consultum financial advisers 20 november 2006 model portfolio enhancements & department update

Consultum Financial Advisers

20 November 2006

Model Portfolio Enhancements & Department Update

Consultum Financial Advisers20 November 2006 2

Contents

1. Model Portfolios

2. Current Research Analysis

3. ‘BOB Highlights’


1. Model Portfolios

1.1 Background

- Committed to supply for all approved platforms

- Portfolios available for:* IOOF Pursuit Select (IPS) & Core* Navigator Investment & Retirement Services* ING OneAnswer Super/ Pension/ Investments* CFS FirstChoice Super/ Pension/ Investments* Lonsec Model Portfolios* plus MLC MasterKey & Custom

- Available for the six standard client risk profiles

- Can use without platforms. Eg DIY Super


1. Model Portfolios

1.2 Recap

- Suitable to use when providing an ‘investment service’ as part of value proposition – A & B grade clients

- Multi manager better when not servicing clients - A & B grade clients

- Portfolios use sector specific funds

- Modelled on each platforms investment menu

- Investment policy are ‘rules & boundaries’

- Asset allocation used is van Eyk (subject to change)

- Quarterly reporting provided

- Portfolios & quarterly reporting available through Xplan

- Adviser role is portfolio administration – annual reviews re-weighting


1. Model Portfolios

1.3 Investment Objectives

- Capital Safe: Aim is capital protection & hence 100% defensive assets

Objective is to outperform cash by 1% over 3 yearsSuggested minimum investment timeframe is 3 years

- Conservative & Moderately Conservative: Aim is capital stability with some limited exposure to growth assets

Objective is to outperform cash by 2% & 3% over 5 yearsSuggested minimum investment timeframe is 5 years

- Moderate Growth, Growth & High Growth: Aim is capital growth through a high exposure to growth assets

Objective is to outperform cash by 4%, 5% & 6% over 7 yearsSuggested minimum investment timeframe is 7 years


1. Model Portfolios

1.4 Investment Policy

- Portfolio investment management style - neutrality

- Active & passive asset managers

- Regional asset allocation

- Strategic versus tactical asset allocation

- Optimal number of managers

- Market segmentation

- Currency management

- Alternate asset classes:

* Direct Property * Short selling * Derivatives

* Boutiques * Currency management


1. Model Portfolios

1.5 Asset Allocation

- Use van Eyk strategic asset allocation

- Capital safe risk profile previously 100% cash & fixed interest

New recommended asset allocation 40% cash/ 30% Aust FI/ 10% High Yield/ 20% International FI

- High yield is generally listed income securities/ sub investment grade corporate debt

- Regard aggressive mortgage trusts as ‘high yield’ –mezzanine debt/ construction financing etc

- Tailoring asset allocation – document in SOA’s


1. Model Portfolios

1.6 Selected Fund Managers

- Ultimately controlled by asset allocation & investment policy

- Eg four Australian equities funds required – style neutral

- Review investment universe/ quant & qual screen on:

* Track record * Review research reports

* Research ratings * Meet portfolio managers & team

* Vet tracking errors/ information ratios/ review manager ‘style’

* Blend potential portfolios & recommend

- Cash & fixed interest, understand risks/ constraints/ asset allocation

- Vet ongoing performance/ all information & changes


1. Model Portfolios

1.7 Platform Portfolios

• IOOF Pursuit Core (old IPS models)- CASH: IOOF Cash Enhanced Trust- AUSTRALIAN FIXED INTEREST: IOOF W FI Interest Trust/ Challenger W High Yield- INTERNATIONAL FIXED INTEREST: Macquarie Diversified Fixed Inter. Fund- PROPERTY: Legg Mason Property Trust- AUSTRALIAN EQUITIES: Ausbil Dexia Aust. Active Equity Fund/ Orion Australian Share Fund/ IOOF Perennial Value Aust Shares Trust/ Perpetual W Industrial Fund- INTERNATIONAL EQUITIES: Axa Bernstein Global Value Equity Fund/ Credit Suisse International Shares Trust/ GSJB Were International Fund/ Platinum International Fund

