money management (26 may 2011)

By Angela Faherty

THREE successive wins in a row makeit a hat trick for Schroder InvestmentManagement, which has once againbeaten its peers to take the covetedFund Manager of the Year crown at the2011 Money Management/Lonsec FundManager of the Year Awards.

It’s been an amazing year for theinvestment house, which has shown ahigh quality offering and achievedoutstanding performance across anumber of asset classes, Lonsec said.The research house praised the fundmanager’s superior product offeringand disciplined risk management focus.

“Schroders is a quality investmenthouse offer ing investors superiorproduct across a number of assetclasses. The manager has a strong riskmanagement focus and advanced port-fol io constr uction techniques.Schroders’ underlying sector capabili-ties are rated highly across the boardby Lonsec analysts,” Lonsec said.

The win comes on the back of threetr iumphant years in the MoneyManagement/Lonsec Fund Manager ofthe Year Awards, and securing the topspot once again comes as no realsurprise given Schroders’ dominancein a number of this year’s categories.The firm has secured the top spot inthree of its four nominated categoriesand has featured more than any otherfund manager. It added two furtherstrings to its bow by also taking out theAsset Allocator and Multi-Sector cate-gories. The fund manager was also afinalist in the Fixed Interest category.

Greg Cooper, chief executive officerat Schroders, credited the f i r m’ssuccess to its long-term approach toinvest ing which has enabled themanager to think through the invest-ment cycle. Explaining the manager’sstrategy, Cooper said: “We have notbeen thinking for the hills. Instead, wehave adopted an approach that wehope will stand the test of time. Therehas been lots of volatility in the marketso standing back and observing whatis going on is a process that serves usvery well.”

Cooper added that winning thecoveted Fund Manager of the Year titlefor the third year in a row was testa-ment to a steadfast team and its multi-faceted approach.

“It would be a great honour to winthree in a row, but to just be nominat-ed is an amazing achievement. To win

two previous awards in different finan-cial cycles and differing extremes isfantastic,” Cooper said.

The other two finalists in this cate-gor y were Goldman Sachs AssetManagement and Aberdeen AssetManagement. Both f ir ms showedcommitment to cl ient ser vice andperformance consistency. In other cate-

gories, relative newcomer, AlphinityInvestment Management was namedRising Star.

Industry stalwart, Gwen Fletcher AM,was also presented with the inauguralMoney Management Lifetime Achieve-ment Award for her tireless dedicationin promoting the financial planningprofession in Australia.

www.moneymanagement.com.au

The publication for the personal investment professional

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Schroders takes a hat-trickFUND MANAGER OF THE YEAR: 1 | FOFA ROUNDTABLE: Page 26

Vol.25 No.19 | May 26, 2011 | $6.95 INC GST

Schroder Investment Management named Fund Manager of the Year

Schroder InvestmentManagement

2011Fund

Managerof the Year Finalist: Goldman Sachs Asset Management

Finalist: Aberdeen Asset Management

AUSTRALIAN EQUITIES (BROAD CAP)Fidelity International

AUSTRALIAN EQUITIES (LONG SHORT)

Perpetual

AUSTRALIAN EQUITIES (SMALL CAP)Perennial Investment Partners

FIXED INTEREST (GLOBAL AND DIVERSIFIED)

PIMCO

GLOBAL EQUITIES (BROAD CAP)Independent Franchise Partners

GLOBAL EQUITIES (LONG SHORT)Five Oceans Asset Management

GLOBAL EQUITIES (REGIONAL AND

EMERGING MARKETS)Aberdeen Asset Management

ASSET ALLOCATOR Schroder Investment Management

GLOBAL PROPERTY SECURITIESAMP Capital Investors

AUSTRALIAN PROPERTY SECURITIESCromwell Property Group

ETHICAL/SRI MANAGERHunter Hall

ALTERNATIVE INVESTMENTS (HEDGE FUNDS)

Winton Capital Management

MULTI-SECTORSchroder Investment Management

RISING STARAlphinity Investment Management

Time to end the uncertainty

The Federal Government mayhave handed down its Future ofFinancial Advice (FOFA) propos-als but that has not served to end

uncertainty in the financial servicesindustry.

As the roundtable published in thisedition of Money Management makes clear,a great deal of uncertainty will continue toimpact the industry until such time as theAssistant Treasurer and Minister for Finan-cial Services, Bill Shorten, finally tables hisdraft legislation.

Australian financial planners have beenmade to live with uncertainty for nearlythree years and it is now beyond questionthat it is not only adversely affecting theirsentiment, but the valuations being appliedto the businesses they have built.

According to Radar Results, the valua-tions being applied to financial planningbusinesses have declined by up to 10 percent in just the few weeks that have passedsince Shorten announced the Govern-ment’s FOFA position late last month.

And while Shorten’s announcementcertainly answered some of the questionsrelating to the two-year opt-in and theGovernment’s intentions with respect to abest interests test and the banning ofcommissions on all risk products within

superannuation, it has left a good manyother questions up in the air.

As the roundtable participants madeclear, questions remain to be answered withrespect to the grandfathering provisionsand the actual requirements aroundvolume rebates.

While there is a good deal more horse-trading to take place around the FOFA

proposals, there are few industries thatwould tolerate the prolonged uncertaintythat has been endured by the financialplanning industry.

It is in these circumstances that theGovernment owes it to the industry to bringthe uncertainty to an end and to deliversome certainty. With this in mind, it is tobe hoped the legislation resulting from theFOFA changes can be introduced beforethe Parliament ends its sittings for 2011.

With the Ripoll Inquiry having taken upmost of 2009-10 and with the resultingFOFA proposals having dominated 2010-11, the industry should not have to waituntil 2012-13 to know its ultimate fate.

The sooner the proposals are broughtforward for debate within the Parliament,the better.

On a positive note, our congratulationsto Schroders for being named MoneyManagement Fund Manager of the Year fora third successive year. In the long historyof the award it is the first time a managerhas succeeded in securing a hat-trick.Perhaps just as importantly, that achieve-ment was recorded across the full range ofmarket conditions: the global financialcrisis, the recovery, and the present day.

– Mike TaylorAverage Net DistributionPeriod ending Sept '1010,183 ABN 80 132 719 861 ACN 000 146 921

2 — Money Management May 26, 2011 www.moneymanagement.com.au

[email protected]

“There are few industriesthat would tolerate theprolonged uncertainty thathas been endured by thefinancial planning industry.”

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THE Federal Government needs to gofurther in removing uncertainty andclarifying key settings around itsFuture of Financial Advice (FOFA)proposals, according to senior finan-cial services identities attending aMoney Management roundtable lastweek.

Financial Planning Association(FPA) chief executive Mark Rantallpointed to continuing uncertaintyrelating to last-resort compensationscheme arrangements and the param-eters of the proposed CP153 educa-tional requirements.

He said an argument existed for theGovernment to extend the FOFAconsultation period to comprehen-sively encompass these issues.

Other roundtable participants

included Association of FinancialAdvisers chairman Brad Fox, FidelityInvestments chief executive GerardDoherty, Colonial First State generalmanager of advice Marianne Perkovic,and TAL chief executive of retail lifeBrett Clark.

The participants also pointed to thefact that considerable uncertaintyremained about the manner in whichthe Government would handle thegrandfathering provisions of theintended legislation.

However, it was Rantall who pointedto the fact that a number of issues hadnot been aired in the debate processaround FOFA, notwithstanding thefact they were currently the subject ofGovernment discussion papers.

“A couple of by-products of FOFAthat none of us have touched on aresubject to different sorts of discussion

papers and are out there for consulta-tion now. They are: the last-resortcompensation scheme, and the educa-tional and testing regime housingCP153,” he said.

“It’s interesting that they weren’tactually captured in the announce-ments and yet are going to have amajor impact, both financially andtime-wise, on an adviser’s business.

“If you roll those into it, potentiallythey can be positive initiatives, butonce again the detail hasn’t beenseen,” he said.

“We’ve still got a lot of work to do;whilst we thought we were nearing theend of the consultation period,perhaps that consultation periodneeds to be opened up and contin-ued,” Rantall said.

For more on FOFA, see the round-table on page 26.

www.moneymanagement.com.au May 26, 2011 Money Management — 3

News

Further FOFA consultation needed

By Milana Pokrajac

THE Federal Opposition willbe well placed to block theGovernment’s proposedFuture of Financial Advice(FOFA) reforms from passingthrough the Parliament nextyear,according to the ShadowMinister for Financial Ser-vices, Senator Mathias Cor-mann.

Speaking at a functionhosted by the Association ofFinancial Advisers in Sydney,Senator Cormann said theCoalition had 74 out of 150members of parliament in theHouse of Representatives,creating a real chance for theFederal Opposition to blockthe proposal.

The Coalition would needto win over one other cross-bencher – from Tony Wind-sor, Bob Oakeshott, AndrewWilkie or Adam Bandt – forthis plan to be effective,Cor-mann said, calling uponfinancial planners to contacttheir own members of parlia-ment and do their fair shareof lobbying.

“We've got the opportunityto put forward our ideas andhope that our arguments aregoing to be so strong and socompelling that we will beable to convince people onthe crossbench to go alongwith our view of what is goodand what is bad public policy,”Cormann said.

The Senator had reas-sured advisers that the Coali-tion would not support theFOFA package as it currentlystood,calling it a “bad publicpolicy” and accusing Minister

for Financial Services BillShorten of “looking after thevested interest of his friendsin the industry super fundmovement”.

The Government had pre-sented the FOFA reforms as away to stop future collapsesof companies such as StormFinancial,Westpoint Group orTrio Capital,but the most con-troversial reforms in the pack-age had nothing to do withthese types of collapses,according to Cormann.

He referred to the banningof risk commissions withinsuperannuation and the intro-duction of the opt-in require-ment, which he said wereunnecessary.

“There is absolutely noneed for the Government toget itself involved and man-date the requirement thatpeople have to re-sign con-tracts with their adviser,” hesaid.

“Don't think the FOFA in itscurrent form is an inevitability,there is still debate to be hadin the parliament and there isopportunity for us to pull whatis currently the wrong piece oflegislation,” he said.

Opposition couldblock FOFA: Cormann

By Mike Taylor

Mathias Cormann

Mark Rantall


News

Commericalproperty tippedfor strong growthBy Chris Kennedy

RENTAL rates and values in commercialproperties are tipped for strong growth onthe back of huge demand for office space inthe Sydney and Melbourne central busi-ness districts (CBDs).

Australian Unity Investment head ofproperty Martin Hession said there waslikely to be $22 billion of capital chasingAustralian commercial property assets inAustralia in 2011, compared to just $12.7billion in 2010 – which in itself was thefourth highest demand year on record.

Hession said that capital values hadincreased across the office, retail and indus-trial sectors, with too much money –including from overseas investors – chasingtoo few assets, while super funds will beamong the most significant local investors.

Office valuations will increase by around20 per cent in the Sydney CBD and 33 percent in the Melbourne CBD by 2014 on theback of strong demand from the financialservices sector, he said. National primeoffice rent rates would rise by around 6.5per cent annually, he added.

Hession tipped slower growth rates in theindustrial sector although supply in thesector is also very low, and will take a longtime to clear because new properties have tobe approved and built. Retail rental growthwould increase only in line with inflation asthe sector was impacted by lower consumerconfidence, online shopping, and risinginflation and cost of living, he said.

New rules for SMSF collectiblesBy Ashleigh McIntyre

THE new rules for self-managed superannuationfunds (SMSFs) investingin collectables and per-sonal-use assets havebeen revealed by the Gov-ernment.

The Minister for Finan-cial Services and Super-annuation, Bill Shorten,has released draft regula-tions outlining tighteningrules around how collecta-bles are stored andvalued.

Changes include newrules prohibiting the leas-ing of assets to relatedparties, the use of assetsby related parties or the

storage of collectables inthe private residences ofrelated parties.

There must also be awritten record of thereason for the storage ofan item in a particularlocation, which must bekept for at least 10 years.

Assets must also beinsured in a fund’s namewithin a week of acquiringthe item, while the trans-fer of assets to a relatedparty now requires inde-pendent valuation.

The rules are set tocommence on 1 July2011 for all new assets,with a transitionary periodapplying to existing assetsin place until 1 July 2016.

Shorten said the regula-tions would allow SMSFtrustees to continue toinvest in collectables inthe wake of the SuperSystem Review recom-mendation that theseinvestments should beprohibited due to the riskinvestments would bemade for current-day ben-efits.

“The new rules willensure that these invest-ments are genuinelymade for retirementincome purposes and notfor trustees’ personalenjoyment,” Shorten said.

Written submissions onthe draft regulations closeon 14 June, 2011.

Ignore bond benchmarksBy Benjamin Levy

INVESTORS should ignore bond benchmarks if they want to avoid bad investments,according to Brandywine Global Investment managing director and portfoliomanager of fixed income, David Hoffman.

While the best run equity companies with the best products grow to encompassa larger share of the equity market, bond indexes were made up of countries thatissued the most debt, and that won’t tell an investor anything about whether the debtof a particular country is a good investment, Hoffman said.

“Bond indexes are structured in such a way that it’s not necessarily to the advan-tage of the investor,” he said.

“A country that has a 30 per cent weighting [in the index], that weighting mightbe very rich or might be very cheap, so the weighting itself should not be a guideas to how you allocate your portfolio,” Hoffman said.

Bond benchmarks have misguided a lot of people into investments, and can hidea lot of activity in the bond market, he said.

“Investors need to look at where they can get a higher real yield, because thehigher the real yield, the less likely inflation will evolve in the economy,” Hoffmansaid.

Brandywine was increasing to an overweight position on the US dollar and movingout of “commodity currencies” such as the Australian dollar, which had a lot ofpopular investment in the commodities sector, Hoffman said.

Synchron lambasts industry fundsCaroline Munro

SYNCHRON has lashed out at the Govern-ment, the industry funds and what it sees asthe ‘socialist’ agenda behind the Future ofFinancial Advice (FOFA) reforms.

