with international equities (hedged) and international equities (unhedged) taking first place in 2020 and 2019, respectively.

But Atchison Principal Kevin Toohey cautions investors about chasing the commodity rainbow. “Over the 20 years, commodities, which have topped the poll six times – A-REITs and emerging markets share second place with three apiece – have also come last in seven of the 20 years.

“Commodities tend to be binary in nature – periods at the very top of the table are typically followed by periods at the very bottom. Over the 20 years their average return has been 8.7 per cent, placing them ninth on the ladder.”

Other interesting trends the research reveals are:

• Emerging market equities (unhedged) have underperformed developed market equities (unhedged) for the past five successive years. This contrasts sharply with the first five years (2003-07) when emerging markets outperformed developed market equities (hedged and unhedged) four years out of five. In two of the five years emerging markets headed the list.
• Of the seven asset classes that have returned seven per cent or higher over the 20 years, four are equities, two are property (G-REITs and direct property) and one is fixed high yield credit.
• Three of the bottom five asset classes are debt, with three being government bonds. Cash comes in last at an average 3.5 per cent.
• The research is a salient reminder of the pre-GFC boom. In two of the five years (2004 and 2005) all asset classes outperformed the CPI, in two years only two failed to outperform it, and in the other year only three asset classes fell short of the benchmark.

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Drew Meredith

Jamie Nemtsas and Drew Meredith, directors of Wattle Partners, a self-licensed, boutique financial advisory firm have announced the acquisition of the highly respected independent asset consulting firm Atchison Consultants.

Founded in Melbourne in 2001 by Ken Atchison, Atchison Consultants is renowned for offering investment consulting across the financial services industry, including areas of asset and investment consulting, research and portfolio construction advice for institutions, foundations, financial advisory firms and other professional investors.

Atchison Consultants Principal and industry leader, Ken Atchison, will continue to head the group for the next three years.

There will be no operational changes to the business, with Atchison Consultants to continue operating independently of Wattle Partners. Jamie Nemtsas and Drew Meredith will become non-executive directors.

The acquisition provides Atchison Consultants with additional resources to continue developing its capabilities in an evolving research and consulting industry. A capital infusion will be made, investing further into the highly regarded in-house analytical team, and seeking to bring together parts of the fragmented industry.

The investment comes after Wattle Partners has spent several years seeking to partner with an external asset consultant to assist in further professionalising their growing business. It was through these extensive due diligence discussions that the partnership arose.

The trend for financial advisory groups to engage external experts like Atchison Consultants has been growing in recent years as the industry deals with additional critical issues like governance and due diligence, notes Mr Nemtsas, Director and Partner at Wattle Partners.

Mr Nemtsas says: “The past five years has seen a proliferation of new wealth-focused asset consultants. However, some of these groups lack the necessary depth and breadth of knowledge, experience and stability. This creates a real opportunity for well-resourced and experienced asset consulting groups seeking to establish themselves as industry leaders.”

Drew Meredith, Co-Partner and Director at Wattle Partners adds: “Asset consulting groups servicing wealth management firm sometimes lack the understanding of what advisers do and how they can help the adviser run a better, stronger business that provides better outcomes for clients. In conjunction with Atchison Consultants, we will deliver enhanced outcomes.

“We are looking through an adviser’s lens to see what impact a full-service asset consultant can have on a firm managing other people’s capital. It is this approach we will take to fully utilise the skills and knowledge Atchison Consultants bring to the table in our own business, such as building and maintaining model portfolios, APLs, asset allocation, governance and tactical expertise to improve client outcomes,” says Mr Meredith.

Mr Atchison says: “I am extremely excited about this transaction. I have known Jamie for a long time and his depth of knowledge and commitment to client outcomes is very impressive, and Drew is one of the best strategic thinkers I know in the financial advisory industry. It also gives me a succession plan in an industry that is rapidly changing.”

Kevin Toohey, Principal at Atchison Consultants adds: “Our team remains committed to servicing our existing clients and we are excited at the opportunity for further growth.”

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