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12/02/2018
1
Industry Evolution Insights SMSF Investments
Investing towards 2021
Anton Tagliaferro
Investment Director, Investors Mutual
Where are we today?
• Global economies growing steadily
• Record low interest rates
• Global debt at all time highs
• Signs of exuberance appearing
12/02/2018
2
Nasdaq last 20yrs
Source: FactSet; as at 8 February 2018
Bitcoin – the urge to speculate never disappears
Clo
sin
g p
rice
Source: Coindesk, as at February 2018
Month
0
5000
10000
15000
20000
25000
De
c-1
2
Jan
-13
Feb
-13
Mar
-13
May
-13
Jun
-13
Jul-
13
Sep
-13
Oct
-13
No
v-13
Jan
-14
Feb
-14
Mar
-14
May
-14
Jun
-14
Jul-
14
Sep
-14
Oct
-14
No
v-14
De
c-1
4Fe
b-1
5
Mar
-15
Ap
r-15
Jun
-15
Jul-
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Au
g-1
5O
ct-1
5
No
v-15
De
c-1
5
Feb
-16
Mar
-16
Ap
r-16
Jun
-16
Jul-
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Au
g-1
6O
ct-1
6N
ov-
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De
c-1
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Jan
-17
Mar
-17
Ap
r-17
May
-17
Jul-
17
Au
g-1
7
Sep
-17
No
v-17
De
c-1
7
Jan
-18
Australia’s Population Growth
Source: FactSet February 2018
12/02/2018
3
Apartment building boom
Source: Bloomberg
Australian Housing debt
Source: Factset as at 8 February 2018
Chinese Outbound Tourism 1995-2014
0
20
40
60
80
100
120
140
Nu
mb
er
of
de
pa
rtu
res (
mil
lio
ns)
Source:UNWTO, UNESCAP 2014
12/02/2018
4
Australia Iron ore production & revenue
0
10
20
30
40
50
60
70
80
90
0
100
200
300
400
500
600
700
800
900
1000
Revenue,
US
$B
Pro
duction,
Mt
Revenue, US$B, (RHS)
Production, Mt, (LHS)
Source: UBS, Australian Government Dept of Industry, Innovation & Science
Australia’s LNG production profile
0.0
10.0
20.0
30.0
40.0
50.0
60.0
70.0
80.0
90.0
2012 2013 2014 2015 2016 2017 2018 2019 2020
Cap
acit
y (m
tpa)
Sanctioned
Producing
Source: IML 31st December 2013
Retail investor needs:
• Capital preservation
• Reasonable capital growth
• Income focused
12/02/2018
5
Investment Philosophy: focus on quality
We seek to buy and own:
• Companies with a competitive advantage,
• with recurring earnings,
• run by capable management,
• that can grow,
• .......at a reasonable price.
Sectors undergoing change
• Telcos
• Supermarket sector
• Wagering
• Discretionary Retail
• Traditional media
Stock selection remains keyCompany specific initiatives
Cost-outs Clydesdale Bank
Acquisitions Pact
Contracted growth Shopping Centres Australia
Market share gains Ansell
Restructuring Caltex
12/02/2018
6
Industrial stocks pay in the long term
17
While the information contained in this presentation has been prepared with all
reasonable care, Investors Mutual Limited accepts no responsibility or liability for any
errors or omissions or misstatements however caused. This is general financial
product advice only and is not intended to constitute a securities recommendation.
This information does not account for your investment objectives, particular needs or
financial situation. Statements of opinion are those of IML unless otherwise
attributed. Except where specifically attributed to another source, all figures are
based on IML research and analysis.
Investors should be aware that past performance is not indicative of future
performance. Returns can be volatile, reflecting rises and falls in the value of
underlying investments. Potential investors should seek independent advice as to
the suitability of the Fund to their investment needs. The fact that shares in a
particular company may have been mentioned should not be interpreted as a
recommendation to either buy, sell or hold that stock. Any commentary about specific
securities is within the context of the investment strategy for the given portfolio.
Investors Mutual Limited is the issuer of the Investors Mutual Australian Share Fund,
Investors Mutual Industrial Share Fund, Investors Mutual Future Leaders Fund,
Investors Mutual Australian Smaller Companies Fund, Investors Mutual Small Cap
Fund and Investors Mutual Equity Income Fund. Applications can only be made on
the form in the current Product Disclosure Statements dated 21 September 2017, or
through IDPS products that include these Funds. The Product Disclosure
Statements can be obtained by contacting Investors Mutual or at http://iml.com.au.