• IOOF Pursuit Select- AUST. FIXED INT.: AMP Enhanced Yield Class A in place of Challenger High Yield- PROPERTY: GSJB Were Property Securities in place of Legg Mason Prop. Securities- AUSTRALIAN EQUITIES: Challenger Aust. Share in place of Ausbil Active Equity/ Schroder Australian Share in place of Orion Australian Share- INTER. EQUITIES: Zurich International Share in place of GSJB Were International


1. Model Portfolios

• Navigator Retirement & Investment Service

- CASH: UBS Cash Fund

- AUSTRALIAN FIXED INTEREST: BT Wholesale Fixed Interest Trust/ Challenger W High Yield

- INTERNATIONAL FIXED INTEREST: Macquarie Diversified Fixed Inter. Fund

- PROPERTY: BT Property Securities Fund

- AUSTRALIAN EQUITIES: Ausbil Dexia Aust. Active Equity Fund/ Orion Australian Share Fund/ IOOF Perennial Value Aust Shares Trust/ Perpetual W Industrial Fund

- INTERNATIONAL EQUITIES: Axa Bernstein Global Value Equity Fund/ Credit Suisse International Shares Trust/ GSJB Were International Fund/ Platinum International Fund

• Note, no portfolios for Navigator Access due to menu limitations. Recommend diversified use with sector blend.


1. Model Portfolios

• ING OneAnswer Super/ Retirement/ Investment

- CASH: ING Cash

- AUSTRALIAN FIXED INTEREST: Optimix Australian Fixed Interest Fund/ AMP Capital Enhanced Yield Fund

- INTERNATIONAL FIXED INTEREST: Merrill Lynch Monthly Income Fund

- PROPERTY: Credit Suisse Property Trust

- AUSTRALIAN EQUITIES: BGI Australian Shares Fund/ IOOF Perennial Value Aust Shares Trust/ Perpetual Australian Shares Fund/ Schroder Australian Equities Fund

- INTERNATIONAL EQUITIES: Axa Bernstein Global Value Equity Fund/ Credit Suisse International Shares Trust/ Zurich International Fund/ Platinum International Fund


1. Model Portfolios

• CFS FirstChoice Super/ Pension/ Investments

- CASH: CFS Cash Fund

- AUSTRALIAN FIXED INTEREST: Axa Alliance Australian Fixed Int. Fund/ Challenger W High Yield

- INTERNATIONAL FIXED INTEREST: CFS Diversified Fixed Interest Trust

- PROPERTY: BT Property Securities Fund

- AUSTRALIAN EQUITIES: Ausbil Australian Active Equity Fund/ BGI Australian Share Fund/ IOOF Perennial Value Aust Shares Trust/ Schroder Australian Equities Fund

- INTERNATIONAL EQUITIES: Axa Bernstein Global Value Equity Fund/ BT Core Global Share Fund/ Credit Suisse International Shares Trust/ Platinum International Fund


1. Model Portfolios

• Ex Lonsec Model Portfolios

- CASH: IOOF Cash Enhanced Trust

- AUSTRALIAN FIXED INTEREST: IOOF Wholesale FI Interest Trust/ Challenger W High Yield

- INTERNATIONAL FIXED INTEREST: BT Global Fixed Interest Fund

- PROPERTY: MLIM Combined Property Income Fund

- AUSTRALIAN EQUITIES: Ausbil Australian Active Equity Fund/ Orion Australian Share Fund/ IOOF Perennial Value Aust Shares Trust/ Portfolio Partners High Growth Shares Trust

- INTERNATIONAL EQUITIES: Axa Bernstein Global Value Equity Fund/ Barclays International Share Fund/ Zurich International Fund/ Platinum International Fund


1. Model Portfolios

• MLC MasterKey Custom

- CASH: UBS Cash Enhanced Trust

- AUST. FIXED INT: Credit Suisse Aust FI Interest Fund/ Challenger W High Yield

- INTERNATIONAL FIXED INTEREST: Macquarie Diversified Fixed Interest Fund

- PROPERTY: Legg Mason Property Trust

- AUSTRALIAN EQUITIES: Ausbil Dexia Aust. Active Equity Fund/ Barclays Australian Share Fund/ IOOF Perennial Value Aust Shares Trust/ Perpetual W Industrial Fund

- INTERNATIONAL EQUITIES: Axa Bernstein Global Value Equity Fund/ Credit Suisse International Shares Trust/ GSJB Were International Fund/ Platinum International Fund

• Note, no portfolios for MasterKey due to menu limitations. Recommend diversified use with sector blend.


