Vince Pezzullo

As it officially opens to investors, Perpetual Investments’ first listed investment company – the Perpetual Equity Investment Company Limited (ASX: PIC) – has received a ‘Recommended’ rating from research house Lonsec and ‘Recommended’ rating from Zenith.

Lonsec identified Perpetual’s “long-standing investment philosophy and process” as “one of the key strengths of this offering.” Similarly, Zenith stated that it “has a high level of confidence in Perpetual’s investment process and believes that PIC will generate excess returns for its investors over the medium to long-term.”

The Zenith report also commented that it “sees PIC as a LIC with solid potential as part of a diversified equities portfolio.”

PIC offers its own diversified portfolio through investment in Australian listed securities with typically a mid-cap focus, as well as up to 25% of the portfolio’s net asset value in opportunistic allocation to global listed securities. Its structure also offers the flexibility to manage potential equity market risk by moving up to 25% of the portfolio’s net asset value into cash and deposit products.

Lonsec highlighted that it, “considers the ability… to alter the asset allocation to global equities and cash to enhance the risk management practices of PIC.”

Designed to deliver regular income and long-term capital growth, Perpetual Investments Portfolio Manager, Vince Pezzullo, said these benefits would be attractive to the growing SMSF market.

“Diversification is important in SMSF portfolios, as is flexibility and liquidity. Through PIC we have the ability to increase or decrease our allocation to Australian equities, global equities and cash, based on market conditions,” Mr Pezzullo said.

“The allocation to global equities in particular offers investors access to the growth opportunities available through investing overseas.”

Zenith’s assessment also praised Perpetual’s “conceptually sound, rigorous and repeatable” investment process and its experienced investment team and stated: “PIC should suit investors seeking an Australian focussed equities exposure while Perpetual’s strong value bias should provide resilience in falling markets along with a steady dividend income.”

“PIC marries the best ideas from Perpetual’s time proven Australian and global equities strategies. Our internal investment team is a deep research engine, expert in bottom-up stock picking which avoids the biases of the ASX300,” Mr Pezzullo.

In its ratings report, Lonsec stated its “high regard for Perpetual’s quality-focused and valuation-driven research process.” It also shared its “favourable view of the investment skill and growing portfolio management track record of Vince Pezzullo as well as the depth and experience of the wider equities investment team.”

Further reinforcing the Perpetual Investment team’s capability and solid track record, last week the Wealth Focus Perpetual Industrial Share Fund, which is co-managed by Mr Pezzullo and Portfolio Manager, Nathan Parkin, won the Super Ratings Fund of the Year Awards for the Australian Shares category based on five-year returns.

PIC’s offer period is now open until 28 November 2014 with a minimum raising target of $150 million. The offer has been arranged through CBA Equities and Taylor Collison and is being jointly managed by Macquarie Capital, Morgan Stanley Australia and ANZ Securities. The co-lead managers are Baillieu Holst and Lonsec.

The post Perpetual Equity Investment Company (PIC) receives ratings from Lonsec and Zenith  appeared first on AdviserVoice.

Alex Vynokur

Leading exchange traded fund provider BetaShares has been awarded two additional ‘Recommended’ ratings from research house Zenith for the Australian Top 20 Equity Yield Maximiser (managed fund) (YMAX) and the FTSE RAFI Australia 200 ETF (QOZ).

YMAX aims to provide investors with exposure to a portfolio of 20 blue-chip Australian shares, along with attractive quarterly income and a lower level of volatility. The Fund has become one of the most popular products in the exchange traded fund market, having grown to over $250m since its launch approximately 18 months ago. As of end August 2014, the Fund’s gross distribution yield was 10.5% p.a.[1] The Fund was awarded a ‘Recommended’ rating by Lonsec in February 2014.

QOZ, Australia’s first fundamental index ETF, provides exposure to the 200 largest Australian equities, weighted in a way that is reflective of the economic footprint rather than the market capitalisation of its constituents. QOZ has also been awarded a ‘Recommended’ rating by Lonsec.

Alex Vynokur, BetaShares’ Managing Director, said the new ratings were testament to the effectiveness of the methodology in both funds, as well as the growing importance of ETFs in general as low-cost portfolio construction tools for advisers.

“Both QOZ and YMAX have enjoyed considerable success among self-directed investors and with advisers because they present cost effective and transparent ways to access strategies more commonly seen in high-cost managed funds,” said Mr Vynokur.

“Exchange traded funds are an important tool by which advisers can access a diverse range of asset classes at a low cost and in a simple, transparent way that their clients can understand.

