The Future of Capital Markets The Changing Face of Asset Management

Transcription

1 The Future of Capital Markets The Changing Face of Asset Management May 2012 Representing Schroders: Greg Cooper Chief Executive Officer Schroder Investment Management Australia Limited ABN Australian Financial Services Licence Level 20 Angel Place, 123 Pitt Street, Sydney NSW 2000

2 Trends shaping the industry

3 Consolidation Funds 2,000 1,800 1,600 1,400 1,200 1, Number of Superannuation Funds Retail Public Sector Industry Corporate Source: APRA, excludes SMSF s

4 Institutionalisation Bank channels dominate Increasing use of models FOFA discourages freedom 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Retail Super Market Share OnePath BT/Westpac CBA/Colonial NAB/MLC AMP Source: Plan for Life and CIRA, Sep data points

5 What will MySuper do? 50 Investment Costs in basis points Australia US Canada Europe Global Source: Schroders, CEM Benchmarking, Worlds Lowest Cost Funds

6 Deleveraging to shape the economic landscape 200 Change in total Debt / GDP (%) Japan UK Spain France Italy US Germany Australia Source: Haver Analytics, National Central Banks, McKinsey Global Institute

7 Some investment implications Corporate bonds held in inventory by dealers As a % of market capitalization High yield secondary trading volume in the US As a % of market capitalization Sources: Bloomberg, Federal Reserve, BofA Merrill Lynch Research; data through December Note: Data represent Primary Dealer Holdings of Corporate Bonds >1-year Maturity in the Fed Flow of Funds report. The Federal Reserve Bank of New York's weekly release of primary dealer transactions; the net outright position includes all Corporate securities scheduled for immediate and forward delivery; inventories are expressed as a % of the investment grade and high yield bond market combined 2 Sources: NASD TRACE, BofA Merrill Lynch Research; data through December Note: TRACE figures are 30-day moving averages of daily high yield secondary trading volumes

8 The elephant in the room 10% Inflation Adjusted 10 Year Rolling Returns (%p.a.) 9% 8% 7% 6% 5% 4% 3% 2% 1% Objective based target return Australian Median Growth Manager inflation adjusted rolling 10 years return 5% excess Return target 0% -1% Dec-94 Dec-96 Dec-98 Dec-00 Dec-02 Dec-04 Dec-06 Dec-08 Dec-10 Source: Schroders. Morningstar Australian Growth Manager. RBA. Net of fees, gross of tax.

9 What we thought would happen What did happen Efficient Frontier 1980's Efficient Frontier 's and 2000's 19% 10.5% 18% 10.4% 17% 10.4% 16% 80: % Return (%p.a.) 15% 14% 13% 12% 40:60 60:40 Return (%p.a.) 10.3% 10.2% 10.2% 10.1% 40:60 60:40 80:20 11% 10.1% 10% 10% 15% 20% 25% Risk - St Dev (% p.a.) 10.0% 6% 8% 10% 12% 14% 16% Risk - St Dev (% p.a.) Source: Schroders. Datastream. ASX 200 and UBS. A Composite index. Actual risk (standard deviation) and return for the period 1 Jan 1980 to 31 Dec 1989 and 1 Jan 1990 to 31 Dec 2010.

10 The asset management conundrum Positive real returns CPI + 4-5% Over reasonable time frames Fixed asset allocation Peer relative

11 Traditional model gives volatile results 15% 10 Year Rolling Real Returns 10% 5% 0% -5% Source: Schroders, Global Financial Data, Balanced fund is 30% global equity, 30% Australian equity, 30% Australian bonds, 10% cash.

12 Significantly more flexibility required 50% Difference in Asset Allocation from Standard 60/40 40% More Defensive 30% 20% 10% 0% -10% -20% -30% -40% More Growth -50% Source: Schroders

13 Investment Process Fund Impact High Low Objective Fund Strategy Asset Class Strategy Implementation Selection Monitoring CPI+ 70 / 30 Small cap, Large Cap, Active, Passive Benchmark Restrictions Tax XYZ Asset Management Performance vs Benchmark 1,3 yrs Source: Schroders, stylised

14 How likely is this to continue? % p.a Year Real Returns for Equities Credit Suisse Global Returns Yearbook, 2012, Real returns from 1 January 1900 to 31 December 2011.

15 Part of the solution? International Shares Fixed Interest Australian Shares International Shares Alternatives Property Fixed Interest Australian Shares Property Alternatives

16 Key Industry Trends MySuper and FOFA Reforms Industry consolidation Investment offering Substitution

17 Investment presentation Disclaimer statement This presentation is intended solely for the information of the person to whom it was provided by Schroder Investment Management Australia Limited (ABN , AFSL ) (Schroders). Investment in Schroder Funds may be made on an application form in the Product Disclosure Statement (PDS) which is available from the Schroders website The information contained in this Presentation is general information only and does not take into account your objectives, financial situation or needs. Before acting on the information contained in this Presentation you should obtain a copy of the PDS and consider the appropriateness of the information in regard to your objective, financial situation and needs before making any decision about whether to invest, or continue to hold. Schroders does 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, Schroders and its directors, employees, consultants or any company in the Schroders Group do not accept any liability (whether arising in contract, in tort or negligence or otherwise) for any error or omission in this presentation or for any resulting loss or damage (whether direct, indirect, consequential or otherwise) suffered by the recipient of this presentation or any other person. Returns shown are before tax and fees and all income is reinvested. You should note that past performance is not a reliable indicator of future performance. Opinions constitute our judgement at the time of issue and are subject to change. The information and opinions and associated estimates and forecasts contained in this document have been obtained from or are based on sources believed by us to be reliable, but no responsibility can be accepted for error of fact or opinion. For security reasons telephone calls may be recorded. Opinions, estimates and projections in this article constitute the current judgement of the author as of the date of this article. They do not necessarily reflect the opinions of Schroder Investment Management Australia Limited, ABN , AFS Licence ("Schroders") or any member of the Schroders Group and are subject to change without notice. 16