1. Model Portfolios

1.8 Current Issues

- Aim to align over time - Ausbil Active Equity inclusion first step (see new Model Portfolios report for specific recommendations)

- New format for presenting portfolios – one table!- Quarterly reporting to continue- Ongoing work: Xplan integration/ strategic asset allocation (global

property)/ Pursuit product development (automatic re-weighting) etc

- Reporting changes: Can no longer portfolio performance reporting for all portfolios due to:

* Theoretical returns* No reporting tool – manually calculated* Convergence of many portfolios – WCFP/ FP/ Lonsec

- Will provide ongoing core portfolio reporting and individual manager & benchmark returns – ideally provide clients actual net return!

- Income biased portfolio – early 2007


2. Current Research Analysis

2.1 Agribusiness Review

- Currently reviewing

- Analysis of sub asset classes: timber chipping/ timber other/ horticulture/ viticulture etc

- Different risk profiles of sub asset classes – some more ‘commodity like’ in nature – other more speculative

- Need to examine providers – important to diversify exposure to promoters/ products

- Adviser policy being changed from marginal tax rate focus to strategy focus (eg CGT issues/ non deductible debt strategies/ family tax

benefit etc)

- Will focus on the cheaper & better rated products – price certainly an issue for ‘commodity like’ offers


2. Department Update

2.2 Super Choice

- Mercer Super comparator tool- Product database being built – forward suggested funds not covered- Adviser policy to change – will remove need to forward completed

analysis forms to Research Department- Policy focus is to use super comparator table to form ‘basis for

recommendation’ – your choice whether to include analysis in SOA

2.3 Non Core Approval Process

- Use Product Request form for new product recommendations except if 4 or 5 star S&P rated, forward email

- If HOLD rec for existing investor, forward email- Ensure full manager/ product/ investment option is detailed on all

requests


3. ‘BOB’ Highlights

• Recent ‘Best of Breed’ (BOB) Research tour – Reviewed 12 managers & estimated 30 products.

• Investment Trends:

- Increasing use of quantitative (quant) management* Improvements in technology & data quality* Screening based on mix of fundamental (bottom up P/E; P/B;

DCF’s etc) & technical analysis (charting; valuation focus)* Allows large universe to be screened – traditional mgrs use MSCI* Traditional fundamental managers use* More & more dedicated quant funds – optimiser use


3. ‘BOB’ Highlights

- Emerging markets focus – not just China!* Largest growth potential due to GDP growth

* All countries are unique. Eg China manufacturing/ Russian & Brazil resources/ Indian IT etc

* Volatility reducing as risk premiums reduce – developing monetary policies/ banking systems/ infrastructure etc

* Inter. Equities funds increasing exposure to generate ‘alpha’

* Diversified funds increasing trend to use

- Thematic investing – dedicated style + ‘traditionals’ increasing use

- Global property commitment

- Increasing development/ use of structured product

- Sophistication of diversified fixed interest/ increasing focus of equities managers (due to complex debt structures)


The End

QUESTIONS


Disclaimer

Consultum Financial Advisers Pty Ltd, ABN 65 006 373 995, Australian Financial Services Licence No. 230323 and Life

Insurance Broker.

This document has been prepared for general information purposes only and not as specific advice to any particular person. Before making any investment decision based on this advice, you should consider, with or without the assistance of an adviser, whether it is appropriate to your particular investment needs, objectives and financial circumstances. A Product Disclosure Statement on any financial product mentioned in this document should also be obtained and read prior to proceeding with an investment decision.

Although every effort has been made to verify the accuracy of the information contained in this document, Consultum Financial Advisers Pty Ltd, its officers, employees and agents disclaim all liability (except for any liability which by law cannot be excluded), for any error, inaccuracy in, or omission from the information contained in this document or any loss or damage suffered by any person directly or indirectly through relying on this information.

This information has been provided for the exclusive use of the party to whom it is addressed and must not be provided to any other party or disseminated in any way without the express approval of Consultum Financial Advisers Pty Ltd. It is intended for your sole use and must not be passed onto a retail client or be made available to any retail client and

any provision of advice based on this information should not be attributed to Consultum Financial Advisers Pty Ltd.

consultum financial advisers 20 november 2006 model portfolio enhancements & department update

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