Lonsec said its ratings upgrade reflects its increased confidence in PM Capital’s approach:  “Lonsec has been impressed the underlying consistency of the PM philosophy and the conviction of the investment views.”

“The fund’s contrarian style often sees PM CAPITAL investigating companies that have fallen out of favour with the broader market on the premise that negative factors are often short term and a company’s value will be restored in time.”

Lonsec notes that Paul Moore, PM CAPITAL’s Chief Investment Officer, is a highly experienced and seasoned investor and believes that his approach to funds management has been consistent over his long career. Included in the Lonsec report are the following observations:

“Lonsec considers PM Capital’s alignment of interest with investors is high… There is a strong culture of ‘eating your own cooking’ and staff investment in strategies… a significant portion of PM Capital’s retained earnings are also invested in the firm’s funds – adding to incentives to preserve capital”

PM CAPITAL’s CEO, Chris Donohoe said that “the return to recommended status is a reflection of both strong fund performance and corporate changes. These include a repurchase of non-working staff shares and a wider allocation of staff shares, lower fees and tightening risk management and portfolio guidelines. “

Donohoe said “over the last six months PM CAPITAL has raised $230M in two offshore equity LICs and our offshore equity FUM will move beyond $1Bn in August. The growth in demand for global equities is logical and ultimately based off the view that compared to the local market there is a greater breadth of opportunity, a better risk reward and all at a time when the currency is in the top quartile – it just makes sense”.

PM CAPITAL Absolute Performance Fund has achieved a total return of 209.4% since its inception in October 1998, which compares favourably against the MSCI World Index (Net Dividends Reinvested, AUD) total return of 46.9% (as at 30 November 2013). The Fund has returned 19.4% per annum over the previous 3 years.

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Matthew McKinnon

Market Vectors ETFs (Market Vectors), the exchange traded fund (ETF) business of US-based investment manager Van Eck Global, today announced it has received an ‘Investment GradeIndex’ rating from research house, Lonsec, for its recently listed Market Vectors Australian Equal Weight ETF (ASX code: MVW).

Market Vectors Australian Equal Weight ETF is designed to track a purpose-built index, the Market Vectors Australia Equal Weight Index, which currently provides investors with equal exposure across 76 of the most liquid large and mid-cap ASX-listed securities.

Matthew McKinnon, Director, Institutions and Intermediaries at Market Vectors Australia, commented, “We are pleased to receive a positive review from Lonsec for Market Vectors Australian Equal Weight ETF – the first equal weight ETF available to Australian investors. Equal weight investing is well established in Europe and the United States, where it is used to build a diversified core portfolio.  The methodology is well suited to the Australian market, which is heavily concentrated with the top 10 stocks making up more than 50% of the top 200 listed companies by market capitalisation. Our research shows that MVW’s underlying equal weight index has outperformed the S&P/ASX 200 Index by 23% over the last 10 years.

“What sets our ETFs apart is the rigorously designed methodology and rules governing the construction of the underlying indices. Each of our ETFs is based on a Market Vectors’ purpose-built index which focuses on liquidity and diversification to design investable indices. Our ETFs therefore comprise portfolios of assets that are liquid and diversified, cost effective and easily accessible to investors via a single trade on the ASX.

“The index methodology for MVW reduces exposure to the large-capitalisation companies that typically dominate Australian benchmark indices and increases exposure to the most liquid Australian mid-caps, providing an alternative to ETFs based purely on market capitalisation indices.

“We are confident that MVW will attract a range of investors from direct and SMSF investors to intermediary and institutions seeking diversified balanced exposure to the Australian equity market,” Mr McKinnon said.

Market Vectors listed its Market Vectors Australian Equal Weight ETF on the ASX this month. The equal weight index has been especially developed by Market Vectors Index Solutions (MVIS), the independent index company of Van Eck Global based in Germany.

Lonsec review – Market Vectors Australian Equal Weight ETF (MVW) 

Lonsec has conviction that Market Vectors Australian Equal Weight ETF can achieve its objective. “The Market Vectors Australian Equal Weight ETF tracks an index that is new to the Australian market and is designed to provide a more diversified exposure than traditional market cap-weighted indices which, given the nature of the Australian economy, have a highly concentrated weighting to banks and miners,” Lonsec said.

“The Fund offers a simple and easy means of gaining a diversified exposure to the Australian share market via a single transaction. The Fund tracks the Market Vectors Australia Equal Weight Index, which provides greater diversification across industries versus traditional market cap-weighted indices,” the ratings report said.

Lonsec favourably noted the transparency of the index. “Lonsec considers the index rules to be very transparent and commends the Van Eck group of companies on making the full index methodology and index constituent selection and review processes readily available to investors.”