“There is a lot of talk in the media about‘conflicted’ financial advice,” said Synchrondirector Don Trapnell. “And yet, no-one isprepared to tackle the elephant in the roomand ask the obvious question: Are the FOFAreforms, announced by a minister who usedto be a director of one of the largest indus-try funds in the country, an example ofconflicted governance?”

Minister for Financial Services andSuperannuation Bill Shorten was a formerdirector of the Superannuation Trust ofAustralia and the Victorian Funds Manage-ment Corporation, and Trapnell stated thatmany of the reforms Shorten announcedlast month took a socialist approach tofinancial advice that unfairly favoured theindustry funds movement.

“Our reading of the reforms – particular-ly around scaled advice, bans on life insur-ance commissions within superannuation

and opt-in – is that they are skewed infavour of industry funds at the expense ofthe financial advice industry and ultimate-ly consumers,” said Trapnell. “In ouropinion this is not surprising given MrShorten’s experience with superannuationhas been solely with the industry fundsmovement, the very group that this legisla-tion favours.”

Trapnell asserted that scaled advice wasactually elitist and presumed that ‘nearenough was good enough’ for ordinary

Australians. He said the “bargain basement”prices associated with scaled advice wouldforce the cost of tailored advice up and outof the reach of everyday Australians.

The ban on commissions on life insur-ance within superannuation did not makesense given that commissions on generalinsurance in super and on life insuranceoutside super were to remain, Trapnelladded. He said that insurance was aboutthe transfer of risk of loss, not about theaccumulation of retirement savings. He saidthe “ludicrous” ban was a further illustra-tion of the Government deferring to theindustry funds movement.

“The eradication of brokerage on generalinsurance has not been on their agendabecause, as yet, they don’t have fingers inthose particular pies,” said Trapnell, refer-ring to the industry funds.

Synchron stated that if the Governmentwas serious about reform it would firstsimplify complicated superannuation rules,adding that tinkering over the last 20 yearshad led to widespread disengagement,apathy and suspicion about the benefits ofsuperannuation.

Agri-MISs focus on winning back investorsBy Milana Pokrajac

THE remaining players in the shrinking agribusiness managedinvestment scheme (MIS) sector appear to have ramped upinvestor protection, providing more clarity about the structure of theirproducts in a bid to win back investor and adviser confidence.

As reported in Money Management earlier this month, the man-aging director of researcher Adviser Edge, Shane Kelly, has notedthe trend, saying product providers were working towards ensuringthe projects actually reached their conclusions regardless of thefinancial situation of the manager.

One such player is Macquarie Agricultural Funds Management,which introduced the so-called security accounts as well as thedirect ownership of assets such as trees and land.

Executive director Anthony Abraham said it was up to fund man-agers to engage retail clients and provide them with confidence thattheir investments were sustainable, due to their long-term nature.

He added investors needed to regard agribusiness managedfunds just like any other financial products.

“They have to look at the product structure and investor security

… how it works and whether the outcomes are achievable,” Abra-ham said.

The introduction of Macquarie’s security accounts is the firstmajor development in its agribusiness funds management busi-ness since the collapse of companies such as the Great Southernand Timbercorp over two years ago.

Abrahams said accounts would be set up on day one with themoney remaining there for the duration of the project. He said fundmanagers could not force their clients to insure their investment,although the Australian Taxation Office highly recommends insur-ance for agri-MISs.

“You’ve got to know who owns the land, you’ve got to know whatrights the investor has, you want to know how the land is funded …and be comfortable,” Abrahams added.

Another player in the market that has been offering and advocat-ing for direct ownership of assets is Almond Investors. However,executive director Wayne Overall predicted the retail inflows wouldnot go back to pre-2009 levels any time soon.

A certain amount of time needed to elapse before retail investorsstarted considering agri-MISs again, he added.

Don Trapnell

Martin Hession


News

By Caroline Munro

INVESTORS in the distressed WellingtonIncome Fund have approachedCastlereagh Capital to take control of thefund and eject its management team.

The PIF Action Group, which represents27 per cent of investors in the fund, statedin a letter to investors that it believed thecontinuing poor financial performance ofthe fund would be improved with thereplacement of the current responsible

entity and manager, Wellington Capital. Itadded that Castlereagh had the necessarycombination of experience, independenceand skill to produce the best outcome forinvestors.

The action group sent investors aninformation booklet that outlined reasonsas to why it believed Wellington wasunsuitable. The reasons included theassertion that Wellington failed to helpfund members pursue claims for up to$400 million (over 50 cents per unit)

against the fund’s former auditors, respon-sible entity and some of its directors.

The group stated there was also noexplanation regarding the 74 per centdiscount between the trading price of unitsand their value as reported in financialstatements, and why no strategy had beenarticulated to reduce the shortfall. Therewas also inadequate explanation as to whyWellington recently sought to raise $33million in an environment where it hadadvised half of the assets of the fund or in

excess of $120 million were to be taken tomarket later in the year; and why Welling-ton raised $11.3 million from unknownthird party investors without unit holderapproval, and was doing so at a 70 per centdiscount to the value of the fund.

“The issuance of units at a discount ofmore than 74 per cent without ourconsent, and in breach of the Constitu-tion and the Corporations Act, astoundsus,” said PIF Action Group president,Charles Hodges.

Avoca waryof resoucesBy Chris Kennedy

AVOCA Investment Manage-ment, the new small capboutique that is the brain-child of former UBS smallcap managers Jeremy Ben-deich and John Campbell,will not be relying on a pre-dictable bet on resourcesto generate alpha.

“When the benefits of theresource boom are behindus and terms of trade havenormalised, what industriesare we left with [to investin]?” asked Campbell.

Campbell said valuationshad dropped considerablyin markets such as domes-tic industrials, includingretail and consumer discre-tionary. When conditions donormalise, the value shouldstill be there in those sec-tors, he added.

The Avoca fund, whichhas the backing ofBennelong Funds Manage-ment, will target the uni-verse of stocks outside theASX top 50. It will have afairly concentrated position,generally holding between35 and 40 stocks, and willtarget returns in excess of3 to 5 per cent above itsbenchmark, Bendeich said.

The fund has had con-siderable interest from sev-eral parties but will notstart seeding capital until1 July. The main investorsbeing targeted include self-managed super fundtrustees, high-net-worthindividuals and otheradvised investors, althoughthere will be room withinthe fund for at least oneinstitutional mandate in thevicinity of $50 to $100 mil-lion, he said.

Because there will belimited capacity within thefund, and a lot of the highquality small cap funds arealready full, Bendeich antic-ipated strong demand forthe fund.

Wellington investors seek to oust management team

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By Milana Pokrajac

THE Government has estab-lished framework that wouldallow statutory fiduciary duty tobe circumvented by some finan-cial planners, while promotingthis reform to be meaningfuland worthwhile, according tothe Boutique Financial PlanningPrincipals Group (BFPPG).

This statement, written byBFPPG president Claude

Santucci, came as part of thegroup’s response to the recent-ly released Future of FinancialAdvice (FOFA) informationpack, in which the Governmentofficially announced the antici-pated changes, including theintroduction of a statutory fidu-ciary duty.

The information pack includ-ed a paragraph indicating anadviser would not be requiredto “broker the entire market …

to find the best possible productfor the client, unless this serviceis offered by the adviser orrequested by the client andagreed to by both parties”.

Referring to the paragraph,Santucci questioned whether itmeant to limit the requirementto acting in the client’s bestinterest “within an institution’slimitation”.

“How wil l consumers bemade aware that the advice

may be limited by an adviser’sinability to consider alterna-tives that may include goingoutside the institution?”Santucci asked.

Santucci claimed the reformwould not improve the qualityof advice unless the conflictbetween acting in a client’s bestinterest and the best interest ofthe Australian FinancialSer vices Licence holder isresolved.

T h e B F P P G l a u n c h e d afurther attack on institutionswhile addressing the ban onvolume rebates, by proposinga complimentar y reform: aban on cross subsidies frominstitutions to their advicearms.

“The two very separate activ-ities of product manufactureand distribution, and the provi-sion of advice must be keptapart,” Santucci wrote.


News

Multi-brand continues for AMP/AXABy Caroline Munro

NO NEW licensee arrangements have beendiscussed following the AMP/AXA merger,said AMP Financial Services managingdirector, Craig Meller.

AMP announced its integration plansregarding product and platforms last week.But when it comes to AMP and AXA-alignedfinancial planners it appears to be busi-ness as usual.

“In advice and distribution we are main-taining our multi-brand approach, and weare going to continue to work with our plan-ners and advisers to ensure they have thesupport to grow their businesses,” saidMeller.

“We haven’t changed the terms and con-ditions of any of the financial advisers inany of the AXA or AMP licensees.”

Meller said when AMP looked at theoffers available to planners from the two dif-ferent groups there were a number ofaspects that could easily be made availableacross licensees.

“The practice finance capability that wedeveloped within AMP Bank has been verysuccessful in helping AMP financial plan-ners grow their business,” he said. “In look-ing at that offer we found that it is muchmore attractive than what the AXA plan-

ners have been able to source for them-selves.”

He said AMP had a ‘broad’ line of creditassigned for financial planners to help withtheir growth strategies, although he wouldnot provide any figures.

Another area to which AMP hoped toadd value was helping AXA planners growtheir businesses through the recruitment ofhigher quality financial advisers. He saidrecently one of the adviser graduates fromAMP’s Horizons Academy agreed to join upwith an AXA practice rather than an AMPpractice.

“We think that is an area where we’ll beable to help the AXA planners grow theirbusinesses much more into the future,”said Meller.

Meller said that while the market forfinancial planners was ‘noisy’ at themoment, the number of planners leav-ing the AMP group was not out of theordinary.

“There are always a small number ofplanners moving from AMP and AXA, butalso from the competition into AMP andAXA,” he said. “I would describe the marketenvironment at the moment as ‘noisy’, butthe movement is well within what we wouldcall ordinary movement in the course ofan ordinary year.”

Bundle advice with MySuperLOW-COST, simple financial adviceshould be incorporated into MySuper andthe costs bundled along with overallsuperannuation costs, according toMercer.

The latest Mercer SuperannuationSentiment Index revealed that whenlooking for advice, most of the 1,078working Australians surveyed consideredapproaching their superannuation fund(40 per cent), their financial adviser (42per cent) or their fund website (24 percent). It also found that 43 per cent ofthose who had sought financial advicefelt confident they had enough retirementsavings, compared to 30 per cent of thosewithout an adviser saying the same. Thosewho sought financial advice were alsogenerally more positive towards theirmain superannuation fund, and 82 percent of those were also confident in theirknowledge about superannuation.

“The more people are engaged with their superannuation fund, the more secure theyare with its performance, regardless of external factors,” said Mercer financial advice leaderJo-Anne Bloch. “They will take a longer-term view of superannuation which is the right wayto look at it. Advice is the crucial link.”

But she said that in the context of MySuper, a high-cost, fully-fledged advice service was notneeded to engage members. She added that members also do not want to pay more for simpleadvice in relation to their current superannuation account, or pay for advice separately.

“Where the costs of simple superannuation advice are built-in to the cost of superan-nuation, more members access this advice,” said Bloch.

Jo-Anne Bloch

Insto planners to avoid fiduciary duty

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By Chris Kennedy

THE key issue still not being addressed inthe Government’s recently announcedFuture of Financial Advice (FOFA) reformspackage is disclosure, with the potentialremaining for a client to walk into an insti-tutionally-owned practice believing it to beindependent, according to Boutique Finan-cial Planning Principals Group (BFPPG)president Claude Santucci.

The BFPPG’s FOFA submission outlinedconcerns that the fiduciary duty require-ment would not require planners to lookbeyond their own Approved Product List(APL).

Santucci said there is no issue withany group or institution using their ownAPLs, and there is room within the indus-try for all business models, provided thereis full disclosure.

Despite the fact that there are require-ments to mention within a statement of

advice whether recommendations arerestricted to products on an APL, clientsoften did not read or fully understandthe fine print.

It remains possible for a client to walkinto a practice and believe that it is inde-pendent when that is not the case, hesaid.

Also, an adviser in an industry fund

operating under limited or scaled advicewill never recommend a client to consol-idate their super out of that fund into aretail product, regardless of where thereturns have been better, Santucci said.

“The level of disclosure is almost non-existent in industry funds and major insti-tutions,” he said.

Some planners run their licences inde-pendently from bank ownership whileothers just follow the party line, headded.

When a client walks into a practice, heor she should know exactly who ownsthe licence, what their limitations are,what deals the practice has with whichproduct providers and who is the endbeneficiary when any products are sold,he said.

That way it is up to the client whetherthey seek out an independent adviseror seek the strength of a practice withinstitutional backing, he said.


News

ASIC emphasisesmerger disclosureTHE Australian Securities and InvestmentsCommission (ASIC) has reminded superan-nuation trustees of changes to disclosurerequirements regarding fund mergers.

Super funds are required to inform mem-bers about any merger of funds and pro-vide transferring members with a new Prod-uct Disclosure Statement (PDS) thatexplains the new product the member willhold following the merger, ASIC stated.Super funds are also required to updatePDSs explaining the merger to prospectivemembers, it added.

The reminder to super funds came aboutas a result of ASIC being aware that mergerand consolidation activity was occurring inthe superannuation industry, ASIC stated.

SMSF trusteesbegin borrowingSELF-MANAGED super fund trustees aretaking advantage of new limited recourseborrowing arrangements to invest in bothproperty and other financial assets, accord-ing to SMSF administrators Multiport.

Around 13 per cent of funds adminis-tered by the firm are now utilising aborrowing arrangement, according to asurvey of 1,400 SMSFs that representaround $1.25 billion in assets.

A slight majority of these were borrow-ing to invest in property, with 56 per centcompared to 44 per cent borrowing toinvest in other financial products. Theproperty loans were also of larger value, at$200,000 compared to $110,000 for otherassets.

Average asset allocations remainedlargely steady over the quarter, with thebiggest shifts in international equitiesexposure, which increased from 7.1 percent of overall assets to 8.8 per cent in thethree months since 31 December 2010; andassets in alternatives such as hedge funds,agribusiness and private trusts whichdropped from 2.1 per cent to 1.3 per cent.