“As adviser take-up has grown, research houses like Zenith and Lonsec have taken a much more active interest in analysis and ratings of exchange traded funds,” Mr Vynokur concluded.

The five BetaShares Funds now holding ‘Recommended’ ratings from Zenith are:

• BetaShares FTSE RAFI Australia 200 ETF (QOZ)
• BetaShares Australian Top 20 Equity Yield Maximiser Fund (managed fund) (YMAX)
• BetaShares Australian High Interest Cash ETF (AAA)
• BetaShares US Dollar ETF (USD)
• BetaShares Gold Bullion ETF – Currency Hedged (QAU)

The post Zenith awards ‘Recommended’ rating to two additional BetaShares Funds appeared first on AdviserVoice.

Jonathan Howie

With the popularity of Exchange Traded Funds (ETFs) growing amongst Australian investors, their biggest challenge can be in choosing between different ETFs that may look very similar, and choosing the right ones for them, says Jonathan Howie, Head of iShares Australia.

“A report released this week by Zenith showed that the ETF sector in Australia has grown 47.5 percent over the last 12 months, from $8.4 billion in July last year, to $12.3 billion at 31 July 2014.

“From this ever-growing universe, it can be difficult to work out the right option to invest in, but the good news is that there are some simple questions that will help investors narrow down the selection.

“Investors may have different reasons for considering ETFs.  Most commonly, we see them being used in three main ways: for specific exposure to an asset such as international equities; to build entire portfolios; or used in a blended approach when combined with actively managed funds.

“Regardless of their reasons, five key questions can help investors make the right choice,” Mr Howie says.

The five questions are:

What is in the ETF?

Mr Howie says this question looks at the exposure of the ETF – whether to the Australian market or an international one, to a single developed market or emerging market, or to a specific sector or industry.

“Investors should also ensure they are aware of the index that the ETF seeks to track, as there may be multiple indexes to choose from.

“In addition, they should assess the index methodology (such as whether it includes initial public offerings), how long the index has existed, the predicted tracking error, whether it employs leverage, and the ETF’s method for tracking the index.”

Can I trade when I need to?

Understanding the real liquidity of the ETF, through both its market volume and the liquidity of the underlying securities, will help investors assess whether the ETF suits their needs, says Mr Howie.

It includes looking at how the ETF liquidity has reacted during stressed markets and what support the ETF issuer provides investors to achieve the best possible execution when buying and selling ETFs. Issuers with strong relationships with market participants may be better able to foster deep and liquid ETF markets and provide investors and advisors the support to access them.

What is the ETF’s structure?

Mr Howie says this area is often overlooked by investors, but is critical.

“A transparent structure minimises unintended risks or costs for investors.  Investors should be able to see the assets under management of the ETF, the type of securities it holds, the diversification guidelines, the redemption process and the tax implications.”

Who are the people behind the ETF?

Those managing the ETF should have experience in the ETF market, in both developing, managing and supporting ETFs as well as in their relationships with market participants, index providers, the stock exchange and the regulator.

“Investors should assess the size, scale, and track record of the ETF provider, and in particular their risk management processes,” Mr Howie says.

What does it really cost?

Last but not least, investors should consider the total cost of ownership – ask questions about the expense ratio, trading costs, average spread, transaction costs, and tax efficiency of the ETF.

“Investors should seek institutional grade ETFs focussed on maximising liquidity, tax efficiency and transparency while minimising transaction costs for investors,” says Mr Howie.

The post Five questions to ask before investing in ETFs appeared first on AdviserVoice.

Randal Williams

La Trobe Financial’s Chief Wealth Management Officer Randal Williams, has announced that the Pooled Mortgages Option (“PMO”), an investment option in the La Trobe Australian Mortgage Fund, has again been recognised with a “Recommended” rating by Zenith Investment Partners.

In the report, Zenith Analyst, Dugald Higgins states that “La Trobe Financial has achieved an impressive track record in the mortgage sector driven by its deep lending experience spanning over 60 years as an organisation.”

The PMO was established in 2002 to provide investors with exposure to a diversified, Australia-wide pool of loans secured by first ranking mortgages. Higgins mentions in the report that “unlike some other funds in the sector, it has always been able to pay eligible redemptions and continues to hold its track record of not having ever returned a capital loss to investors, a feat which several prominent mortgage funds have been unable to replicate over the past three years”. Higgins further notes “that the PMO is most suited to those seeking capital stability and an income return which should solidly exceed the cash rate through investment cycles.”