Potential investors should consider the Product Disclosure Statements before
deciding whether to invest, or continue to invest in the Funds.
The prospective P/E ratios and earnings forecasts referred to in
this presentation constitute estimates which have been calculated by IML's
investment team based on IML's investment processes and research.
© 2017 Morningstar, Inc. All rights reserved. Neither Morningstar, nor its affiliates nor
their content providers guarantee the data or content contained herein to be
accurate, complete or timely nor will they have any liability for its use or distribution.
To the extent that any of this information constitutes advice, it is general advice and
has been prepared by Morningstar Australasia Pty Ltd ABN: 95 090 665 544, AFSL:
240892 and/or Morningstar Research Limited (subsidiaries of Morningstar, Inc.)
without reference to your objectives, financial s ituation or needs. You should
consider the advice in light of these matters and, if applicable, the relevant Product
Disclosure Statement (in respect of Australian products) or Investment Statement (in
respect of New Zealand products) before making any decision to invest. Neither
Morningstar, nor Morningstar’s subsidiaries, nor Morningstar’s employees can
provide you with personalised financial advice. To obtain advice tailored to your
particular circumstances, please contact a professional financial adviser. Please
refer to our Financial Services Guide (FSG) for more information
www.morningstar.com.au/fsg.asp
Disclaimer
Recognising the value of absolute return strategies
Tim Carleton
Principal & Portfolio Manager
Auscap Asset Management
12/02/2018
7
This presentation is not a Product Disclosure Statement under the Corporations Act 2001 (Cth). The fundraising disclosure requirements of the Corporations Act 2001 (Cth) do
not apply to an offer of units in the Auscap Long Short Australian Equities Fund (Fund).
Information in this presentation is general information only and does not take into account a particular client’s individual objectives, financial situation, needs or circumstances,
nor does this presentation purport to contain all the information that a prospective investor may require in evaluating a possible investment in the Fund. A prospective investor
should conduct their own independent investigation and assessment of the Fund before making any investment, including obtaining investment, legal, tax and accounting advice
appropriate to their circumstances.
Auscap Asset Management Limited (Auscap), its related bodies corporate and associates, directors, officers and employees do not guarantee or make any representation or
warranty (whether express or implied) as to the success of the Fund, the repayment of capital invested in the Fund or any particular rate of return on investment in the Fund.
Past performance of the Fund is not indicative of future performance and should not be relied upon by investors to form expectations about the future performance of the Fund.
No investment in the Fund should be made without fully reviewing the information, the disclosures and the disclaimers contained in all relevant Fund documents, including in
particular the Product Disclosure Statement, a copy of which is available at www.auscapam.com. Prospective and existing investors should consider the Product Disclosure
Statement in deciding whether to acquire, or to continue to hold, an investment in the Fund.
Disclaimer
1. Who are we?
2. What are absolute and relative return strategies?
3. The differences between absolute and relative return strategies
4. The benefits of absolute return strategies
5. Conclusions
Contents
Who are we?
Auscap Asset Management is a value based long short Australian equities investment
manager established in 2012. Auscap Asset Management is the Responsible Entity and
Investment Manager for the Auscap Long Short Australian Equities Fund.
Auscap Fund
Value based long short Australian equities fund
The Auscap Fund is a registered managed investment scheme
Funds under management ~$570m
Accessible to retail investors and available on a number of platforms
12/02/2018
8
Who are we?
Long position characteristics
Target attractive low-risk total return (income + growth) opportunities
Cash producing businesses with strong return on invested capital trading at attractive prices
Transparent business models, with products/services that we are familiar with
High ROA, stable balance sheets and quality management
Short position characteristics
Low quality earnings, poor or negative cash generation
Complex business model and multiple assumptions required to meet growth targets
Low ROIC, stressed balance sheets and inexperienced or promotional management
Earnings in a downgrade cycle
What are absolute and relative return strategies?
Relative return funds
Most funds are relative return focused – they aim to generate higher returns that the market.
Absolute return funds
Absolute return funds are generally market agnostic – they aim to generate positive returns
irrespective of market conditions.
