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CLIENT INVESTMENT UPDATE Wholesale Products. 30 September 2014. General advice warning and disclaimer.

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Presentation Transcript
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General advice warning and disclaimer
    • The information in this presentation has been provided by MLC Investments Limited (ABN 30 002 641 661) a member of the NAB Group of Companies, 105–153 Miller Street, North Sydney 2060 for advisers only. No company in the NAB group, nor MLC limited guarantees the capital value, payment of income or performance of any fund referred to in this presentation.
    • Any opinions expressed in this communication constitute our judgement at the time of issue and are subject to change. We believe that the information contained in this communication is correct and that any estimates, opinions, conclusions or recommendations are reasonably held or made as at the time of compilation. However, no warranty is made as to their accuracy or reliability (which may change without notice) or other information contained in this communication. Any projection or forward looking statement in this report is provided for information purposes only and no representation is made as to the accuracy or reasonableness of such projection or that it will be met.
    • Past performance is not a reliable indicator of future performance. The value of an investment may rise or fall with the changes in the market. Returns are not guaranteed and actual returns may vary from target returns described in this document. Please note that all performance reported is before management fees and taxes, unless otherwise stated.
    • This communication contains general information and may constitute general advice. Any advice in this communication has been prepared without taking account of individual objectives, financial situation or needs. It should not be relied upon as a substitute for financial or other specialist advice.
    • Before making any decisions on the basis of this communication, you should consider the appropriateness of its content having regard to your particular investment objectives, financial situation or individual needs. You should obtain a Product Disclosure Statement or other disclosure document relating to any financial product issued by MLC Investments Limited (ABN 30 002 641 661) and consider it before making any decision about whether to acquire or continue to hold the product. A copy of the Product Disclosure Statement or other disclosure document is available upon request by phoning the MLC call centre on 132 652 or on our website at mlc.com.au.
  • This information has been provided by MLC Limited (ABN 90 000 000 402) members of the
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Table of contents

1.

Market performance

2.

Investment Futures Framework

3.

Activity this quarter

4.

More analysis of returns

Where to find client tools

5.

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1.

Market performance

All asset classes delivered positive returns over 1, 3 and 5 years. Australian shares lagged global in the quarter.

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1.

Market performance

A positive year for most global share markets but returns are relatively modest compared to a quarter ago.

6

Source: Iress

slide7

1.

Market performance

Iron ore accounts for around a quarter of Australia’s exports. Prices have fallen to a five year low, driving the Australian share market lower.

Source: Datastream

7

slide8

1.

Market performance

Australian company dividend payout ratios are already at or near record levels for key market sectors. There is little scope for dividends to grow faster than earnings.

Source: Macquarie Research, from Maple-Brown Abbott

slide9

1.

Market performance

US manufacturing gathers momentum while China’s growth slows. Developments in China remain a key source of risk for Australia and the AUD.

HSBC - Markit Purchasing Managers Index of Manufacturing Activity

Source: HSBC,Markit, MLC

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2.

  • Our scenarios didn’t change over the quarter.
  • Investment Futures Framework

Three speed global economy (China soft landing)

Higher

(Mild) inflationary resolution

Developed market austerity, recession, stagnation

Early re-leveraging

Extended quantitative easing

Probability

Sovereign yield re-rating

Reform

China hard landing

Inflation shock

Two speed recovery

Extended risk aversion

Lower

One speed slow growth world

Stagflation

For a description of each scenario, please refer to ‘MLC’s scenario insights & portfolio positioning’, September 2014.

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2.

  • MLC Inflation Plus − Moderateasset allocation at 30 September 2014
  • Investment Futures Framework
  • − MLC Inflation Plus positions
  • Unchanged positions:
  • Higher foreign currency exposure
  • Defensive global shares (instead of broad market global shares)
  • No direct allocation to long duration traditional bonds
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MLC Inflation Plus portfolios

2.

Objective-driven allocations

Source: MLC as at 30 September 2014

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2.

  • Investment Futures Framework
  • − MLC Horizon 4 Balanced positions
  • MLC Horizon 4 – Balanced asset allocation at 30 september 2014
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2.

  • Potential returns have improved for fixed income, as yields have risen, and Australian shares, because the market declined this quarter.
  • 40 SCENARIO SET PROBABILITY WEIGHTED REAL RETURNS (SEP 2014) (5 YEARS, 0% TAX WITH FRANKING CREDITS, PRE-FEES, PRE-ALPHA)
  • Investment Futures Framework − Potential returns

Source: MLC

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3.

  • Activity this quarter – Changes to MLC Inflation Plus asset allocations

No changes to Moderate and Assertive. The following adjustments to Conservative increased defensive positioning before the Australian share market decline in September.

15

slide16

3.

  • Activity this quarter – Changes to MLC Horizon 4 Balanced asset allocation

Adjustments to increase defensive positioning before the Australian share market decline in September.

slide17

3.

  • Activity this quarter – Changes to managers
  • Visit mlc.com.au for details of strategy changes. Click on Adviser site, MLC Investments tab and Latest News

17

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4.

  • More analysis of returns
  • MLC Inflation Plus portfolio returns
    • Relative to benchmark
    • Contributors to returns
  • MLC Horizon portfolio returns
    • Contributors to returns
    • Benchmark indices
    • Relative to peers
  • Asset class fund returns
    • Relative to benchmark
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4.

  • A. MLC Inflation Plus
  • − Returns relative to benchmark

Source: MLC

19

slide20

4.

  • MLC Inflation Plus Assertive Returns (before fees and taxes) relative to its target
  • Delivered 3.3% pa real return over 7 years to 30 Sep 2014. Currently on track to deliver target return over shorter time frames.
  • A. MLC Inflation Plus Assertive
  • − Returns relative to benchmark

This highlighted point is the real return over 7 years to 30 Sep 2014

Source: MLC

slide21

4.

  • CONTRIBUTION TO TOTAL RETURN BY ASSET CLASS (BEFORE FEES AND TAX)
  • A. MLC Inflation Plus Assertive
  • − Contributors to returns

Source: MLC

slide22

4.

  • B. MLC Horizon
  • − Contributors to returns

Key contributors to most portfolios over the quarter

  • Global shares (unhedged)
  • Fixed income
  • Multi-asset real return strategies

Keycontributorstomostportfoliosovertheyear

  • Global shares (unhedged)
  • Australian shares
  • Fixed income
slide23

4.

  • Returns are above median over most timeframes, and all are above median over 5 and 10 years
  • B. MLC Horizon – Relative to peers – quartile performance rankings for MLC Wholesale

Note: Peer universe is the MLC Morningstar Wholesale Universe

Source: Morningstar Direct

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4.

  • Recently the shorter term results have not been as strong.
  • MLC Horizon 4’s one year peer relative return has slipped below median. The main reasons are:
  • our global and Australian share managers have underperformed their market benchmarks
  • we have a lower allocation to Australian REITs than our peers and performance has been quite strong
  • B. MLC Horizon
  • − Relative to peers

24

slide25

4.

  • C. Asset class funds
  • − Relative to benchmark

*

* This index has recently changed it’s name from UBS to Bloomberg.

Source: MLC

25

slide26

5.

  • Where to find client tools
  • Go to the Adviser section of mlc.com.au, then go to
  • MLC Investments/Performance/Commentaries.