The PMO’s manager, La Trobe Financial, was established in 1952 as a credit specialist. Randal Williams, Chief Wealth Management Officer at La Trobe Financial, stated that “the La Trobe Financial team was driven by the need for consistency and repeatability of performance. With equities markets experiencing such volatility, our investors are targeting capital stability and reliable income at a premium to cash. We have provided that since inception.” Williams further stated “Like any fund, the performance of the PMO is driven by the quality of its assets. We therefore welcome Zenith’s description of our credit assessment processes as `robust’ and `stringent’”.

Chris Andrews, Head of Funds Management at La Trobe Financial noted “that it was particularly pleasing that Zenith recognised the PMO as having … the highest level of diversification in the mortgage fund sector”.

Andrews added “La Trobe Financial’s unique co-investment model diversifies the funding sources for each individual loan, meaning that the PMO can massively increase its number of investments and decrease its average size of investment. This achieves enhanced diversification, which smoothes asset performance for investors and thereby contributes to an exceptionally stable absolute return profile”

The post Fund Manager continues track record of performance appeared first on AdviserVoice.

Anton Tagliaferro

Investors Mutual’s listed investment company QV Equities (ASX: QVE) has gained strong interest from advisers and investors since its offer period opened on Monday 14 July. Some of Australia’s leading platforms including BT, Colonial First State, MLC and Macquarie have all announced QVE’s inclusion in their platform offerings.

The platform inclusions in many leading dealer groups’ approved product lists is quite unique for a listed investment company. It will improve access and allow SMSFs, HNW individuals and their advisers to incorporate QVE into their portfolios. Investors Mutual’s founder and Investment Director Anton Tagliaferro said QVE had been designed to help investors achieve a diversified portfolio outside of top 20.

“QVE provides investors with a prudent vehicle to diversify their portfolios, and there has been strong uptake since the offer period opened. It is a well known fact investors are over concentrated in top 20 blue chip stocks. They are now realising the breadth of opportunities and diverse entities the ex20 segment offers in terms of industry sectors,” Mr Tagliaferro said.

Research ratings reflect investor appeal – QVE ‘Highly Recommended’ by Lonsec, and ‘Recommended’ by Zenith

QVE has also been awarded a ‘Highly Recommended’ rating by Lonsec and ‘Recommended’ by Zenith, with both research houses commending Investors Mutual’s investment approach and experienced team.

Lonsec’s ‘Highly Recommended’ research report stated “QVE offers investors access to a high quality Board of Directors and investment team with a ‘true to label’ value style and strong track record of performance across market cycles.”

Lonsec also noted its high conviction “in the calibre of Anton Tagliaferro and Simon Conn as value investors across the market capitalisation spectrum” with the “highly accountable performance driven investment culture and boutique structure” also being of note.

Zenith echoed the sentiments that “IML’s philosophy is ideally suited to a LIC, given the sector is strongly supported by the SMSF market, which seeks preservation of capital and income.

“Zenith sees QVE as a LIC with solid potential as part of a diversified equities portfolio, believing an ex20 exposure should complement an investors direct stock holdings or an exposure to the traditional LICs which focus on the top 20 stocks which are predominately financials and resource companies.”

QVE’s offer period is open from now to 8 August, 2014 with a raising target of between $100 to $200 million. The issue has been arranged through CBA Equities who are also one of the joint lead managers to the issue along with BBY, Patterson and Taylor Collison and co manager Lonsec Securities.

The post Research houses and platforms follow strong investor interest in QV Equities Limited appeared first on AdviserVoice.

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.

The post Russell stands out amongst multi-manager peers in Zurich review appeared first on AdviserVoice.

Tyndall Australian Share Concentrated Fund added to Asgard eWrap.

Following its inclusion on Colonial First State’s FirstWrap platform, the Tyndall Australian Share Concentrated Fund has also been added to Asgard eWrap.

The fund was launched to the retail market in May this year, and has already been rated ‘recommended’ by Zenith. The fund’s aim is to provide long-term capital growth and income by investing in a concentrated selection of shares included in the S&P/ASX 200 Accumulation Index.

Matt Russell, head of sales and marketing at Tyndall AM, said that there has been a very high level of interest in the fund by advisers.

“A number of advisers have told us that their clients are increasingly seeking specific outcomes and opportunities from the Australian equities fund component of their portfolio, not simply a generalist or index-hugging approach.

“The Tyndall Australian Share Concentrated Fund fits this criteria through its concentrated nature and more mid-cap bias, as well as its total return approach,” he said.

The post Asgard adds Tyndall fund to platform appeared first on AdviserVoice.

Sector review reveals value opportunities

The Listed Infrastructure sector performed very strongly over the past 12 months, with S&P Global Infrastructure Index returning over 20%. Zenith noted that “all nine funds that achieved a rating of Approved or higher outperformed Zenith’s assigned benchmark.”