Multiport also announced an integratedgearing package in addition to its coreadministration services, which takes careof documentation and loan applicationsthrough the entire process.

“The rules around gearing a property ina SMSF are complex and it’s essential totailor the right loan to suit the needs of thetrustee,” said Multiport chief executiveJohn McIlroy.

“We have seen a marked increase overthe past 12 months in adviser and trusteeenquiry rates around gearing into SMSFs.However, there remains confusion aroundthe process and what needs to take placein order to complete the purchase smooth-ly. This solution fills the void,” he said.

Retirement system needs rethink

By Caroline Munro

THE financial services industry needs to shiftfocus away from accumulation to decumu-lation thinking if it is to adequately meet theneeds of those entering retirement, accord-ing to Challenger chairman of retirementincome, Jeremy Cooper.

Speaking at the 2011 Morningstar Invest-

ment Conference, Cooper said the massivemovement of baby boomers entering retire-ment presented an enormous value propo-sition for advisers. He noted that advice hada powerful effect on investment behaviour,and could help address such issues aslongevity and inflation risk in the drawdownphase.

Cooper said there were currently about20 per cent of funds in the pension phase.However, this was likely to increase dramat-ically as the population aged and as theretirement savings system matured. Henoted that 50 per cent of retirees cashed outtheir superannuation on reaching retire-ment, but in less than 10 years industryexperts expected that to change significant-ly – some 90 per cent were expected to stayin the system and take a pension, while only10 per cent would take their cash as a lumpsum, he said.

However, contributions caps continuedto be a huge issue with $27.65 billion in taxin the 2011 financial year coming out ofsuper, said Cooper. He said policy changewould be required if the Government

wanted to address the issue of retireestending to take a lump sum. He added thatthere also needed to be a shift of thinkingaway from accumulation products andaccumulation thinking that currently domi-nated. The industry still talked about expect-ed returns on the retirement phase, whichwas not good enough, said Cooper.

“We need to go further and look at whatassets will do year-on-year,” he said.

Cooper said the systematic and policydesign around superannuation did not thinkhard enough about retirement. He notedthat the age pension was actually the perfectretirement product, although due to meanstesting and other restrictions it was notenough to fund a comfortable retirement.He said lifetime annuities could copy theattractive features of the age pension, oper-ating and behaving almost identically.

Cooper said most other retirementsavings systems around the world had adeferred lifetime annuity option.

“It’s a good time to clear away the tax andother regulatory impediments arounddeferred annuities,” he said.

NEW Finsia head Russell Thomas has identified a renewedfocus on the organisation’s membership as a key priority as hestarts his term as chief executive and managing director of theassociation.

Russell was appointed after a period as interim chief exec-utive, and the capability he demonstrated there along with hisinsight into the professional membership landscape madehim a compelling appointment, according to Finsia presidentMalcolm McComas.

Thomas said that this will be a period of execution and cap-italising on the work the association has done in the pastthree years in terms of better understanding the changingdynamics of membership organisations, and starting to beddown the new credential and regulatory framework facing theindustry.

The Future of Financial Advice (FOFA) reforms bring achange in focus in professional expectations and expecta-

tions of financial professionals in the front line of the industry,he said.

“This has been where the reputation of the industry as awhole has been most at stake. Our credential program hasbeen designed to fit into the Future of Financial Advice reformframework and also provide that uplift in standards,” Thomassaid.

The main focus will be to shift back to the essence ofthe two participant organisations that formed Finsia, theAustralasian Institute of Banking and Finance and the Secu-rities Institute of Australia, and to focus on what makes agood membership association, he said.

The Australian financial service industry needs to makesure that it is fighting fit for positioning itself in the network ofAsia Pacific economies and making sure the reputation itearned during the financial crisis can be turned into long-term success for the country, Thomas said.

Jeremy Cooper

JohnMcIlroy

New Finsia president focuses on membership

Disclosure not addressed in FOFA

ClaudeSantucci

onepath.com.au

At OnePath, we’re committed to providing the kind of award-winning solutions that you’d expect

from one of Australia’s leading investment, insurance and superannuation companies.

Recently our insurance business won the following awards:• Life Company of the Year – AFR Smart Investor Blue Ribbon Awards 2010 for the third consecutive year

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What’s more, our industry-leading MoneyForLife retirement solution has recently won:• Money Magazine ‘Best of the Best’ Innovative Super Product Award 2010

• Rainmaker Excellence Awards 2010 – Best Innovation of the Year

Our superannuation solutions have also consistently been recognised by leading independent rating houses:• The Heron Partnership – Top Rated Corporate Product 2011 – 8 times running (Corporate Super)

• The Heron Partnership – 5 Quality Star Rating 2011 (Integra Super, OneAnswer Personal Super and

OneAnswer Pension)

• Selecting Super – AAA Fund Quality Assessment Rating 2011 (Corporate Super and Integra Super)

The team that made all of this possible is now even more committed to delivering award-winning

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To find out more about OnePath, contact your Business Development Manager or visit onepath.com.au

The AwardWinning Path.


News

Matrix denies it is seeking a buyer ahead of reformsBy Mike Taylor

MATRIX Planning Solutions hasdenied a report it has been seekinga buyer ahead of the Governmentintroducing legislation around theFuture of Financial Advice (FOFA)changes.

The dealer group has declared itis neither hoping to find a buyer

before the FOFA changes nor indiscussions with potential buyers.

In a statement issued late lastweek, Matrix managing directorRick Di Cristoforo said that likeany good business, Matrix regu-larly evaluated its strategy toensure it stayed ahead of the pack,but any strategy it undertookwould need to support and help

develop its culture and valueproposition.

“Matrix Planning Solutions isindependently owned and prof-itable and we plan to be aroundfor some time,” he said. “We agreethat dealer groups of the futurewill need to drive even greatervalue to member firms, and lookforward to meeting the challenge.”

Di Cristoforo’s statement saidthat while there were elements ofFOFA that would challenge allparticipants, Matrix was extreme-ly confident of its future – some-thing evidenced by its strategicalliance with AustralianSuper andother quality platforms and itsinitiatives in delivering scalablestrategic advice.

FOFA rhetoric doesn’t match the strategy, says AFABy Milana Pokrajac

THE original intent of the Govern-ment’s Future of F inancial Advice(FOFA) reforms was to createenhanced transparency and betteroutcomes for investors, but this rhet-oric does not match the outlinedstrategy.

That is the main point flowing fromthe Association of Financial Advisers’(AFA) updated FOFA member pack,launched by chief executive RichardKlipin and national president BradFox.

The AFA reiterated its convictionsthat the reforms package was againstthe interests of consumers, advisers,

small businesses and communities inregional Australia.

“FOFA has failed to strike the rightbalance between improving advice out-comes on the one hand, whilst retain-ing access and affordability for allconsumers on the other,” Klipin andFox wrote in their address to mem-bers.

The FOFA member pack had out-lined the main changes announced bythe Financial Services Minister BillShorten last month, such as the banon risk insurance commissions insuperannuation, a two-year opt-inrequirement and a ban on all volumepayments/sales target payments toadvisers and licensees.

The document had also made clearthat the debate was still in full force,but had moved from policy to a politi-cal debate, encouraging advisers towrite to their local members and lobbyagainst the FOFA reforms package asit is currently presented.

The association stated that FOFA“adopts a paternal ist ic pol icyapproach and signals a return to the‘nanny state’, where the Governmentdictates terms of the adviser-clientrelationship”.

Klipin had called for the Govern-ment to under take a model l ingprocess that would identify the bene-fits and consequences of the pro-posed FOFA changes.

ASFA welcomes tougherreporting rules for SMSFsTHE fact that self-managed superannua-tion funds (SMSFs) are not reportingentities for the purposes of Anti-MoneyLaundering/Counter Terrorism Financ-ing (AML/CTF) regulations makes themmore likely to be used for money laun-dering and terrorism financing pur-poses.

The Association of SuperannuationFunds of Australia (ASFA) made this claimin a submission to the Australian Transac-tion Reports and Analysis Centre (AUS-TRAC), welcoming amendments to reportingrules ending the use of the so-called Simpli-

fied Trustee Verification Procedures (STVPs)by SMSFs.

ASFA said that while it recognised thatthe majority of SMSFs were fully compliantand managed in accordance with the leg-islative framework in which they operated,there had been historical instances of fraudand/or criminal abuse perpetrated throughSMSFs.

“As such, we support the proposedamendments that will require reporting enti-ties to conduct a full customer identificationprocedure when dealing with SMSFs,” thesubmission said.

THE Federal Government’s Future of Financial Advice (FOFA) announcement has alreadyhad an impact on the valuation of planning practices, according to Radar Results.

The company said its valuers had reduced earnings before interest and tax (EBIT)multiples by 0.5 times since the FOFA announcement, equating to a reduction of approx-imately 10 per cent of a practice’s value.

Commenting on the situation, Radar Results principal Michael Birt said valuationsdepended on the style of the planning business, the products used, the client ages and,in particular, their current fee arrangements.

Giving his own analysis, Birt said a concern he had with FOFA was the proposal for atwo-year opt-in, but of greater concern was the Government’s inability to outline a defi-nite grandfathering arrangement.

“Grandfathering has been presumed by most advisers to be automatic, however,Shorten’s recent statement that ‘issues around grandfathering arrangements will stillbe subject to further consultation’ is certainly not what planners wanted to hear,” hesaid.

“The question is whether life insurance agents, who have been building up clientregisters for many years, may have a part of their register rendered useless,” Birt said.“Certainly, retail risk policies written inside a personal super plan seem to be in the firingline.”

FOFA hitting valuationsRichard Klipin

Rick Di Cristoforo


Fund Manager of the Year

Platinum sponsor


Methodology12Australian Equities (Broad Cap)Australian Equities (Long Short)13Australian Equities (Small Cap)Fixed Interest (Global and Diversified)14Global Equities (Broad Cap)Global Equities (Long Short)16

Global Equities (Regional and Emerging Markets)Asset Allocator

17Global Property SecuritiesAustralian Property Securities18Ethical / SRI ManagerAlternative Investments (Hedge Funds)19

Multi-Sector20Rising Star21Lifetime Achievement AwardYoung Achiever of the Year22Best Advertising CampaignMarketing Team of the Year23

Three times in a row makes it ahat-trick for Schroder Invest-ment Management which hasonce again been crowned the

2011 Money Management/Lonsec FundManager of the Year. The investmenthouse was praised by Lonsec for itsquality offering and outstandingperformance across a number of assetclasses.

“Schroders is a quality investmenthouse offering investors superior productacross a number of asset classes,” Lonsecsaid. “The manager has a strong riskmanagement focus and advanced portfo-lio construction techniques. Schroders’underlying sector capabilities are ratedhighly across the board by Lonsecanalysts, with the highest possible ratingsachieved in Australian equities and fixedincome.”

The win comes as no surprise, givenSchroders’ dominance in this year’sawards. The firm has secured the top spotin three of its four nominated categoriesand has featured more than any otherfund manager.

Greg Cooper, chief executive officer atSchroders, credited the firm’s success toits long-term approach to investing. Hesaid: “I think one of the reasons that wehave been acknowledged in these awardsis our approach has been to thinkthrough the cycle. We have not beenthinking for the hills. Instead, we haveadopted an approach that we hope willstand the test of time. There has been lotsof volatility in the market, so standingback and observing what is going on is aprocess that serves us very well.”

Cooper credits Schroders’ head of fixedincome and multi-asset, Simon Doyle,and his team for successfully battlingthrough a volatile market. “Simon and histeam have done a fantastic job, particu-larly in very volatile fixed incomemarkets. One of the beauties aboutSchroders is the ability to operate a multi-asset approach which allows for interplaybetween various asset classes,” he said.

Indeed, Schroders’ investment stylewas commended by Lonsec for its

outperformance. The research housesaid: “Schroders’ diversified funds haveoutperformed peers and benchmark overall time periods, with value added acrossall stages of the investment process. Keydecision makers for the funds are experi-enced and highly regarded.”

On hearing Schroders’ was shortlistedonce again for the Fund Manager of theYear award, Cooper said: “It would be agreat honour to win three in a row, but tojust be nominated is an amazing achieve-ment. To win two previous awards indifferent financial cycles and differingextremes is fantastic.”

Runner-up in this category wasGoldman Sachs Asset Managementwhich has a long history of providingleading domestic and global investmentofferings in Australasia. Phil Gardner,managing director and head of distribu-tion at Goldman Sachs Asset Manage-ment, said the firm’s position as a finalistwas down to its commitment to clientservice and its focused risk managementapproach.

“Our disciplined approach to riskmanagement and sharing insights acrossasset classes helps us generate strong,consistent and repeatable returns forinvestors. We are honoured that MoneyManagement and Lonsec have recog-nised the calibre of our investmentprofessionals and we believe the awardsreflect the level of insight and strategythat we strive to bring to our investmentproducts and our investors,” he said.

Third-placed finalist, Aberdeen AssetManagement, said the consistency of itsapproach was what made it stand outfrom the crowd in this category. BrettJollie, managing director at AberdeenAsset Management, said: “What makesus different is the discipline and consis-tency of our investment process acrossmarket cycles, the experience andresourcing of our investment teams bothin Australia and offshore, solid long-termoutperformance and the support of ourglobal investment professionals.”

By Angela Faherty



It’s a hat-trick

THE process Lonsec imple-mented to select the winnersfor each award category is con-sistent with last year’s processand consisted of three primarycomponents.

Firstly, as an initial screen,fund managers needed to berated by Lonsec in their cate-gory. Lonsec’s managed fundsresearch process is qualita-tively skewed. Lonsec believesthat managing money is acombination of art and scienceand that there are a number

of critical ingredients that com-bine to produce a qualityinvestment product. Lonsec’sassessment of people and theinvestment process theyemploy has the greatestimpact on its rating process.

From this screened uni-verse, Lonsec utilised twoequally weighted componentsto select the Fund Manager ofthe Year winners in each cate-gory.

The first component was theone-year excess return for rep-

resentative funds for calendaryear 2010. Since the majorityof retail flows are invested inwholesale trusts via platforms,wholesale trusts were used asthe vehicles for performancecalculation for managers.

