Research Insights
Why did ANZ buy Suncorp Bank?
Senior Equity Analyst for Banking, Nathan Zaia, on the ANZ-Suncorp deal.
Moynes, a former educator and financial adviser, wrote the short book after his own struggles in retirement and subsequent interviews with other retirees. He believes that there’s a predictable and identifiable pattern to retirement, and it involves four phases:
The Sustainable Investing Flows Landscape for Australasian (Australia and New Zealand) Fund Investors provides a high-level view of the trends in asset flows across the sustainable fund universe, and any corollaries to the rest of the Australasian fund universe.
With negative gearing, where costs of owning a rental property exceed revenues, the ‘loss’ can be charged against other personal income. Some people seem to think the loss itself is a good thing because it reduces their tax, but the tax savings only reduces the loss: it is still a loss.
Are absolute return managers exhibiting the skill to consistently deliver on all their objectives, and are these strategies worth the additional cost for investors? Should absolute return bond managers be expected to protect the downside as well as meeting absolute return objectives?
Exchange-traded funds’ growing popularity among retail investors continued to drive growth in this sector, albeit at a slower pace in 2022. Net new flows declined compared with 2021 as investors remained cautious amid volatile global markets. Asset growth was, however, supported by multiple successful new launches in 2022.
When engaging with asset managers, Morningstar has recently seen a softening of language around green claims. An unintended consequence of the focus on greenwashing has likely contributed to the rise of greenhushing, which is the antithesis of greenwashing.
Although holders of large super balances will be hit by the higher tax, the fears of a hard cap forcing the removal of money from super, or the imposition of tax at the top personal marginal rate, have not been realised. The delay until after the next election also gives time for consultation and modification.
In our February 2023 edition, we present a list of 22 strategies that we believe are worth investors’ consideration. Since our last edition, we have added one strategy and have seen two strategies graduate into full coverage for our 2023 review cycle.
Sustainable funds have faced a challenging 12 months, with only 35% outperforming their respective category peers over the calendar year. Yet despite these performance headwinds, Australian investors have continued to support sustainable investing with fourth-quarter inflows up 311% over the previous quarter.
Much has been written in 2022 about the death of the so-called 60/40 portfolio. Many suggest it isn’t an appropriate solution for future portfolio construction. This paper will explore these concerns and also explore whether the 60/40 portfolio may now be even better placed for the future.
Drive to Survive, the gripping and successful Netflix series on Formula 1 racing, is also a very fitting motto for investment management, as it captures the fierce and innovative competition for survival of the fittest. The parallels are clear, with storied histories, narratives, and defining brands, teams both large and boutique, strong leaders, and never-ending battles for success. The Formula 1 teams and fund managers are both trying to achieve a singular objective: win.
The momentous rise in government-bond yields since the second half of 2021 has had one unexpected effect: shrinking income distributions. This may be particularly surprising given bond managers have been able to reinvest at progressively higher yields, and presumably they are able to distribute more income.
When it comes to sustainable investing, climate change has never been higher on the agenda. This work is critical, but the scale of capital needed for the transition is significant. According to the COP27 agreement, a global transformation to a low-carbon economy is expected to require an investment of at least USD 4-6 trillion per year.
Sustainable funds have faced a challenging 12 months, with only 33% outperforming their peers within their respective categories. The longer-term picture remains more positive, with 52% of sustainable investments with five-year track records outperforming peers within their respective Morningstar Categories. This quarterly paper highlights recent trends within sustainable retail investments in Australia.
Sustainable funds have faced a challenging six months, with only 31% outperforming their peers within their respective categories. The longer-term picture remains more positive, with 55% of sustainable investments with five-year track records outperforming peers within their respective Morningstar Categories.
Morningstar’s monthly Best Stock Ideas highlights high-quality Australian and New Zealand companies, which are currently trading at discounts to our assessed fair values. The ideas, chosen from our coverage of nearly 200 companies, are intended to have broad application in a variety of equity strategies, but individuals should consider their personal investment goals and positioning before investing.
No single Australian’s retirement is the same—the notion of the “average” client simply doesn’t exist. But advisers know that. After all, the advice industry has been providing personalised strategies for years and helping retirees answer the big question: How much should I spend each year? But if personalisation is the way forward, is it time to consider the role of minimum drawdown rates in superannuation?