Zenith’s sector report also focused on the defensive attributes of Listed Infrastructure, undertaking in-depth quantitative analysis on fund performance over the past five years. Baird believes that “Listed Infrastructure provides downside protection; however, the level of protection diminishes as the magnitude of the market downturn increases.”

From an initial investment universe of 14 Listed Infrastructure products, nine received a positive rating, with four funds achieving a HIGHLY RECOMMENDED rating, four received a RECOMMENDED rating and one was assigned an APPROVED rating.

While the sector has performed strongly in recent times, managers reviewed by Zenith believe “that there are still value opportunities in the sector; however, they are less common than they have been in recent years.”

The post Zenith 2013 Infrastructure Sector Review appeared first on AdviserVoice.

From an initial universe of 121 strategies, 59 were assigned a rating, with five of these receiving Zenith’s highest designation ‘Highly Recommended’. A further 44 were assigned a ‘Recommended’ rating, while 10 achieved an ‘Approved’ rating.
 
Zenith’s coverage of the Fixed Interest asset class has continued to grow, with an additional 34 ratings. This extended coverage is representative of the continued demand by investors for a more diverse range of high quality products.

Zenith notes in particular a growing presence of specialist and less constrained fixed interest opportunities spanning income-focused, absolute return, and emerging market debt. 
 
Zenith’s View 
Senior investment analyst Andrew Yap stated that “In general, managers across Zenith’s recommended list performed strongly, showing a greater propensity to generate alpha while constraining downside volatility.”

Alpha was more commonly aided by active credit strategies that benefited from a continued narrowing in global spreads. In contrast to this, we noted a more neutral approach to duration management and at a time where inflationary pressures among developed economies remain subdued.
 
Yap added, “We have noted a greater willingness from sector participants to diversify their portfolios into lower grade spread securities in an effort to enhance income generating potential. We attribute this market thematic to the coordinated effort by central authorities to maintain cash rates at historically low levels to spur global growth.

“This has necessitated managers reallocating capital to other market segments where an increased yield premium can be secured. While Zenith believes this ‘thirst for yield’ can in part explain the increased demand for high-yield and emerging market debt, we are also wary these exposures can impact average credit quality, a factor that can lead to increased performance volatility. With credit spreads approaching pre-GFC levels, Zenith believes the pace of contraction may slow, necessitating managers to enact a more diverse set of macroeconomic trades to drive investment outcomes.”

The post Zenith releases its 2012 Fixed Interest Sector Report appeared first on AdviserVoice.

NB has around $19 billion in assets under management across its Alternatives division (which includes Hedge Fund of Funds and Private Equity investments) and in Zenith’s view it is well set up to provide advisory services to Select particularly in the area of hedge fund selection.
 
Select’s long standing CIO, Dominic McCormick, is now ultimately responsible for portfolio management responsibility for SAP, although there is significant input from Sydney based consultant David Bell and London based Fred Ingham (of NB). Together the 3 individuals make the key portfolio decisions for SAP (with McCormick having the final decision).
 
The other key recent departure from the research team was Michael Winchester in early 2013. Winchester has over 12 years investment experience and had been the Head of Research at Select.
 
SAP potentially moving to daily liquidity 
In other developments Select has informed Zenith that it is considering moving the SAP from weekly redemptions at present to a daily liquidity profile. In our view this will result in some change for the underlying portfolio where some of the less liquid positions may need to be exited over the medium term.

In our view though, there should be limited performance impact (given a weekly redemption profile did not allow SAP to pick up a large illiquidity premium in any case).
 
Zenith’s View
The appointment of NB should cover the losses of Graham-Smith and Winchester as Select will ultimately have access to alternatives research undertaken by NB’s 19 member hedge fund team (including 3 operational due diligence specialists) as well as NB’s vastly resourced private equity research platform.

Further, we note that Select will have good access to senior personnel within NB with one of its 4-member investment committee members from the hedge fund business being assigned to advise Dominic McCormick directly (Fred Ingham). 
 
Further, Select has replaced Graham-Smith and Winchester with two sound replacements. Dr. Bartholomew Dowling was hired into Select as an Investment Strategist after previously holding a seat on Select’s external advisory committee.

Dowling was previously an Investment Manager (Listed Equities & Fixed Interest Portfolios) for AXA Australia. The second replacement is Thomas Good who has joined as an investment strategist after previously working as a Manager (Debt and Alternatives) for the Future Fund.

The post Zenith re-rates Select Alternatives Portfolio appeared first on AdviserVoice.