Differences
Focused on absolute returns and
absolute risks
Do not have to be fully invested, can
hold cash
Index unaware
Can invest long or short
Positions are sized by conviction
Can invest in alternative instruments
How is an absolute return strategy different?
12/02/2018
9
Difference
Focused on absolute
returns and absolute
risks
Benefit
Can deliver better risk
adjusted returns
Risk
Can underperform in
a rising market
What are the benefits/risks of absolute return strategies?
Year Fund A Fund B Fund C
Year 1 Return +18% +20% +10%
Year 2 Return –10% –30% –7%
Year 3 Return +10% +28% +6%
Simple Average Return +6% +6% +3%
-20%
-15%
-10%
-5%
0%
5%
10%
15%
20%
25%
0 1 2 3
Year
Compound Returns for Funds A, B & C
Fund A Return Fund B Return Fund C Return
Fund A Fund B Fund C
Simple Average Annual Return +6.0% +6.0% +3.0%
Average Compound Annual Return +5.3% +2.4% +2.7%
What are the benefits/risks of absolute return strategies?
-100%
-50%
0%
50%
100%
150%
200%
250%
Dec-1
2
Ju
n-1
3
Dec-1
3
Ju
n-1
4
Dec-1
4
Ju
n-1
5
Dec-1
5
Ju
n-1
6
Dec-1
6
Ju
n-1
7
Dec-1
7
Auscap performance* and cash holding
Auscap Cash holding
* Performance figures are calculated for the lead series net of all fees and expenses and assuming the reinvestment of all distributions. Actual performance may differ for
investments made in different classes or series. Past performance is not a reliable indicator of future performance.
Difference
Do not have to be fully
invested, can hold cash
Benefit
Can preserve capital
and gives optionality
Risk
Can underperform in a
rising market
What are the benefits/risks of absolute return strategies?
Source: IRESS, Auscap
Difference
Index unaware
Benefit
No passive positions
Risk
Can underperform in
a market where
sectors that aren’t
held do well for the
broader market
12/02/2018
10
What are the benefits/risks of absolute return strategies?
Auscap All Ords
Average annual returns 24.8% 10.9%
Annualised standard deviation 11.3% 11.2%
Average positive months 2.8% 2.8%
Average negative months 0.2% -2.7%
Number of positive months 45 40
Number of negative months 16 21
Difference
Can invest long or
short
Benefit
Broadens opportunity
to generate returns
and protect capital
Risk
Asymmetry of risk on
short positions
What are the benefits/risks of absolute return strategies?
-5%
0%
5%
10%
15%
20%
25%
30%
35%
40%
Con
sum
er
Dis
cre
tion
ary
Con
sum
er
Sta
ple
s
Energ
y
Fin
ancia
ls
Hea
lthcare
Ind
ustr
ials IT
Mate
rials
Rea
l E
sta
te
Tele
co
ms
Utilit
ies
Sector Exposure December 2017 Auscap vs ASX200
ASX200 Auscap
Source: IRESS, Auscap
Difference
Positions are sized by
conviction
Benefit
Highest portfolio
weightings in best ideas
Risk
Some concentration
risk
What are the benefits/risks of absolute return strategies?
Alternative Instruments
Equity/Index futures and options
Commodities
Unlisted securities
Foreign exchange
Interest rate derivatives
Pre-IPO companies
Exotic/OTC derivatives
Fixed Income securities
Hybrids/Convertibles
Difference
Can invest in alternative
instruments
Benefit
Additional ways to add to
returns
Risk
Increased risk from
liquidity, leverage and
participation in
alternative asset classes
12/02/2018
11
Differences Benefits Risks
Focused on absolute returns and
absolute risks
Can deliver better risk adjusted
returns
Can underperform in a rising
market
Do not have to be fully invested, can
hold cash
Can preserve capital and gives
optionality
Can underperform in a rising
market
Index unaware No passive positions – every
investment considered on its
merits
Can underperform in a market
where sectors that aren’t held do
well for a broader market
Can invest long or short Broadens opportunity to generate
returns and protect capital
Asymmetry of risk on short
positions
Positions are sized by conviction Highest portfolio weightings in
best ideas
Some concentration risk
Can invest in alternative instruments Additional ways to add to returns Increased risk from liquidity,
leverage and participation in
alternative asset classes
How is an absolute return strategy different?