At a time when the Australian Prudential Regulation Authority is calling on Australian super fund trustees to improve the frequency and methodology used in unlisted asset valuations, perhaps we should also remind ourselves how abysmal Australia’s portfolio holdings disclosure requirements are when compared with other countries’.
“Fingers Crossed” read the headline of The Australian Financial Review last weekend. Two words investors should never rely on. Appeals to hope should be a wake-up call in the current environment. They should shake up the complacent and reinforce the need for capital preservation. Luck is not a sustainable investment strategy. There is likely to be much more economic pain ahead before greener pastures emerge.
Consensus has shifted overwhelmingly towards expecting higher interest rates to address burgeoning inflationary pressures—it wasn’t too long ago that the Reserve Bank of Australia was maintaining a yield-curve-control policy and projecting to keep interest rates on hold until 2024. Changes in the shape of the Australian yield curve over this period tell the story—it’s risen and steepened significantly, particularly at the front end and intermediate maturities.
In the past year, inflation has risen to high levels in many Western countries including Australia, driving interest rate expectations up and bond and equity markets down. Cost-of-living concerns and fears of recession are growing, but Australian equity investors shouldn’t panic.
Many Australian investors, including the large superannuation funds, are allocating assets to private markets such as private equity, unlisted infrastructure and private debt. In the right structure, private markets have positively contributed to portfolio return outcomes. However, financial advisers often cite liquidity and transparency of the underlying investments as the biggest challenge to allocating more to private markets. But is it the Australian retail platform infrastructure that constrains advisers from allocating private assets to client portfolios? Or is liquidity more crucial for investor needs when constructing portfolios for the retirement income phase?
Market conditions have shifted dramatically in 2022, driven by an outbreak of global inflation to the level not seen in four decades. The easy monetary policy era appears to be over, and markets are adjusting to the reality that central banks may not be prepared, or able, to step in and support asset values with stimulatory settings. Against this backdrop, the selloff in global equities has been sharp, but it is noteworthy that there has been a large dispersion in manager performance particularly when differentiated by style.
Bringing inflation under control will probably require a meaningful contraction in economic activity. The nightmare scenario would be stagflation, where central banks do not kill growth, but inflation escapes unscathed.
Last week the future for banks looked bright. Rising interest rates would nourish emaciated margins. A red-hot economy would keep new borrowers coming through the door and credit growth strong. The $200 billion Australians had squirreled away in savings and offset accounts would ward off defaults or an economic slowdown.
The following user guide is for Morningstar Direct users to be able to download their model portfolios that can be easily imported into Morningstar’s Portfolio X-ray tool on Adviser Research
Centre and AdviserLogic.
The first quarter of calendar year 2022 represented the worst quarter on record for the AusBond Composite Index, returning -5.88%. It was also the worst month on record, returning -3.75%. Commodities continued to benefit from de-globalisation, while interest rate expectations hammered fixed-rate investors.
Shares in Ryman Healthcare are 40% below our NZD 15.20 fair value estimate, with shareholders penalised for transient issues, or industry problems not shared by Ryman. Rivals struggle with old facilities and declining occupancy, and one third of Australia’s care homes lose money. The industry is consolidating and Australian providers exiting, despite demographic tailwinds. Meanwhile, Ryman’s demand is underpinned by the ageing population, its brand, and track record of care.
In our recent article, “Australian Equity Performance: What’s Driving Markets,” we looked at return drivers in the domestic market that had begun to soften following a strong pandemic-rebound period. We decided to see how variability in return profiles between styles and sectors can be managed within a portfolio’s Australian equity allocation. One key observation lately has been the variance in fortunes between value and growth investment styles driven by divergent sector performance.
Over the past seven years, cryptocurrencies have rocketed from about $5.2 billion in market capitalization for the top 100 coins to nearly $1.7 trillion as of January 2022. Cryptocurrencies now represent the fourth-most popular type of investment among investors, behind only stocks, mutual funds, and bonds. Bitcoin alone has a market cap that would rank in the top 10 largest companies in the S&P 500.
The 2022/23 federal budget has delivered the third round of significant fiscal stimulus in as many years. While most of the stimulus was necessary, at some point the piper must be paid. Would the budget have been any different if it wasn’t an election year?