The second component wasa qualitative analyst ‘momen-tum’ score, which the Lonsecresearch team determined forfund managers in each cate-gory. Factors that were consid-ered in this momentum scoreincluded process enhance-

ments, team stability anddepth, management of fundsunder management (FUM)capacity and risk manage-ment.

The highest scoring fundmanager, from the aggregateof these two equally weightedcomponents, was declared thewinner in each category.

In summary, managers whohave performed well againstthe benchmark within their cat-egory and have strong positivequalitative momentum, as

assessed by Lonsec, are final-ists for these awards.

In regards to the overall fundmanager of the year award andthe rising star award, Lonsecused a voting process involvingthe Lonsec research team.Firstly, nominations were madefor managers. Secondly, nomi-nated managers were thenranked by senior members ofthe Lonsec research team.The highest ranking managerwas declared the winner ineach category.

Finding the Fund Manager of the Year winners for 2011

Winner: Schroder Investment Management

Finalist: Goldman Sachs AssetManagement

Finalist: Aberdeen Asset Management

FundManager of

the Year

Greg Cooper



Privately owned FidelityInternational’s perform-ance and establishedlong-term track record

were winning factors in itssuccess in taking out this year’sAustralian Equities Broad Capcategory at the Money Manage-ment/Lonsec Fund Manager ofthe Year Awards. Led by PaulTaylor, the Fidelity AustralianEquities Fund has taken poleposition for its bottom-up, long-term stock analysis approach.

Commending Taylor and hispeers, Lonsec said both thefund’s research team andperformance were sound exam-ples of quality and experience inthe investment industry. “Thefund has established a verystrong longer-term track record,”Lonsec said. “Taylor is consid-ered to be a quality investor withprior portfolio management andstock analysis experience, bothon a global and domestic level.The portfolio manager issupported by a well resourcedand highly capable researchteam responsible for bottom-upstock analysis.”

Indeed, it is the manager’sconsistency of performance and

aptitude for stock selection thatportfolio manager Paul Taylorconsiders the reason for itssuccess. Since its inception in2003, the fund has outperformedthe market by 4 per cent eachyear, he says, beating its perform-ance target of 2.5 per cent abovethe benchmark through savvystock selection.

“As a bottom-up stock pickingfirm, we look for great ideas andcompanies and try to form a 360-degree view of a company we areresearching. Typically, we holdbetween 30 and 50 stocks in thefund, which we believe is impor-tant as above that is too close tothe market, while below that isnot enough,” Taylor says.

He adds that the fund has aholding period of three years,which he considers important

from a bottom-up perspective asit provides reasonable marketvisibility without the faddishtrends afforded by a shorter six-to 12-month cycle. Taylor creditsthe domestic equities team and astrong global network for thesuccess of the fund as well as thestability of the team, a matter heconsiders a result of the privateownership of the firm.

Runner-up in the category,Greencape Capital, outshone itspeers following five years of solidgrowth. Matthew Hyland, direc-tor at Greencape Capital andportfolio manager of the Green-cape Broadcap Fund, believesthe firm’s consistency overextreme turning points in themarket is a reason for its successin this category.

He said: “A fund manager’s

ability and processes get testedwhen there is a sharp turningpoint in the market. I think ourfund stands out because we havea strong commitment to capaci-ty; it is a genuine broadcap fundand we have shown we have thecapability to navigate themarkets and provide consistencyof performance in bull and bearmarkets.”

Third-placed Goldman SachsAsset Management attributesthree distinguishing features toits winning Australian EquitiesWholesale Fund. The first is thatits team of nine investmentprofessionals, coupled with thebroader global investment team,is responsible for the firm’sUS$679.9 billion in assets undermanagement, while the team’sfocus on idea-generation and

independent thinking is what thefirm believes sets it apart from itspeers.

The manager also credits itsneutral-balanced approach tostock selection and a disciplinedapproach to managing risk asreasons its team has been able todeliver strong performance resultsin both up and down markets overthe long and short-term.

Dion Hershan, head ofAustralian equities at GoldmanSachs Asset Management, said:“We believe a style-neutral,balanced approach to stockselection across stock styles andinvestment horizons allows forstrong performance results overthe short and long-term andthrough different market cycles.”

By Angela Faherty

Taking the long viewWinner: Fidelity

Finalist: GreencapeFinalist: Goldman Sachs Asset

Management

Australian Equities

(Broad Cap)

Athorough understanding of thequality of a company and itsrelative valuation are thereasons behind the success of

Perpetual Investments’ Shares Plus LongShort Fund, according to head of equitiesJohn Sevior. The fund topped the rank-ings in the Money Management/LonsecFund Manager of the Year Australian Equi-ties Long Short category for its fundamen-tal, value-style approach.

According to Lonsec, the fund deliv-ered a very strong result for investors inthe 2010 calendar year with an excessreturn versus the S&P/ASX 300 Accumu-lation Index of 7.7 per cent post fees. Themanager’s investment style enables it toconstruct portfolios that take advantageof both positive and negative views onstocks, ensuring it delivers returns for itsclients.

“We believe we are often able toperceive a value of a company that isdifferent from the opinion of the marketby looking for research opportunitiesaway from common sources,” Sevior said.“Therefore, outperformance can beachieved through a selection of securitiestrading at a different valuation to theirinherent value.”

Lonsec praised Perpetual’s review of thefund’s mandate in 2010, which it saidresulted in an improved fund structure.The key changes included the appoint-ment of Paul Skamvougeras, a dedicatedportfolio manager with direct short sellingexperience, a revised short selling processthat reflects the skill set and experienceof the portfolio manager, and the adop-tion of a more concentrated portfolioconstruction approach.

“These changes are an improvement

on the previous fund structure and as aresult, has increased conviction in thefund’s ability to meet investment objec-tives,” Lonsec said.

Also commended in the AustralianEquities Long Short category was lastyear’s winner, the Smallco InvestmentFund. The fund has four very experiencedsenior portfolio managers with detailedbottom-up fundamental research back-grounds and the firm specialises in thesmaller end of the market.

The fund typically holds 25-35 stocksand prides itself on being a capacityconscious, concentrated, small cap, indexunaware Australian equities fund with the

potential to short sell small cap stocks,says Rob Hopkins, managing director atSmallco.

“We are very conscious of capacity andwill limit funds under management toensure the Smallco Investment Fund cancontinue to take meaningful positions insmaller companies without investorreturns being affected by the time it takesto establish or exit an investment,” hesaid. Hopkins added that as part of itsstrategy, the fund was closed in 2007 at acomparatively low level of FUM incontrast to its peers, but has sincereopened to new investors.

Finalist K2 Asset Management also sawits Australian Absolute Return Fundacknowledged in the Australian EquitiesLong Short category. Since inception inOctober 1999, it has consistently outper-formed the market and delivered clientsa 14.1 per cent return.

David Poppenbeek, head of AustralianStrategy at K2 Asset Management, said:“The fund is managed with an absolutereturn focus, achieving strong returns butalso protecting capital in volatile markets.The funds are managed with the flexibil-ity to use cash to protect capital and useshorting when and if appropriate,” hesaid.

By Angela Faherty

Perpetual’s ups and downsWinner: Perpetual

Finalist: Smallco Investment ManagerFinalist: K2 Asset Management

Australian Equities

(Long Short)

Paul Taylor

John Sevior

Three-time award winner PIMCOhas again won first place in theFixed Interest, Global and Diver-sified category in the Money

Management/Lonsec Fund Manager of theyear awards.

PIMCO kept its place as pre-eminentfund in its category, thanks to its renewedfocus in information technology infrastruc-ture and risk measurement, Lonsec noted.

The PIMCO Equity Trustees Global Bondfund has a deep and quality investmentteam focusing on both top-down macrothemes and bottom-up research on indi-vidual debt securities, according to Lonsec.

The fund is very actively managed, saidPeter Dorrian, PIMCO head of globalwealth management in Australia.

“We’re in interesting economic timeswith different parts of the world moving invery different directions in terms of theoutlook for their economies and growth.One of the things that we always do atPIMCO is that we spend a lot of time seeingthe relative outlooks across all the coun-tries in which we can invest, and all thesectors in which we can invest,” Dorrian said.

The fund is very good at avoiding thosesectors that present risk to investors, andassess sectors with the best return, he said.

PIMCO’s style of active management hasbeen the real success story, he said.

Dorrian warned investors to avoidperipheral European countries like Portu-gal and Greece, as well as the US Treasurymarket. PIMCO sold out of its US Treasuryholdings a couple of months ago.

PIMCO was favouring the emerging

markets, corporate, and the high qualitymortgage sector, Dorrian said.

Investors need to look foremost for afixed income manager that assesses the riskof that investment, to return capital firstand then provide a return on that capital,Dorrian said.

“Now, more than ever, with the dispari-ty that we have seen in bond marketsaround the world, it’s really important thatwe look first to assessing risk in any positionwe take,” he said.

Lonsec also viewed favourably PIMCO’smove in recent years to broaden the focusof the fund’s senior portfolio managers toinclude non-US accounts, including theAustralian fund.

The fund was introduced into Australiain 1998. It has produced returns of nearly 13per cent over the last 12 months to April 30,more than 5 per cent over the index return.

They currently have $2.2 billion in fundsunder management.

Taking a diversified approach withoutcompromising the level of risk they use inthe portfolio is also the secret behindMacquarie’s nomination, according to BrettLewthwaite, head of Macquarie’s fixedinterest, currency and commodities assetmanagement business.

The Macquarie Master Diversified FixedInterest Fund, while being well diversified,has been designed to behave like a domes-tic or Australian bond fund, in order toachieve superior return outcomes forclients.

The team of more than 25 analysts lookfor the best investment opportunitiesaround the world and then modify themto replicate the Australian index from dayto day.

The fund has outperformed the normalAustralian bond fund by 2 per cent.

“We believe that the global universe offixed income avails itself to be able to takea lot more diversified positions, that enablevalue to be added at a higher level, withoutsacrificing the level of risk,” Lewthwaite said.

For Simon Doyle, head of fixed income andmulti asset at Schroder Investment Manage-ment, the nomination of the Schroder’s FixedIncome Fund was a vindication of its consis-tency of investment performance over theshort and medium-term.

“The fund performed well through therecovery phase and that performance hascome about through the execution ofrobust investment processes and the goodteam sitting behind that process,” he said.

By Benjamin Levy



Good things insmall packages

Lonsec picked first-timewinner in this category,Perennial Value SmallerCompanies Trust, out of

the crowd of competitors thanksto its strong, sustained perform-ance and 6.7 per cent excessreturns.

With a focus on capital preser-vation, the fund screens outhighly leveraged, poor manage-ment companies, as well as‘concept stocks’, to find qualitysmall companies with sustainable

businesses that are trading at adiscount to valuation.

The portfolio managers, GrantOshry and Andrew Smith, workclosely with Perennial ValueManagement’s (PVM) large capteam to give them a broader depthof coverage than they would other-wise get, a relationship noticed byLonsec in anointing the winner ofthe small caps category.

“PVM exhibits many charac-teristics that Lonsec looks for ina boutique, such as equityownership by the investmentteam, a strong alignment ofinterests, and an investment-orientated culture,” the researchhouse said.

Oshry agreed with the remark.“When we set up this boutique,

we ensured that key personnelowned direct equity in the busi-ness, so our interests are clearlyaligned with our underlyinginvestors. But a number of otheranalysts, because they own equityin Perennial Value and PerennialValue owns equity in smaller

companies, they have directincentives to the success of thefund,” he said.

The support of PVM’s widerteam of analysts is a key point ofdifference between the SmallerCompanies Trust and some oftheir peers in the industry, accord-ing to Oshry.

All the fund managers are alsopersonally invested in the fund ona voluntary basis, and pay fullperformance fees for its perform-ance, Oshry said.

The small size of the fund – ithas $350 million in funds undermanagement (FUM) – allows it tomove nimbly in and out of themarket and react much morequickly to the flow of news.

“It won’t limit us in terms of ourinvestment choice. We invest in acompany with a market cap of $50million, whereas some of our peersrunning a $2 billion fund, if theyown 10 per cent of a company itwill give them a $5 million expo-sure, and that’s too small.”

The fund will close off at $750

million in FUM from retail andwholesale flows. That will leavethem at one-third the size of mostof their peers, Oshry said.

Runner-up in this category wasthe Pengana Emerging Compa-nies Fund.

“Our whole philosophy isbased around company contact;we have an exhaustive companyvisitation program,” said PenganaEmerging Companies Fundmanager Steve Black.

Pengana Emerging CompaniesFund visits on average 400 to 500companies a year. The fundmanagers look for mispricedsecurities, companies that are toosmall for large brokers to look at,or that are not well covered.

“It’s about quality managementwith good franchise businesses,”Black said.

While he admitted this wassomething of a ‘needle in ahaystack’ approach, a targetmarket of companies withapproximately $30 million incapital made no other approach

possible, Black said.The fund contains approxi-

mately 50 to 60 stocks.Small-cap companies only

have small contracts or smallnumbers of customers, so theanalysts need a greater under-standing of the quality of manage-ment if things go wrong quickly,Black said.

Runner-up Celeste FundsManagement chief investmentofficer Frank Villante said theAustralian Small Companies Fundhad used a very consistentmanagement process for anumber of years.

“We apply it day-in and day-out, irrespective of market moodor equity market economic cycle,so I think we’re fairly diligent inwhat we do, and fairly focused onwhat we do,” Villante said.

Their success at generatingexcess returns was a combinationof the right people and the rightprocess, he said.

By Benjamin Levy

Winner: Perennial Investment Partners

Finalist: Pengana CapitalFinalist: Celeste Funds Management

Australian Equities

(Small Cap)

Grant Oshry

PIMCO retains fixedinterest crown

Winner: PIMCO

Finalist: MacquarieFinalist: Schroder Investment Management

FixedInterest

(Global andDiversified)

Peter Dorrian

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They may have a world of stocks tochoose from, but being concen-trated and risk-aware has helpedthe Five Oceans Asset Manage-

ment team over the line with the ‘WorldFund’.

