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September 2012
Nikko AM Pulse
This information is for professional investors only. Not for
redistribution.For more information, visit
http://en.nikkoam.com/worldseriesfundplatform
WSFP14092012
August was a month where the action was in the pool,the stadium
and on the podium, but not in markets, asvolumes dipped lower and
volatility reached a five yearlow. Investor activity was muted,
although someinteresting noise from the Quantitative Easing (QE)
andcommodity camps kept things interesting. This monthsome of the
team visited our offices and contacts in
Sydney and Auckland, where we exchanged ideasregarding
investment solutions and the pattern ofdemand in those regions. In
the note below, we sharesome of our takeaways from that trip, as
well currenttrends in searches and manager performance.
Antipodean Angst Notes from Austral ia
and New Zealand
With over $1.3trn in pension fund assets (the fourthlargest pool
globally), a mature superannuation fundindustry and a keen eye on
energy, resources and Asia,Australian institutions rank as
heavyweights on a globalscale. Consultant coverage is comprehensive
andsophisticated, despite the fact that intense competitionhas
squeezed fees in this advisory layer even morethan the norm across
global markets. The sheer size ofsome of the larger superannuation
funds - in a 2011survey by Pensions and Investments, and
TowersWatson, there were 15 Australian super funds withassets
totaling $368bn in the top 300 global funds - hasled to fee
pressure at a manager level too, as steadygrowth of passive
mandates and the addition of in-house investment talent is
occurring at the expense of
active management mandates.
Interestingly, we perceived there to be sparse interest
inAsia-focused or resource/commodity themedinvestments, which are
enduring themes across our
J apanese, US and European contacts. This wasattributed to the
fact that the Australian economy isalready very resource driven and
dependent on exportsto Asia; therefore these factors were
indirectly embodiedin a domestic equity allocation. Within
domesticallocations, still-high bank deposit rates (around the
4%level) raised the bogey for any yield based strategyalthough, as
we are witnessing in J apan, high dividendyield equities remain in
demand. There was someinterest merging market debt and active
credit perceived as two areas needing specialist knowledgeand
on-the-ground research.
A month ly comment from the investment team of Nikko AMs World
Series Fund Platform.
The pending introduction of MySuper, a proposed low-cost default
option designed for the 80% ofsuperannuation members who are
disengaged anduninterested in directing their own funds, has led
tosome hand wringing within the investment managementcommunity. Its
overarching emphasis on cost reductionand high transparency
suggests some increase in
passive options, but certainly ongoing pressure onactive
management fees.
The World Series Fund Platform team at Tyndall AssetManagement
runs multi-manager portfolios in bothglobal and domestic equities.
Its global product stemsfrom a longstanding need on the part of
some Australiaand New Zealand based investors to obtain
globalexposure and source best of breed managers via a one-stop
investment solution.
Within New Zealand, our conversations focused on
retailinvestors, as the smaller size of the institutional
market
made demand patterns more esoteric. The marketssmall size and
relative isolation has, ironically, led to itssuitability as a
testing ground for new strategies. Theappetite for such strategies
seemed subdued though;multi-manager products were more prevalent
than inAustralia perhaps a reflection of the smaller size ofaverage
accounts and there was, interestingly, nointerest in some of the
headline NZ themed strategiessuch as timber, where we have seen
sporadic interestfrom global investors.
We saw some faint interest in the diversified
growth/multi-asset strategies that have gainedtremendous
traction in Europe and the US, butotherwise, traditional solutions
including balanced,seemed to fit the bill.
Late summer in the Year of the Pendulum
One of our Asian managers referred to the current yearin China
as the year of the pendulum, but it seems anapt description of the
rest of the world too. Over themonth the S&P reached a four
year high, bringing itsyear to date return to a respectable 12.5%.
Othermarkets were driven by strong performance in financials
and although agricultural commodities retrenched a
littlefollowing Julys gains, renewed QE and macro chattercaused
gold and oil to soar.
7/29/2019 Nikko AM Pulse 09-12
2/2
September 2012
Nikko AM Pulse
This information is for professional investors only. Not for
redistribution.For more information, visit
http://en.nikkoam.com/worldseriesfundplatform
WSFP14092012
Asia was again in mixed territory, as the Hang Sengrose whilst
the Shanghai Comp and the Nikkei weredown slightly. It was a busy
period for Chinese data 1H12 GDP growth was 7.8%, which still
represents astrong headline figure in comparative terms, albeit
shortof some expectations. Overall export growth from Chinaslowed,
but was still up 9.2% in 1H12 (with an increaseof 17% in exports to
ASEAN countries), whilst real retailsales, urban consumption and
real rural income were allup double digits.
The bugbear of inflation was muted, with CPI at 3.3% in1H12,
down from 5.4% for the full year of 2011. Despitethese figures
however, the Asian region continues toperform in a lacklustre way,
although managers areexpecting more positive performance to round
out theyear.
August was overall a solid month for equity managers,as well as
long/short equity and alternative creditstrategies.
Interestingly, the very strategies that prevailed duringlast
years negative risk environment, such as macroand CTA strategies,
have disappointed year to date,with indices down for the year. Much
has been made ofhedge fund managers failing to make headway
versustraditional solutions this year, but this has not slowed
thegrowth of the industry by size or manager number.
This document is for information purposes only and is not
intended to be an offer, or a solicitation of an offer, to buy or
sell any investments. This documentshould not be regarded as
investment advice. In making any investment decision, prospective
investors must rely on their own examination of the meritsand risks
involved.
This document has been prepared and issued by Nikko Asset
Management Europe (Nikko AME), on the basis of publicly available
information, internallydeveloped data and other sources believed to
be reliable. While reasonable care has been taken to ensure that
the information is accurate and anyassumptions made or simulations
used are fair and reasonable, Nikko AME, nor any director, officer
nor employee thereof, shall in any way makeguarantee,
representation or warranty of and be responsible for the accuracy
or completeness of this document. Any opinions expressed in this
documentmay be subject to change without notice. Nikko AME is
authorised and regulated by the Financial Services Authority and is
registered in England No.1803699.Registered address: 1 London Wall,
London, EC2Y 5AD.
Important Information
Latest figures report the number of hedge funds to haveincreased
by 4.6% to over 14,000, with assets in theindustry now topping $2.3
trillion. This refutes thesuggestion that increased barriers to
entry havestemmed the pace of fund launches, or that the
industryhas had its day and the attendance and interest levelat
recent hedge fund events would substantiate this.Following a period
of consolidation and huge cuts in sellside research coverage, it is
estimated that currently50% of the stocks in the US have no
meaningful analystcoverage. However, whilst this might seem to
suggest
an increased information advantage, the huge increasein
regulation and information sharing via internet siteshas surely
eroded some of the edgeand certainly thelongevity of any edge that
fundamental research cansustain.
***As always we welcome your feedback, questions
andcomments.
The Investment Team
Nikko AM World Series Fund Platform
September 2012
If you are a distributor and are looking for a
specialistinvestment solution for your clients, please contact us
aboutour worldwide third-party fund manager research.
E: [email protected]
If you are a fund manager that can add value with
specialistexpertise in strategies which Nikko AM doesnt have
in-house,please contact us we may be interested in appointing you
assub-advisor to a new product launch for our 300
intermediariesacross Asia.
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