Conclusions: a better way to manage capital
0%
50%
100%
150%
200%
250%
De
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c-1
4
Jan
-15
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b-1
5
Mar-
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May-1
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No
v-1
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De
c-1
5
Jan
-16
Fe
b-1
6
Mar-
16
Ap
r-1
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May-1
6
Jun
-16
Jul-
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Au
g-1
6
Se
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Oct-
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No
v-1
6
De
c-1
6
Jan
-17
Fe
b-1
7
Mar-
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Ap
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7
May-1
7
Jun
-17
Jul-
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Au
g-1
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Se
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Oct-
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No
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De
c-1
7
Auscap Long Short Australian Equities Fund* vs All Ordinaries Accumulation Index
Auscap Fund All Ordinaries Accumulation Index
JUL AUG SEP OCT NOV DEC JAN FEB MAR APR MAY JUN FYTD
FY13 1.4% 0.7% 1.2% 1.5% 9.8% -4.0% 8.3% 19.7%
FY14 4.7% 4.3% 5.8% 5.5% 2.9% 2.6% 1.3% 5.3% 0.7% 0.3% 3.8% 1.5% 46.0%
FY15 3.0% 5.2% -2.1% 2.2% -0.4% 0.4% 3.7% 4.9% 4.0% -1.4% 4.4% -7.5% 16.8%
FY16 3.5% 1.6% 4.8% 4.6% 4.7% 4.6% -3.0% -3.5% 3.2% -1.2% 1.0% -1.2% 20.1%
FY17 8.5% 2.1% -2.4% -2.7% -1.8% 4.0% -1.2% 0.4% 2.5% -0.8% -1.5% 1.2% 8.0%
FY18 -0.8% 2.8% 2.5% 7.0% 2.6% 1.6% 16.5%
* Performance figures are calculated for the lead series net of all fees and expenses and assuming the reinvestment of all distributions. Actual performance may differ for investments made in different
classes or series. Past performance is not a reliable indicator of future performance.
Fund details
Investment Vehicle Australian domiciled registered managed investment scheme
Fund Holdings 25 – 45 positions
Fund Administrator Link Fund Solutions
Custodian & Prime Broker Citigroup Global Markets Limited
Tax & Audit Ernst & Young
Maximum Gross/Net Exposure 200% / 150%
Minimum Investment $100,000
Commenced Date 3rd December 2012
Management Fee 1.5% of FUM[1] pa
Performance Fee 15% of outperformance over RBA Cash Rate[2]
Withdrawal Rights Monthly, with 1 month notice
Bid/Ask Spread 0.2% / 0.2%
Distribution Annually, following financial year end
[1] Management fee payable monthly.[2] Performance Fee is calculated as 15% of the total gross return less expenses and management fees in excess of the RBA Cash Rate over the performance period, payable semi-annually for the series class and monthly for the platform class. The performance fee is subject to a high water mark with respect to previous performance.
12/02/2018
12
Contact detailsLee Hopperton Jennifer Herbert
Head of Distribution Senior Distribution Manager
Phone: +61 2 8378 0806 Phone: +61 2 8378 0814
Email: [email protected] Email: [email protected]
Lauren Murphy
Distribution Manager
Phone: +61 2 8378 0800
Email: [email protected]
Plugging Into Technological Change
Kris Walesby
Head of ETF Securities Australia
12/02/2018
13
-100
0
100
200
300
400
500
600
1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016
Tech earnings have outpaced the wider market
Source: Bloomberg, ETF Securities as of close 14 September 2017
MSCI World IT EPS
MSCI World EPS
0.9
1.1
1.3
1.5
1.7
1.9
2.1
1998 2000 2002 2004 2005 2007 2009 2011 2012 2014 2016
Global Tech trading nearly 20 yr lows versus Market
Source: MSCI, Bloomberg, ETF Securities as of close 31 July2017
12m Fwd relative PE
+1 St Dev
-1 St Dev
12/02/2018
14
#Robotics
CONSUMER
ENTERPRISE
www.cbinsights.com 34
MEDICAL
12/02/2018
15
12/02/2018
17
Disclaimer
Thank you…
Enhancing the SMSF client experience in an age of disruption
Martin Morris
Head of Distribution, Praemium
12/02/2018
18
Advice models have evolved significantly over the last two decades as a result of financial and regulatory changes
Technological advances have also changed the way in which financial planning practices do business
We are seeing a noticeable shift in consumer behavior as a result of technological developments
Client engagement is becoming increasingly important as a result of changing consumer behaviour
Evolution or revolution?