This benchmark-unaware, long-biasedfund topped the list in the Global EquitiesLong/Short category of the MoneyManagement/Lonsec Fund Manager of theYear Awards, thanks to its solid perform-ance and strong absolute returns in 2010.

Chief executive Ross Youngman said hisfund focuses on picking a high-convictionportfolio of well-researched internationalstocks that the team feels is attractive froma business sustainability viewpoint.

But there’s also the risk managementaspect, including active currency manage-ment that is incorporated into portfolioconstruction, the use of exchange-tradedfutures and options, as well as environ-mental, social and corporate governance

(ESG) factors, Youngman said. This ESG awareness, while it is difficult

to quantify, has definitely contributed tothe performance of the fund over the years,Youngman said.

“We don’t put percentage terms on it,but it’s fundamental and is fully incorpo-rated into our approach to selecting stocks,so it’s always considered in terms of theoverall competitive positioning of thecompany.

“It mitigates risk. Certainly from ourperspective a lot of what happened in 2008during the global financial crisis was acorporate governance issue within thefinance sector,” Youngman said.

Another factor that helped Five Oceansmake the top of the list was the consider-able investment knowledge and skill of theportfolio managers, the Lonsec judges said.

Among the team is co-founder of thebusiness Chris Selth, who manages theportfolio. He is backed by a Sydney-basedteam of 11, which has remained very stable

since inception in 2005. Youngman said although the team is

based in Sydney, its members frequentlytravel internationally and bring informa-tion back to the central location for cross-referencing among the other teammembers.

“We think that for us, that’s the best wayto run money – to have a centralisedapproach so as to bring the full experienceset of the team to each idea that we’relooking at for the portfolio,” Youngmansaid.

Lonsec judges commented that giventhe absolute nature of the strategy, the fundwould be suitable for investors who areseeking some downside protection via themanager’s ability to reduce net equitymarket exposure and its ability to exploitshorting opportunities.

“Lonsec considers the World Fund to behigh quality, experienced and suitablyresourced to implement this investmentstrategy,” judges said.

Last year’s runner-up, K2 Asset Manage-ment, was again a finalist, this time for itsSelect International Absolute ReturnFund.

Head of international strategy NickGriffin said both consistent outperfor-mance during a volatile period and thestability of the team were factors of thefund finishing in the top three.

“Put in the context of recent times, thelast 12 months was actually a relativelyeasy investment environment. By focus-ing on global growth-leveraged multina-tionals and shunning domestic focusedstocks in the developed markets, the fundwas able to outperform global indices,” hesaid.

Also in the finalist line-up is PlatinumAsset Management’s Asia Fund, which tookout the Long/Short global equities catego-ry last year.

Director and deputy chief investmentoffice Andrew Clifford believes the long-term track record of the fund and itsproven investment process have combinedto contribute to its success.

Clifford said the fund’s approach toidentifying out-of-favour stocks and its aimto protect against loss through managingcurrency risk all helped it to perform at atime when rising inflationary pressure andtightening policy in China created concernfor markets.

By Ashleigh McIntyre

It may be relatively new on the fundsmanagement scene, but MacquarieProfessional Series’ IFP Global Fran-chise Fund has certainly made a

name for itself in the Australian market.The fund has knocked Schroder Invest-

ment Management off the top of the GlobalEquities (Broad Cap) category for this year’sMoney Management/Lonsec Fund Managerof the Year Awards, thanks to its combina-tion of experience, motivated personnel anddelivery.

Macquarie Professional Series head ofdistribution Adrian Stewart said he has beenvery pleased with the level of support thefund has received across the financial plan-ning industry so far.

The fund is managed by IndependentFranchise Partners in London, a firm thatwas founded in 2009 by the lead portfoliomanager Hassan Elmasry and four others.

The investment team had been workingtogether on the same strategy at MorganStanley Investment Management for anumber of years prior to establishing theirown firm.

“The fund and group, Independent Fran-chise Partners, have been identified ashaving a very strong competitive advantagein people, process and product design,”Stewart said.

According to Stewart, this value-biasedand benchmark-unaware strategy uses

bottom-up research to identify qualitycompanies with an enduring competitiveadvantage (such as brands, patents andlicences), which are capable of supportinghigh return on capital.

The portfolio is relatively unconstrainedin relation to region or sector allocation, isquite concentrated at 20 to 40 stocks andhas a turnover of less than 20 per cent peryear since inception, said Stewart.

“Being benchmark-unaware allows themto focus on buying quality companies.They’re not looking through a filter of abenchmark or allocations to countries,regions or sectors,” he said.

According to the Lonsec judges, the fundis most suitable for investors who are willingand able to tolerate a portfolio that can varysignificantly from the traditional globalequities benchmark.

“Moreover, IFP is committed to preserv-

ing the characteristics of the strategy andcapacity is tightly managed,” the judgesadded.

A newcomer to the category, BNPParibas’ MFS Global Equity Fund came in asa finalist for its consistency in investmentprocess and team, as well as its long-termoutperformance of the benchmark.

Co-portfolio managers David Mannheimand Roger Morley run the fund, backed byan experienced team of 50 stock analystsacross Boston, London, Mexico City, Singa-pore, Sydney and Tokyo.

The fund’s investment process focuses onidentifying stocks that have an appropriatevaluation and are expected to deliver above-average returns relative to the benchmark.

But the features of the fund that stoodout most were its low turnover and theability of managers to take a large activeposition in stocks that present appropriate

opportunities. Also new to the category is the Goldman

Sachs International Equity Fund, which ismanaged by Wellington ManagementCompany out of Boston, United States.

The five-person team is led by NicolasChoumenkovitch, with each membercovering specific industries.

The fund takes a “unique assets” and“pure play” investment approach, whichinvolves looking for companies with areturn on capital that is underappreciatedby the market, as well as companies thathave assets that are hard to replicate. Thefund can also invest up to 20 per cent of theportfolio in emerging markets companies.

This, along with its core, style-neutralapproach, has resulted in consistedperformance in both up and down markets.



Macquarie takes the mantleWinner: Independent Franchise Partners

Finalist: MFS Investment ManagementFinalist: Goldman Sachs Asset Management

Global Equities

(Broad Cap)

Winner: Five Oceans Asset Management

Finalist: K2 Asset ManagementFinalist: Platinum Asset Management

Global Equities

(Long Short)

A bet both ways

Adrian Stewart

Ross Youngman

If there is one thing Aberdeen AssetManagement senior investmentspecialist Stuart James can put histeam’s success down to, it is experi-

ence.“We’ve been doing this since 1987. To a

large extent you learn your most valuablelessons when things are tough, so thatlong-term experience really holds us ingood stead,” James said.

While the Aberdeen Emerging Oppor-tunities Fund came a close third in lastyear’s Money Management/Lonsec FundManager of the Year Awards for the GlobalEquities (Regional and Emerging Markets)category, this year the fund has taken outthe top spot.

Lonsec judged Aberdeen’s approach to

have “served investors well over the longterm and delivered strong absolute andpeer-relative performance during 2010”,which James puts down to the team’ssimple, transparent and disciplinedapproach.

James said his clients expect true activemanagement that provides them expo-sure to the growth in emerging markets,but also provides some protection fromthe risks – “and that’s exactly what we’vedelivered”.

One of the key things that madeAberdeen stand out, according to James, isthat it is completely benchmark-unaware.

“We don’t believe benchmarks are aportfolio construction tool, they tell younothing about future opportunities. So weliterally build a portfolio of the best qualitycompanies we can find,” he said.

James said the fund is also very concen-trated, with an average number of hold-ings at around 50 companies.

“We simply believe that your 150th ideais not your best idea, so why put client’smoney in it? Why not put more of theirmoney in those companies in which youhave the highest conviction?”

Among the other traits of the fund are itslow turnover at 20 per cent, its lower valu-ations which sit at approximately 10 percent below market consensus, and itsbottom-up approach to stock-picking.

“The team is headed up by Devan Kalooin London and we have 39 fund managers

around the world dedicated to emergingmarkets,” said James.

“We also do all our own proprietaryresearch. We have teams located acrossthe world, from Sao Paulo, Singapore,Kuala Lumpur, Bangkok and Hong Kong.”

This depth of analysis and frequentcontact with company managementearned Aberdeen praise from the Lonsecjudges, who stated it was among thelargest emerging markets teams in theresearcher’s universe.

Premium China Funds Managementalso performed well in this category withits Premium China Fund, the same fundwhich has been shortlisted for the lastthree years.

Executive director Simon Wu said thiswas a reflection of a number of factors ofhis organisation, including its net after-fee performance track record of 18 yearsand its comprehensive informationservice for investors.

The underlying manager Value Partnershas a deep value, bottom-up, benchmark-unaware, research focused approach andis also very conscious of risk, said Wu.

“Their focus is to find the right business,

run by the right people at the right price,”he said.

It is this approach which has helped thefund achieve 19.1 per cent per annum netof fees since inception in 1993, said Wu.

Last year’s winners T. Rowe Price havealso made the shortlist for its Asia ex-Japanfund.

T. Rowe Price’s director for Australia andNew Zealand, Murray Brewer, said he wasthrilled to be a finalist again as it was atestament to both the performance andthe strategy of the fund, as well as to itsportfolio manager Anh Lu.

Brewer said the fund was “a little bitdifferent to what other people are doingin this category” as it worked on thepremise that the benchmark for Asia ex-Japan is flawed.

He said that rather than investing in bigmanufacturing companies exporting todeveloped countries, as the benchmarkdoes, T. Rowe Price’s fund prefers toconcentrate on companies that takeadvantage of the growing middle-class ofconsumers in China and India.




Global veterans Winner: Aberdeen Asset Management

Finalist: Premium China Funds ManagementFinalist: T. Rowe Price

Global Equities (Regional and

Emerging Markets)

Stuart James

Schroder Investment Managementadds another accolade to the trophycabinet by taking out the top spot inthe newly created category of Asset

Allocator in the 2011 Money Management/Lonsec Fund Manager of the Year Awards.The aim of the award is to reward managerswho undertake tactical or dynamic assetallocation through their diversified prod-ucts and have added good value for clients.

Schroders’ asset allocation capabilitieswere held in high regard by Lonsec, as wasthe manager’s strong risk managementframework that focused on downside riskand the advantage of positive interactionand integration with its global multi-assetteams.

“Differentiating Schroders from manyassessed peers is the greater opportunityset that is available to diversify total riskacross a number of asset classes, includingalternatives, global property and high yieldcredit. This flexibility of asset classes

provides Schroders with the ability to effi-ciently express the appropriate views as wellas tap into global multi-asset teams forbroader asset allocation themes,” Lonsecsaid.

Schroders’ tactical asset allocationprocess is initiated by a quantitative assess-ment of prevailing market valuation, liquid-ity and cycle, which is then supplementedby a rigorous qualitative overlay. It is thisconsistently applied process and access toasset classes that Lonsec considered to be adistinct competitive advantage of the fund.

It also added that the key positivecontributors to Schroders’ diversified fundsfor the 12 months to December 2010 werean overweight position in high yieldingcredit and the allocation to Australian smallcaps.

Simon Doyle, head of fixed income andmulti-asset at Schroders, said: “Ourperformance is a result of the execution ofrobust processes and we have done what

we said we would do. There is a good teamsitting behind our investment processesand our strategy is a mixture of top-downasset allocation and bottom-up stock selec-tion skills.”

Runner-up in this category was Perpetu-al Investments, which has demonstrated atrack record of delivering strong perform-ance for its clients. The manager attributesthis to its focus on quality assets, its activeasset allocation, its commitment to contin-ual research and its experienced asset allo-cation team.

Commenting on making the final short-list, Michael Blayney, head of balancedfunds at Perpetual Investments, said:“Through tactical asset allocation we canselectively increase or decrease the funds’exposure to domestic equities, fixed incomeand cash when appropriate. This long-termstrategic asset allocation is assessed on anongoing basis to determine if the weight-ings between asset classes should bealtered.”

Blayney said that regular assessment ofasset allocation was imperative if optimumresults were to be achieved. He said:“Regular rebalancing is needed to success-fully maintain a diversified portfolio and isthe strategy of selling better performingassets and buying poorer performing assetsto maintain an asset allocation.”

Also acknowledged for its asset alloca-tion and awarded third place in this new

category was Advance Asset Management.The manager places a lot of focus on theresearch practices that go into stock selec-tion, said Patrick Farrell, head of AdvanceInvestment Solutions.

“Asset allocation is very important, andwe place a lot of focus on it. We want toensure the return risk trade-off is right, soour research is focused on the volatility andreturns of future markets. Our team isheaded up by industry veteran, FelixStephen, and a lot of effort is put into under-standing companies and coming up withsignificant themes. This is reflected in ourasset allocation and portfolio construction,”he said.

By Angela Faherty

Picking and choosingWinner: Schroder Investment Management

Finalist: Perpetual InvestmentsFinalist: Advance Asset Management

Asset Allocator

Simon Doyle

As the Australian real estateinvestment trust [AREIT ]market tanked a couple ofyears ago, Cromwell Property

Group took a gamble and jumped intothe deep end with a new fund in late2008, according to Cromwell financedirector Dale Wilson.

But no investors wanted to go near thesector at the time, so they decided to puttheir ‘ultimate contrarian play’ on thebackburner, Wilson said.

That gamble paid off this year, withCromwell Phoenix Property SecuritiesFund being named the winner of theAustralian property securities categoryin this year’s Money Management/Lonsec Fund Manager of the YearAwards.

Cromwell wanted to marry Phoenix

Portfolios director Stuart Cartledge’shistory and experience in AREIT, withtheir experience in direct property,Wilson said.

“We concentrate on the Australianmarket, but we’re unashamedly bench-mark-unaware,” he said.

The fund’s benchmark-unawareapproach to investing was a big reasonit was appointed winner of the category.

Cromwell is one of the few funds in thesector that follows such a strategy, andits approach – providing enhanced diver-sification and reducing risk – paid off asinvestors’ risk appetite increased in thesector in the past 12 months.

“Our product is fairly unique in themarketplace. We’re a fairly focused business,and our product, we think, is in a sweet spotwith respect to portfolio construction,” saidportfolio manager Stuart Cartledge.