“It is Lonsec’s belief that not all index providers are as forthcoming with this information. Furthermore, Lonsec believes that access to transparent, straight forward information on index products, their underlying indices and how they are constructed is crucial to investors’ understanding and ability to gauge suitability,” the report said.

“By equal weighting the index constituents, the underlying index has a significantly higher weighting to mid-cap stocks, and is more diversified by sector and individual security weightings than the S&P/ASX 200 Index,” Lonsec said

Analysis by MVIS reveals that its equal-weight index has outperformed the S&P/ASX 200 in nine out of the last 12 years. Overall, the Market Vectors Australia Equal Weight Index has outperformed the S&P/ASX 200 since 2002 to March 2014 by 23 per cent, according to MVIS

The Market Vectors Australian Equal Weight ETF joins four existing Market Vectors sector-based ETFs which were listed on the ASX in October last year. They are the Market Vectors Australian Banks ETF (MVB), Market Vectors Australian Property ETF (MVA), Market Vectors Australian Resources ETF (MVR) and Market Vectors Australian Emerging Resources ETF (MVE).

Market Vectors Australia is planning to launch more ETFs on the ASX later this year as it continues to gain market share in the Australian ETF market.

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Scott Tully

Colonial First State’s FirstChoice Multi-Index funds have been awarded a ‘Recommended’ rating from Zenith Investment Partners.

Zenith described CFS’ FirstChoice Multi-Index funds as ‘a compelling offering for investors seeking a low cost exposure to the diversified sector’.

Zenith also cited their high regard for the FirstChoice Investments team responsible for managing the FirstChoice Multi-Index funds; in particular Scott Tully and Peter Dymond who Zenith believes are ‘key to the continued success of the Multi-Index funds’.

Head of FirstChoice Investments for Colonial First State, Scott Tully, said “We are very pleased to receive a ‘Recommended’ rating from Zenith for the FirstChoice Multi-Index funds.  We introduced FirstChoice Multi-Index to the market to provide investors with access to good value, diversified portfolios using innovative investment strategies.”

“The combination of Colonial First State and Realindex Investments has generated great returns for our investors since FirstChoice Multi-Index was launched in 2009,” said Mr Tully.

The interactive relationship with investment consultant Mercer enables the FirstChoice Investments team to identify value-add opportunities and ensures the portfolios are comprised of the most compelling strategies to meet their investment objectives was noted by Zenith in their review.

The CFS FirstChoice Multi-Index funds currently have over $3 billion in funds under management.  The annualised, since inception performance (as at 30 September 2013)* of the headline FirstChoice Multi-Index funds recommended by Zenith are as follows:

• FirstChoice Wholesale Multi-Index Balanced:  11.58%pa
• FirstChoice Wholesale Multi-Index Conservative:  7.85%pa
• FirstChoice Wholesale Multi-Index Diversified:  14.44%pa

The Colonial First State FirstChoice Investments team manages portfolios that in total exceed $25 billion of funds under management on behalf of 600,000 investors.  The team has developed a range of innovative investment strategies over the last decade including the CFS FirstChoice Multi-Index funds.

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In total, 16 funds received a rating, with Russell the only manager to be awarded Zenith’s highest accolade “HIGHLY RECOMMENDED”. Investment strategies offered by MLC were upgraded to RECOMMENDED, and two strategies managed by Investment Science were placed on REDEEM.

Senior Investment Analyst Andrew Yap stated that “Zenith has upgraded Russell’s diversified suite of funds owing to our collective assessment of the manager’s globally resourced team, its scalable investment process and integrated risk framework. In a relative sense, we believe Russell offers some of the strongest investment propositions to investors seeking a locally distributed multi-asset solution”.

Yap added that “MLC’s Horizon suite of strategies (2-7) have also been upgraded on our increased conviction in the manager’s differentiated process and the significant strides made with regard to attribution and risk management capabilities”.

Within the multi-manager category, Zenith has observed significant progress in the areas of implementation and risk management.

Key amongst these developments has been the move by sector participants to a more tailored approach to portfolio construction, one in which asset-class exposures are gained through discrete investment vehicles, with derivatives more commonly used to enact active asset allocation strategies.

Zenith believes this evolution in process represents an acknowledgement by managers of the limitations associated with gaining asset class exposures on a physical basis and through internally managed co-mingled trusts. These include difficulty in tailoring portfolio exposures and in improving portfolio efficiency.

Zenith has also noted a significant advance in risk management capabilities which represents the realisation of several years of development and investment by sector participants.

Risk systems are now deemed sufficiently flexible to permit investment personnel to form a greater appreciation of risk, which in a multi-asset context can exhibit multiple dimensions and necessitate assessment through a range of non-traditional measures.

In the weeks ahead, Zenith will release the ratings outcomes of its “Single Manager” and newly created “Real Return” categories. In addition, a report summarising the key sector findings from all three categories will be published at the conclusion of the 2013 Diversified Sector Review.

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