Technological change
17 million out of 24 million
76% of silver surfers use Facebook
3/4 prefer to solve own
customer service issue
40%prefer self service over
human contact
199516 million users
20173.9 billion users
Trustee profile and behaviours
47 Average age of new
trustees in 201659 Average age of a
trustee in 2017
40% of HNW are using online
services for portfolio management
50% believing their financial adviser
should have a digital offering
Advisers at risk of losing control further to a more
sophisticated and self-driven client base
2025 Three-Quarters of the
Global Workforce will be Millennials
12/02/2018
19
Growth of Fintech
SMSF and RoboAdvice
No such thing as disruption
Digitally Focused Ability to answer investment trends quickly
Self-invested Model
Risk or Disturb?
Low Cost
SMSF and SMA
12/02/2018
20
SMSF and SMA Opportunity
The demand for ETFs increasing 20 per cent trustees planning to use them in their SMSF in the next 12 months--up from 18 per cent in the 2016 study.
Increased demand for advice52 per cent of trustees likely to turn to a financial planner for advice, and 48 per cent more likely to use an accountant.
International SMA SMSF trustees under represented in global assets. Access to low cost transparent direct equity or ETF specialist diversified portfolios
Providing specialist diversification70% of SMSF money in the three main asset classes. AEQ / Cash & TD / Direct Property
SMA Tech solving trustee problemsDelivering superior digitalexperience
Bespoke advice throughportfolio customisation
Significant Portfolio Management cost savings
Evolution or revolution?
Single administration platformFor custodial and non-custodial assets
The power of connectivity
12/02/2018
21
This presentation has been prepared by Praemium Australia Limited ACN 117 611 784 (‘Praemium’) and is for general information only. Praemium does not provide financial or product advice and nothing in the presentation whether visual or oral should be construed as advice. Every effort has been made to ensure that it is accurate, however it is not intended to be a complete description of the matters described. The presentation has been prepared without taking into account any personal objectives, financial situation or needs. It does not contain and is not to be taken as containing any advice or recommendation. Furthermore, it is not intended that it be relied on by recipients for the purpose of making investment decisions and is not a replacement of the requirement for individual research or professional tax advice. Praemium do not give any warranty as to the accuracy, reliability or completeness of information which is contained in this presentation. Except insofar as liability under any statute cannot be excluded, Praemium and their directors, employees and consultants do not accept any liability for any error or omission in this presentation or for any resulting loss or damage suffered by the recipient or any other person.
This document was accompanied by an oral presentation, and is not a complete record of the discussion held.
No part of this presentation should be used elsewhere without prior consent from the author.
SMSF Investments
Chris Andrews
Chief Investment Officer, La Trobe Financial
La Trobe Financial
12/02/2018
22
Investors & the search for control
The huntcontinues…
Declining interest rates…
12/02/2018
23
Make equities more attractive
SMSF Asset Allocations - Select
• Listed Australian shares – 29.4%• Cash and Term Deposits – 22.53%• Non-residential property – 11.3%• Residential property – 4.8%• LRBAs – 4.4%
Source: ATO Sept 2017
The risks of complacency
12/02/2018
24
Normalised deviance in investing
Fixed interest focused on capital preservation
The future: customisation
12/02/2018
25
The material in this presentation is general background information about La Trobe Financial’sactivities as at the date of this presentation. The information is given in summary form and does not purport to be complete. It is not intended to be relied upon as advice to investors or borrowers or potential investors or borrowers and does not take into account the investment objectives, financial situation or needs of any particular investor or borrower. These should be considered, with or without professional advice, when deciding if an investment or a loan is appropriate.
La Trobe Financial Asset Management Limited ACN 007 332 363 Australian Financial Services Licence 222213 Australian Credit Licence 222213 is the issuer and manager of the La Trobe Australian Credit Fund ARSN 088 178 321. It is important for you to consider the Product Disclosure Statement for the Credit Fund in deciding whether to invest, or to continue to invest, in the Credit Fund. You can read the PDS on our website, or ask for a copy by phoning us on 13 80 10