The fund was the best performingproduct in its peer group up to the end ofthe calendar year last year, according toLonsec.

The real estate investment trust sectorhas decided to revert the benchmark atthe absolute wrong time, Wilson said.

“If you’re going to be an activemanager, this sort of market that we’vehad and the sort of market we’re goingto keep having is really the market whereyou want to be in,” he said.

The benchmark for AREIT in Australiais only made up of five or six stocks, butCromwell instituted a constraint againstholding a stock that comprised morethan 20 per cent of its portfolio.

“It also allows us to look through thecycle, ignore the index to a degree, andreally concentrate on where we seevalue,” Wilson said.

Many smaller cap stocks which havebeen worse off in the sector have vastlyimproved and stabilised their business-es and are now offering huge discountsto their real asset value, and Cromwellhas leaped at them.

“We have taken a series of small bets,that in totality have paid off pretty well,”Wilson said.

Lonsec also applauded CromwellPhoenix’s detailed stock analysis and‘robust research’ which supports thefund’s high conviction approach.

Brett McNeill, investment manager ofthe Aviva Investors Listed Property Fund,thanked his analyst team for the effortsthat led to the fund being named runner-up in this category.

“We’re very conscious of trying toincorporate the insights and experiencethat our investment team have; it’s verymuch a team-based approach to manag-

ing this fund,” McNeill said.The fund is designed to be low-cost

and tax-effective, McNeill said.They spend a lot of time on gover-

nance issues, seeing it as a key role as amanager, he said.

The quality of the sector has improvedmarkedly, leading to a very good propo-sition for investors at the moment,McNeill said.

Finalist APN AREIT fund manager,Michael Doble, said the sector is in anirvana on the risk/return scale.

Doble, who is also chief executive ofAPN, said they were running standard riskdeviation that was well less than themarket, while delivering returns that werehigher than the market.

“You can’t but help attract the atten-tion of people who are looking at thesesorts of things,” he said.

By Benjamin Levy

The high calibre of the investmentteam and continuously evolvingteam structure were two of thereasons Lonsec once again named

AMP Capital Global Property Securities Fundwinner of this award at the Money Manage-ment/Lonsec Fund Manager of the YearAwards.

The analysts in the fund undertake adetailed review of everything that mayimpact on property outlook in variousregions around the world, including theeconomic, real estate fundamentals, andvaluations at both a regional and countrylevel, according to Brett Ward, global portfo-lio manager for the fund.

Once that review is complete, regionalinvestment teams – based in four key citiesaround the world – review real estate stocksin conjunction with the fund analysts.

Only then do they invest the allocated

funds to a constructed portfolio.Lonsec focused on that decentralised

regional stock selection structure as one ofthe key reasons for the fund taking out firstplace in the category, calling it a repeatableand logical investment process.

“The regional teams have a high degree ofautonomy, because markets are alive andchanging and we want our process to beresponsive to change as it occurs, as well asresponsive to opportunities,” Ward said.

“At the same time, in the construction ofthe portfolio, we want to make sure that weapply quite consistently our global outlook –and indeed our regional outlook too,” he said.

Ward put much of the fund’s success downto the regional teams, who are well experi-enced.

“They are very good at what they do, andthe application of our research processes andstock selection processes leads to the consis-

tency of our returns,” he said.The core of the fund’s analyst team has

been working together for almost 10 years.That experience in both listed and directproperty has let them navigate marketssuccessfully over the medium to long-term.

The company covers 250 companies indetail as part of its investment research.

The fund also has the backing andresources of AMP Brookfield’s real estate plat-forms, while the interests of AMP Capital,Brookfield and investors are well aligned.

LaSalle director of client services DavidQuirk believed it was the research team’sinsight into market behaviour that led to theEquity Trustees SGH LaSalle Global ListedProperty Securities Fund being namedrunner-up in the category.

“We truly have a global platform, wherewe’ve got people on the group in Europe, inAsia, in Hong Kong, in the United States, andhere in Australia. That combines with ourparent company, and we’re a large managerof direct property as well,” Quirk said.

That insight into markets makes them verycompetitive against other managers, he said.

The fund is also a previous finalist in thecategory.

Being a joint venture between SG Hiscockand LaSalle, the expertise needed to managethe investments is split between two teams,with SG Hiscock managing the domesticmarket, and LaSalle focusing on offshoreinvestments.

The fund has reached more than $US10billion in funds under management in real

estate investment trusts, holding approxi-mately 80 to 90 stocks.

Part of LaSalle’s success is its ability to focuson property without the distraction ofcompeting for capital or attention frommanagement, Quirk said.

Having a low-cost approach and beingfully invested will allow you to gain the fulladvantage of any moves in the market,according to Joseph Brennan, Vanguard’sprincipal and chief investment officer for theAsia Pacific region.

Investors in the Vanguard InternationalProperty Securities Fund, also a finalist inthis category, have reaped the rewards ofbeing fully invested in the market, despite –or perhaps because of – markets being quitevolatile over the last couple of years, andcurrency moves.

By Benjamin Levy


Building for the future

Winner: AMP Capital Investors

Finalist: SG Hiscock & Company/LaSalleInvestment Management

Finalist: Vanguard Investments

Global Property

Securities

Brett Ward

Swimmingagainst the tide

Winner: Cromwell Property Group

Finalist: Aviva InvestorsFinalist: APN Property Group

AustralianProperty

Securities Stuart Cartledge



Pioneering the cause forethical investingfollowing its inceptionin 1994, it is no surprise

that Hunter Hall was the clearfront-runner and the f irstwinner of this year’s inauguralEthical/SRI Money Manage-ment/Lonsec Fund Manager ofthe Year Award.

Taking out the top spot withthe Hunter Hall Global EthicalTrust fund, Lonsec commend-ed the manager for its strengthand consistency in the respon-sible investing sector.

“The trust holds a number ofkey attractions and under theleadership of founder and CIOPeter Hall, the firm continuesto make a leading contributionto the responsible investmentsector in Australia,” Lonsecsaid.

Hunter Hall was hailed byLonsec as a “deep value-style

contrarian investment managerwith a long heritage of ethicalinvestment in Australian andglobal equity products”. TheGlobal Ethical Trust is its bench-mark-unaware unhedged globalequity product that typicallyoffers greater exposure tosmaller companies and devel-oping economies.

It is the firm’s true commit-ment and high ethical screen-ing process that makes it astandout winner in this catego-ry. The manager applies a highlystable negative ethical screenthat seeks to avoid investmentin a range of excluded corporateactivities, including companiesderiving revenues from themanufacture and sale ofweapons, tobacco, gamblingand intensive animal farming.

“Under the leadership offounder and CIO Peter Hall, thefirm continues to make a

leading contribution to theresponsible investment sectorin Australia and the Trust hasperformed comparatively wellin 2010,” Lonsec said.

Michael Walsh, head of strat-egy and development at HunterHall, said the firm has workedhard to raise the bar when itcomes to ethical investing. Hesaid: “When Peter Hall startedthis firm in 1994, the ethicalpolicy was a personal prefer-ence, so it is amazing to thinkwe are now working in anindustry dedicated to responsi-ble investing.”

Walsh continued: “Ourperformance over the last yearhas been consistent. It is a hardsector in which to make moneyand the fact that the fund made8 per cent is creditable. We arealso very proud of our charita-ble giving policy which meanswe donate 5 per cent of pre-tax

profits to charity. Last year wedonated about $1 million tocharity. Our belief is that it isimportant to be dedicated tothe space.”

Perpetual Investments wasalso commended for itsEthical/SRI Fund which has alsoperformed consistently well ina volatile market. The fundinvests in a portfolio of qualityAustralian shares of sociallyresponsible companies anduses the same investmentprocess as its broad Australianequities strategies as well as anadditional screening process todetermine suitable funds.

John Sevior, head of equitiesat Perpetual Investments,attributed the fund manager’ssuccess in this category to itslarge, stable and experiencedteam and research policy. Hesaid: “Socially responsibleinvestment research requires

specialist skills and is aimed atevaluating a company’sperformance in a range ofsocially responsible criteriawhich are, in general, unrelatedto a company’s f inancialperformance.

“The fund has remained trueto label by applying Perpetual’stime-tested process whichfocuses on quality stocks inorder to provide downside riskprotection, while our extensiveinternal research enables us toidentify stocks at attractive valu-ations,” he added.

By Angela Faherty


Practicalethics

Winner: Hunter Hall

Finalist: Perpetual Investments

Ethical/SRI Manager

MichaelWalsh

Hedge funds have beenknocked around inrecent times, butthere’s nothing like a

return of 13.2 per cent after fees tomake someone sit up and payattention.

That is the return of the WintonGlobal Alpha fund, the declaredwinner in the Alternative Invest-ments category in this year’sMoney Management/Lonsec FundManager of the Year awards.

The fund, offered exclusively by

Macquarie Professional Series, is amanaged futures hedge fund thatuses a statistical researchapproach to identify trends infinancial markets.

The fund has more than 100staff dedicated to finding thosetrends. They search only for highquality PhD graduates and postdoctorates to fill out their staff,making it a highly qualified teamof analysts.

“Really for us, the key was theirinvestment in research and theirdedication to research,” saidAdrian Stewart, head of distribu-tion at Macquarie ProfessionalSeries.

Winton’s team leader, DavidHarding, has been in the CTAsector for 27 years, giving him aunique depth of knowledgearound the development of thesector. Lonsec pointed toHarding’s experience as thereason for the fund’s success,saying it has competitive advan-tages with Harding’s quality andtrack record.

A dedication to risk manage-ment is essential in the hedge fundindustry, especially for this fund,which Lonsec labels highly volatile.

Despite its volatile nature, thefund still has the lowest volatilitytarget across the CTA peer group,Stewart said.

“We can still deliver a strongtrack record in performance bytaking less risk, which is some-thing of an achievement,” hesaid.

The fund has produced morethan 6 per cent in excess returnssince it first started. Launched inMay 2007, it now has more than$20 billion in funds undermanagement, making it the 14thlargest hedge fund in the world.They are well diversified, sittingacross 100 different markets at anyone time, including share indices,bonds, interest rates, currenciesand commodities.

MAN AHL Alpha Fund, runner-up in the category, takes a differentapproach to their analysis.

The fund doesn’t rely solely on

key analysts for its returns, buthas developed a computerisedinvestment program that cansample more than 4,000 marketprices a day. The program wasbuilt with the help of more than110 MAN personnel who arededicated to developing theprogram, improving its executionof trading, and coming up withnew strategies.

According to Lonsec, 34 person-nel are devoted to developing newtrading signals and models, while27 are devoted to developing itstrading systems. With this largenumber of experts working on thefund, it is clear why Lonsec saidthe high level and quality of intel-lectual resources underpinned thealpha fund’s prime rating.

Hersh Gandhi, MAN Invest-ments director, said the fund’sstrong returns in bear markets andhighly diversified portfolio made itsuccessful in the hedge fundspace.

“It’s done over 8 per cent in thelast 12 months. That compares

pretty favourably to Australianstocks which are just under 5 percent.”

A managed futures fund likeAHL appealed to investorsbecause they need something thatprovided a low correlation to themarket and strong returns whentraditional assets were struggling,Gandhi said.

The fund has been around fortwo-and-a-half years.

AQR Delta Fund, run by AQRCapital Management, was thethird finalist in the category. Thefund relies on its diversified port-folio of multiple hedge fund strate-gies to provide high risk-adjustedreturns in excess of the UBS BankBill Index. The fund utilises abottom-up dynamic investmentprocess, and relies on more thannine different strategies.

The fund’s net returns toinvestors over 12 months toDecember last year were 9.6 percent.

By Benjamin Levy

Bringing homethe bacon

Winner: Winton Capital Management

Finalist: MAN InvestmentsFinalist: AQR Capital Management

AlternativeInvestments

(Hedge Funds)

Adrian Stewart

Underpinning Schroders’ successin the multi-sector category isLonsec’s high opinion of thefirm’s underlying capabilities,

strong risk management framework andstrong peer relative performance. This cumu-lative approach has ensured that SchroderInvestment Management has secured thetop spot in the Money Management/LonsecFund Manager of the Year Multi-SectorAward.

It was the stability and experience ofSchroders’ multi-asset team that impressedLonsec, which considered its ability to tapinto a larger global multi-asset team a keyfactor in its success in this category. Thefund’s outstanding performance during 2010was also hailed as a significant contributor.

“Throughout 2010, the SchrodersBalanced Fund delivered solid returns of 6.29per cent, outperforming the Lonsec peergroup and the multi-sector growth bench-

mark. Importantly, Schroders was one of onlya few managers in the sector to successfullyadd value across all stages of the investmentprocess, across both asset allocation andstock selection,” Lonsec said.

Schroders’ head of fixed income andmulti-assets, Simon Doyle, said the fund hasperformed exceedingly well during the last 12months, a direct result of the low-riskapproach adopted by the manager. “Ourmulti-balanced fund performed very wellthroughout the downturn and recoveryphase. Over the last 12 months we haveachieved better returns from equitiesbecause we have stayed cautious and fairly

neutral,” he said. Indeed, Schroders’ strong risk manage-

ment culture was praised by Lonsec as being“focused around meeting objectives, riskbudgeting and portfolio construction”. Theresearch house added that the managerdemonstrated this through the proprietarysystems development and risk tools inunderstanding where risk is derived. This hasresulted in a good “relative performance overthe medium-term, with significant outper-formance against their peer group”.

Second in the running for this year’s multi-sector award is last year’s runner-up, AdvanceAsset Management. The manager has

focused intensively on asset allocation duringthe last year, with particular attention beingplaced on the volatility and returns of futuremarkets.

Patrick Farrell, head of Advance Invest-ment Solutions, said the focus on asset allo-cation is what drives the team and laudedpraise on the firm behind the multi-sectorfund and its portfolio manager, FelixStephen. He said: “The multi-sector fund isan extension of Advance Asset Manage-ment’s heavy focus on asset allocation andresearch into future market performance.We have dedicated portfolio managersassigned to each asset class and we prideourselves at getting that significant piece ofinformation that will make all the difference.”

Last year’s winner Mercer was also praisedfor its performance in the multi-sector cate-gory. The team is led by Stephen Roberts whois the regional business leader for Asia Pacificat Mercer Investment Management. Hecredits the consistency of the fund and its‘building blocks’ approach to portfolioconstruction for acknowledgement in thiscategory.

“We continue to lead the market in termsof offering investors the widest set of port-folio ‘building blocks’ at the sector level. Thisenables investors to construct truly diversi-fied portfolios that are better prepared forthe future and more robust when the invest-ment environment enters volatile times,” hesaid.

By Angela Faherty


Winner: Schroder Investment Management

Finalist: Advance Asset ManagementFinalist: Mercer

Multi-Sector

Expert riskmanagement


The ethical fund which outperformed the mainstream funds.

Disclaimer – Issued by Uniting Growth Fund Limited. An Offer Document for Uniting Growth Fund is available from UCA Funds Management. Past performance is not a reliable indicator of future performance. Any general advice has been prepared by Uniting Growth Fund Limited, without reference to your objectives, financial situation or needs. You should consider the advice in light of these matters and read the relevant Offer Document before making any decision. Uniting Growth Fund Limited is not prudentially supervised by APRA. Contributions to Uniting Growth Fund do not obtain the benefit of the depositor protections of the Banking Act 1959. Uniting Growth Fund is designed for investors who wish to promote its charitable purposes. ^Inception date 7 July 2003. *The Morningstar Rating is an assessment of a fund’s past performance – based on both return and risk – which shows how similar investments compare with their competitors. A high rating alone is insufficient basis for an investment decision. The 5 Star Morningstar rating is based on 5 year risk-adjusted returns for the Multisector Aggressive category as at 31/03/11. © 2010 Morningstar, Inc. All rights reserved. Neither Morningstar, nor its affiliates nor their content providers guarantee the above data or content to be accurate, complete or timely nor will they have any liability for its use or distribution. Any general advice has been prepared by Morningstar Australasia Pty Ltd ABN: 95 090 665 544, AFSL: 240892 (a subsidiary of Morningstar, Inc.), without reference to your objectives, financial situation or needs. You should consider the advice in light of these matters and, if applicable, the relevant offer document, before making any decision. Please refer to our Financial Services Guide (FSG) for more information at www.morningstar.com.au/fsg.pdf.

6 months (actual) 10.28% 1 year 10.64% 3 year 5.05%pa 5 year 4.98%pa Since inception̂ 9.90%pa

Uniting Growth Fund annualised total returns to 31 March 2011 Source: Atchison Consulting

Uniting Growth Fund has been ranked #1 by Morningstar in its category over 3 and 5 years,* doubly impressive considering it was

judged against funds which didn’t have the same strict ethical guidelines. To learn more about UCA Funds Management and our

Uniting Growth Fund go to www.ucafunds.com.au/ugf or call toll free 1800 996 888.

Simon Doyle

Arelative newcomer has beennamed the winner of the RisingStar category at the MoneyManagement/Lonsec Fund

Manager of the Year Awards this year.Alphinity Investment Management was

born out of a close-knit team of formerAllianceBernstein analysts, who left theirformer employer and established the newboutique under the auspices of Chal-lenger Financial Services Group in Julylast year.

Alphinity had the advantage of beingrecognised as a great investment teamthanks to their track record at Alliance-Bernstein, said Johan Carlberg, principaland portfolio manager of Alphinity.

Lonsec was ‘comforted’ by the fact thatthe entire team moved across from

AllianceBernstein to establish Alphinity,creating a cohesive and stable unit, theresearch house said.

“We have brought the bulk of the teamacross and we have worked together fora number of years, so our philosophy andprocess is the same as we applied atAlliance. That’s what’s been recognised soearly on,” Carlberg said.

The team of five investment profession-als have various backgrounds, frommanagement consulting to pure financialmarket backgrounds, but with an averageindustry experience of 18 years.

As the team at Alphinity has broughttheir expertise into their own business,Lonsec praised its advantage in businessviability compared to other start-upboutiques in the industry.

“A lot of people have been following usover the years and are familiar with us andare favourably disposed to the new struc-ture that we have set up,” Carlberg said.

Alphinity also draws on Challenger’sinstitutional resources, allowing the teamto focus on investment management.

Alphinity chose Challenger as a partnerbecause of its years of experience as a finan-cial backer of boutiques, Carlberg said.

Alphinity focuses on undervaluedcompanies that are about to enter anupgrading cycle and utilises strong funda-mental research combined with quanti-tative factors.

“We’ve found that works across thedifferent phases of the market cycle, andwe’ve outperformed with that process instrong equity markets, and during theGFC,” Carlberg said.

“The way we use those quantitativefactors is as just another tool in the funda-mental research; we don’t take any otherquantitative factors at face value,” he said.

Karara Capital was named as runner-up in the emerging market category.

“The most important thing is ourpeople, our experience and our expert-ise,” said Karara managing partner DavidSlack.

Karara is the third investment firmSlack has established.

“It is all about the people workingharmoniously together as a team, with alarge amount of experience and expert-ise combining together with a philosophy

that is consistent with how we’ve alwaysmanaged money,” Slack said.

Karara follows a fundamental, style-neutral approach to stock picking. LikeAlphinity, they look for where themarket is under-appreciating compa-nies, and pick ones with sustainableprofits.

“From that point of view, it’s importantwhat we don’t focus on. We don’t focus onhighly speculative companies, andcompanies that are very difficult to value,”Slack said.

One of the important elements in theirstock selection is their expertise in under-standing economic development andhow it impacts on the companies theyresearch, he said.

“Not only do you have to have thecompany performing well itself, but itsoperating conditions need to beconducive for good profit performance,”Slack added.

Phoenix Portfolios, third finalist in thecategory, also has a good relationship withCromwell Property Group, which is farmore meaningful than what a lot of otherboutiques have with their incubators.

“Our team is one that has worked inproperty for a long time, and in manyrespects, I would argue, we come at prob-lems with very different perspectives,”said Stuart Cartledge, Phoenix Portfoliosdirector.

By Benjamin Levy



New kid onthe block

Winner: Alphinity Investment Management

Finalist: Karara CapitalFinalist: Phoenix Portfolios

Rising Star

Johan Carlberg

Gwen Fletcher AM hasbeen awarded MoneyManagement’s inau-gural Lifetime

Achievement Award for hersteadfast dedication andoutstanding stewardship indeveloping and promoting the

profession of financial planningin Australia.

As one of the pioneers off inancial planning in thiscountry, Fletcher is widely cred-ited as being one of the princi-pal driving forces behind theformation of the Financial

Planning Association (FPA) in1991-92, through the merger ofthe International Associationfor Financial Planning (IAFP)and the Australian Society ofInvestment and FinancialAdvisers (ASIFA).

In 1980, Fletcher was grantedone of the f irst Austral ianlicences to practice as a finan-cial planner, which later led herto establish the InvestmentTraining College in 1983.

Since that t ime, she hasserved as chair and president ofthe Association of FinancialService Educators, served onthe FPA’s Financial Educationin Schools Project taskforce,lectured at Macquarie Univer-sity, presented at conferences,authored publications, success-fully brokered the deal to bringthe CFP designation toAustralia, while all the timeinvolved in the education offinancial planners and runningher own successful planningpractice.

For her services to the devel-opment of the financial plan-ning industr y through theestablishment of nationalorganisations and training andeducation programs, and as amentor for women in the

finance industry, Fletcher wasmade a Member of the GeneralDivision of the Order ofAustralia (AM) in 2007.

Later that year, Fletcher wasalso honoured with anotheraward for services to the finan-cial planning profession – thistime from the United States.

In what is believed to be afirst for someone outside theUS, Fletcher received the pres-tigious Heart of Financial Plan-ning Distinguished ServiceAward from the FPA USA. Thisaward is presented to individ-uals, financial planning prac-tices, organisations or FPAChapters in recognition of theirextraordinary activities andcontributions to the financialplanning community andpublic.

In nominating Fletcher forthis US award, Professor TomPotts from Baylor Universitysaid she truly deserved thishonour in recognition of all thatshe had done in advancing thefinancial planning profession.

“Gwen is often referred to as‘The First Lady of AustralianFinancial Planning’, but she hashad an impact globally as well,”Potts said. “She has been apioneer and leader in

Australian financial planningand she has also been active inpromoting international co-operation in the developmentof the profession. Gwen defi-nitely exhibits the FPA’s corevalues and she is universallyrespected and loved.”

Although now retired as afinancial planner, Fletcher triesto remain active in the profes-sion by attending industr yevents and conferences.

By Jayson Forrest



Planning’s first lady

Morningstar co-head off u n d re s e a rc h Ti mMu r p h y h a s b e e nnamed Money Manage-

ment Young Achiever of the Year2011.

In making its decision, the judgingpanel was impressed with Murphy’stertiary qualifications and achieve-ments within the financial servicesindustry.

In 2001, Murphy graduated with aBa c h e l o r o f Ap p l i e d Fi n a n c e(Macquarie University), from where

he joined Commonwealth Bank’sgraduate program. From 2002-05,Mu r p h y g a i n e d e x p e r i e n c e i n anumber of roles, including corpo-rate credit analysis at Common-wealth Bank and HSBC, mortgagesecuritisation at Macquarie Bank,and equity derivatives trading atOptiver. During this time he alsoc o m p l e t e d h i s Po s t g ra d u a t eDiploma in Accounting.

Murphy joined Morningstar in thes e c o n d h a l f o f 2 0 0 5 a s a f u n dre s e a rc h a n a l y s t . In 2 0 0 7 , t h ecompany sent him to London totrain a team of new analysts that hadbeen hired for Morningstar’s expan-sion of fund research in Europe.Returning to Australia, Murphy waspromoted to senior research analystand in 2009 he was again promotedto co-head of fund research, whichhe holds today.

In this role, Murphy has joint lead-e r s h i p o f Mo r n i n g s t a r’s f u n d

research business in Australia andNew Zealand and is responsible forMorningstar’s consulting relation-ships with dealer group clients.

In 2009, Murphy added to hisqualifications by graduating with aMa s t e r o f Ap p l i e d Fi n a n c e( Ma c q u a r i e Un i v e r s i t y ) , w h i c hincluded an exchange program atCo p e n h a g e n Bu s i n e s s S c h o o l ,earning him the right to use the CFAdesignation in 2010.

Macquarie University has alsoinvited Murphy as a guest lecturerin its Master of Applied Financeprogram in the area of Equity FundsManagement.

In what was a tightly contestedcategory, the judges also paid tributeto the three finalists: Matthew Dellit(Professional Investment Services),Finn Kelly (Wealth Enhancers) andMatthew Parrella (Finovia).

By Jayson Forrest

LifetimeAchievement

Award

Winner:

Gwen Fletcher

Young Achiever of

the Year

Winner: Tim MurphyFinalist: Matthew DellitFinalist: Finn KellyFinalist: Matthew

Parrella

Morningstar’syoung gun

Gwen Fletcher

Tim Murphy

This year’s inauguralMarketing Team ofthe Year Award hasgone to Challenger.

The judging panel wasimpressed with the Chal-lenger submission, whichwas professional, well artic-ulated and hit the ‘sweetspot’ by addressing theentry criteria.

The Challenger submis-

sion clearly identified howt h e m a rk e t i n g t e a m w a sable to successfully launcha new retail financial serv-ices brand in the market-p l a c e by re s p o n d i n g t obrand issues and imple-menting a concise brandstrategy.

The Challenger marketingteam comprises of StuartBarton (general manager,corporate marketing andcommunications), RodneyGreenhalgh (generalmanager, product and

channel market ing) ,Amanda Ir v ing (head ofmarket ing strategy andexecution), Samantha Pierce(senior manager, projects),Andrew Rice (head of adver-t is ing and design) andRebecca Payne (seniormanager, onl ine andcommunication systems).

The Colonial First Stateand CommInsure marketingteams were runners-up inthis category.

By Jayson Forrest

In what was a hotly contest-ed category, the BT Superfor Life campaign – MakingSuper Simple – has taken

out this year’s award for BestAdvertising Campaign.

In awarding BT Super withAdvertising Campaign of theYear, the judges acknowledgedthe quality of execution of thecampaign, the campaign’s inte-g ra t e d m e d i a a p p ro a c h

(comprising television, print,and online/digital), promotion-al activities at cinemas, and theuse of the wider Westpac Groupbank channels to help promotethe campaign.

The result was a 50 per centincrease in new accounts and a56 per cent increase in inflowss i n c e t h e l a u n c h o f t h ecampaign in Februar y 2010,e xc e e d i n g t h e c a m p a i g n’sperformance objectives.

T h e j u d g e s we re a l s oimpressed by the campaign’ssimple yet effective creative.

However, in a narrow deci-s i o n , t h e BT Su p e r f o r L i f ecampaign managed to hold offC h a l l e n g e r’s ‘Re a l St o r i e s’campaign, Fidelity’s ForensicInvesting campaign, and BT’s‘Bigger Picture’ campaign.

By Jayson Forrest



A simplysupercampaign

Meeting the

challenge

Best AdvertisingCampaign

Marketing Team of the Year

Winner:BT ‘Super for Life’Finalist:Challenger ‘Real Stories’Finalist:Fidelity ‘ForensicInvesting’

Winner:ChallengerFinalist:Colonial First StateFinalist:CommInsure


BDM of the Year

Experiencepays dividends

With over 15 years of experiencein financial services, it wasMichelle Woodgate’s unwa-vering passion and commit-

ment to the industry that saw her crownedthe 2011 Money Management BDM of theYear.

An active member of the SunshineCoast financial planning community,Woodgate held the position of secretary atthe Sunshine Coast Chapter of the Finan-cial Planning Association from 2002 to2010. She joined Asgard in January 2008as a sales consultant business develop-ment manager, having worked for adecade as a financial planner at a numberof small and large boutique practices.

Woodgate believes her experience in theindustry helped her to better understandthe advice process as well as the chal-lenges and demands facing financial plan-ners. “My financial planning experiencehas given me extensive knowledge, under-standing and first-hand insight into theadvice process and the challenges facingfinancial planners, their businesses andtheir clients,” she says.

As part of her current role, Woodgate isresponsible for the growth in revenuederived from funds under managementon the Asgard Platform, AdviserNET. Sheachieves this through relationship build-ing with an existing panel of adviser clientsas well as prospecting for new clients. “Ialso support advisers through marketingand communication campaigns, such asseminars, that promote financial planningstrategies and the value of financialadvice,” Woodgate says.

It was Woodgate’s passion for the peopleshe works with and her dedication to thecause that made her a favourite with thejudges. Clearly relishing her role in the

industry, Woodgate praised the people sheworked with and says hers is an ever-evolving role.

“I work with dynamic and intelligentpeople who are not only excellent financialplanners, but brilliant business people andinspiring marketers. I see my relationshipwith my panel of advisers as mutual.

“Not only do I get the opportunity tomake a contribution to my clients’ busi-nesses and add value by uncovering busi-ness inefficiencies, but I am also constant-ly learning and developing my own skillsas a result of these relationships,” she adds.

With the Future of Financial Advice(FOFA) reforms continuing to causeuncertainty in the market, Woodgate saysshe is looking forward to helping add valueto her clients’ businesses.

“Advisers know that change in theirbusiness is inevitable,” she says. “However,many planners still remain unsure abouthow to embrace the change from an oper-ational perspective. This is where I reallyadd value to my clients’ businesses.”

Woodgate’s speciality is working withclients and providing them with the tools,know-how and expertise on how to ratio-nalise their back-office process, improvetheir client interface and simplify coststructures. “I know this is going to be anincreasingly important part of my role inthe coming months and years, and it’scertainly the part of my role I enjoy themost,” Woodgate says.

Woodgate feels her greatest achieve-ment over the past few years has been thesatisfaction she has achieved from helpingadvisers grow their business in toughmarket conditions. “I love it when advisersgive me feedback on the positive differ-ence my strategies have made to their

practice. Knowing I have helped a prac-tice grow, or increase its profitability,makes all the hard work worthwhile,” she says.

Looking ahead to the upcoming finan-cial year, Woodgate feels the industry iswell poised to handle change. She believesworking together is the key to success infinancial services and says educatingconsumers is essential.

“The greatest success for our industryhas been the general increase in clientawareness and understanding of products,technical strategies and pricing post-GFC.While investors still have some uncertain-ty about ‘investing’, they have a far betterunderstanding of financial planningconcepts such as ‘transition to retirement’and risk profiling,” Woodgate says.

“Advisers tell me they are benefitingfrom having more informed clients, as theclient can easily understand the value an

adviser adds when helping them createand protect their wealth. Clients are busybuying into an adviser’s value propositionrather than being sold into a product. Thishas a positive overall effect for the finan-cial planning industry,” she says.

With the BDM of the Year awardwrapped up, Woodgate is looking forwardto continuing with business as usual. Shehas a busy year ahead helping advisersembrace regulatory change and acceler-ate business growth.

“I will continue to work with my panelof advisers by committing to deeplyunderstand their business needs andgoals. With this knowledge I can thenpartner with them to develop tailoredpractice level strategies that result in amore efficient and profitable business thatcan navigate change,” she says.

By Angela Faherty

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Call Andy O’Meagher on 1800 230 737 or visit act2.com.au for further information

BDM OF THE YEAR

Michelle Woodgate

QUEENSLANDMichelle Woodgate, Asgard


BDM of the Year

WANathan Kerr, TOWER AustraliaNathan Kerr has been the sales development manager at TOWERAustralia since July 2008. In his current role he is responsible forthe maintenance and growth of a client portfolio of financial

advisers and the cultivation of relationships to drive reputation and revenue.He is also responsible for the acquisition of new business clients and therecruitment and management of junior sales staff. Kerr is currently thenumber one sales manager nationally among his peers and, as of the end of

the financial year, his portfolio is at 122 per cent of budget. He believes a good BDM must be proudto be in sales and should always behave professionally. He is a keen advocate of continued profes-sional development.

VIC/TASVoula Makris, CommInsureVoula Makris’ journey in the financial services industry beganwith AMP in 1990 where she held a variety of roles, includingaccount credit officer, senior customer service officer, and busi-

ness development associate. In February 2005, Makris joined Colonial FirstState as a business development associate supporting the BDM team, whereshe believes she learned the necessary skills to carry out her current role atCommInsure, which she attained in late 2006. Makris says one of her main

business principles is to build relationships with all advisers in order to promote growth and sherelishes the challenges of finding solutions for her clients. She believes trust is the foundation for herstrong adviser relationships and says a passion for the industry is integral to her work.

SA/NTLisa Ng, Zurich InvestmentsLisa Ng has held the role of state manager for the western regionof South and Western Australia at Zurich Investments since 2005.In January this year, she also became the regional manager for

South Australia where she is responsible for the distribution of Zurich’s prod-ucts and services via intermediaries in the SA market. She particularly enjoysthe ‘people’ aspect of her role and has learnt a lot from her interstate relation-ships which she says have given her an insight into the different ways people

work. Ng was awarded an outstanding contribution award by Zurich for her contribution to herwork in WA and wants to see standards and education levels higher on the agenda in the financialservices industry.

NSW/ACTJonathan Wu, Premium China FundsJonathan Wu started his career as a trainee accountant with SimonWu and Co in 2000 before becoming a paraplanner at SWU Finan-cial Planning in 2001. Following a brief stint at Investors Mutual

from 2004 to 2005, Wu assumed his current role as head of distribution andoperations at Premium China Funds Management. Wu joined at thecompany’s inception and launched the first flagship Premium China Fund.Since 2005, Wu has also been the financial planner and head of group oper-

ations of SWU Financial Planning, where he has led the group operations during the global finan-cial crisis. Wu says the most enjoyable part of his role is the fact that he sits on both sides of thefunds management industry and understands the issues facing financial planners as well as provid-ing advice to clients.

Neil KendallNeil Kendall is the managing director ofTupicoffs, an independent financial plan-ning practice based in Brisbane, and hasclients in Brisbane, Sydney, Melbourne andPerth. He has developed a specialist nicheproviding advice to high-net-worth clients.Kendall is a regular industry speaker onimproving the quality of financial adviceand has spoken throughout Australia andoverseas. Kendall was the Money Manage-ment Financial Planner of the Year in 2006,and the runner-up in 2009.

John Negri John Negri joined Perennial InvestmentPartners in November 2009 and is current-ly an investment specialist for the Victo-ria and South Australia regions. Negri hasover 23 years of experience in the financialservices industry and was crowned theMoney Management BDM of the Year in2010. Prior to joining Perennial he wasemployed with ING and ANZ for 10 years,predominantly in the IFA market, andNational Mutual for 11 years.

Catherine RobsonCatherine Robson has been deliveringstrategic financial planning advice andinvestment management services for over14 years. Robson joined NAB PrivateWealth in March 2000 after a number ofyears with Macquarie Private Bank. In2010, Robson was awarded the 2010Money Management Financial Planner ofthe Year Award. She was named theAustralian Private Banking Council’s 2010Outstanding Wealth/Investment Adviser.

Mike TaylorMike Taylor is managing editor of MoneyManagement and Super Review. He hasbeen a journalist for over 35 years with acareer spanning coverage of financialservices, Federal and State politics, andindustrial relations.

EACH year the Money Manage-ment BDM of the Year attractsan outstanding group of candi-dates, and 2011 was noexception.

In February this year, MoneyManagement called for indus-try participants to nominatebusiness development man-agers (BDMs) they felt wereworthy of the award. Compa-

nies Australia-wide were repre-sented in the final nominationpool, which featured a list of20 BDMs.

A voting advertisement,which listed the 20 finalists,was published in Money Man-agement over two issues andwas also published on theMoney Management website.

Financial planners were

asked to vote for the BDM theyconsidered most worthy of thetitle BDM of the Year, and scoretheir technical skills and/orproduct knowledge, practicedevelopment and adviser relations on a scale of one to five.

Money Management receivedapproximately 600 votingforms, which were checked to

ensure only financial plannersvoted.

The number of votesreceived for each candidatewas tallied and an aggregatescore calculated. A number ofcandidates scored very highly,making the judges’ task ofdeciding state winners all themore challenging.

Money Management pro-vided the judges with theBDMs’ biographies as well theirresponses to a series of ques-tions. Along with this informa-tion, we forwarded their scoresand number of votes receivedto the judging panel.

Each judge individually

assessed the final contendersand offered their vote for whoshould be named national BDMof the Year, also voting on statewinners. These votes were thentallied and, after careful consid-eration, five state winners weredetermined, as well as anational BDM of the Year.

Money Management wouldlike to thank those who nomi-nated and voted for the BDMs,and for their overwhelming inter-est in the award.

We would also like to extendour gratitude to the membersof the judging panel for theirtime and commitment tomaking a tough decision.

Meet the judgesState winners

Finding the 2011 BDM of the Year


FOFA roundtable

The Government’s final outline of its Future ofFinancial Advice proposals has raised as manyquestions as it has answered, with participantsin a Money Management roundtable looking forthe answers and a more certain environment.

MT The theme of the roundtableis FOFA and the Budget – but as

Marianne pointed out, therewasn’t a lot in the Budget. So we’ll kick offwith FOFA. One of the things we now knowabout the FOFA proposals put on the tableby the Government is that we have risk, liferisk, within all of super covered off in termsof commissions. So I will start with MrClarke from Tower (or TAL, as it is nowknown), and get his take, as someonedealing in that market full-on, and whathe makes of that.

BC Through the discussions leading upto the announcement, the entire industryhad given away the fact that in broad-based superannuation – particularly underthe proposed MySuper arrangement – thecommissions were going to be banned.The industry conceded that point, and wasworking towards operating fairly comfort-ably in that environment.

One that came out of left field was theban on individual risk and commissionson those products and that will introducesome clear complexities in the nature of

the advice and the way that the conversa-tion unfolds with the customer, given thatthe conversation between the adviser andthe customer generally starts with meetinga need across a number of different insur-ance benefits. The secondary conversationis around how those benefits are structuredinside super and outside of super. Intro-ducing this different remuneration struc-ture within the model will create addition-al complexity in a conversation that mostpeople are generally not familiar with. Tomake it more complex is not a greatoutcome, for advisers or for the industry.

We are where we are and now we needto understand how we can make it workor engage further in conversations with thegovernment. But as it’s proposed right nowit’s going to introduce quite a deal ofcomplexity into a conversation with acustomer, and that’s really going againstthe principles around which FOFA wasestablished – making advice less complexand more accessible for the customers.

MT Brad, I know you guys were fairlyworried about this leading up to the

government’s announcement. What’s yourview?

BF We think they got it wrong. We can’tsee how this ties to what the desiredoutcomes of FOFA were to be. The govern-ment keeps stating a fact that is not a fact:That half of the complaints from the ASICshadow shopping survey illustrate – in thecase of poor advice – over half involvedpoor life insurance advice. That is a resulttaken completely out of context and simplyis not based on fact.

There are no merits behind this deci-sion about splitting inside superannua-tion away from outside superannuationby the basis of the tax world that the advicelives in. We see it as potentially providingmore confusion for consumers; it putsadvisers in the space of needing to changetheir business models which will only addto costs, and in the short-term put perhapsa lot of older advisers in the difficult spotof whether to stay in the industry tomaximise the value their business isgetting out. Our chief concern is it doesn’thelp consumers.

MT Mark what’s your view? I know theFPA has a view that the government haslaid down a framework. Do you think therecan be some horse-trading around it?

MR I’d hope that there can be somefurther negotiations around this particularissue. I think everybody would acknowl-edge that when the governmentannounced they were banning commis-sions inside superannuation for risk prod-ucts, it caught everybody a little by surprisebecause that wasn’t the general sense ofthe discussions until that point. Ourconcern is that this is not in the consumers’best interest, for a number of reasons.

Firstly, we have an under-insuranceproblem in Australia and I don’t thinkanybody is debating that that isn’t the case.There are many examples of people beingunder-insured or having no insurance; thepersonal catastrophe that happens at theback end of that, and as a result of that, isquite debilitating for those left behind.Where we haven’t got an effective remuner-ation system that really will provide a solu-tion and a good alternative to commissions

Mike Taylor (Chair) – Managing editor, Money ManagementMark Rantall – CEO, Financial Planning AssociationGerard Doherty – CEO, Fidelity InvestmentsMarianne Perkovic – General Manager, Advice, Colonial First StateBrett Clarke – CEO, Retail Life, TALBrad Fox – Chairman, Association of Financial Advisers

Present

FOFA reformsroundtable

Left to right: Brett Clarke, Mike Taylor and Mark Rantall


FOFA roundtable

in insurance, we don’t think that should bebanned – for a couple of reasons.

Number one: there’s a tax deductionprovided for the commission within super-annuation and generally most life insur-ance is well advised within the superan-nuation environment unless there areextenuating circumstances which havebeen identified by the adviser. Secondly,not 100 per cent of all commissions oninsurance products are rebated back toclients in all cases, so there seems to be anarbitrage there that has not been takenaway 100 per cent. The final concern isparticularly for low-income earners – theirability to actually fund the advice and theunderwriting that is undertaken by theadviser is going to be severely tested.

MT Marianne, you’re at the coalface;you’ve got advisers out there and life risk isalso an issue for you.

MP If we just focus on the financial plan-ners: anything good that came out of theGFC actually helped these financial plan-ners look for alternate revenue streams andthey then turned to risk insurance to fillthat gap. That’s a good thing because it hashelped solve the under-insuranceproblem. When you’re trying to createwealth and protect it, this goes against thefundamental in trying to have people runbusinesses that can offer all those servic-es. It’s already been said that we don’t agreewith this and we continue to advocate tothe government looking at – hopefully –relaxing the rules around the commissionpayments.

MT Gerard, you’re coming at it from aslightly different perspective as someonefrom a product side, but what’s your takeon it?

GD I’m concerned about under-insur-ance in Australia, so any good financialplanner should probably be recommend-ing insurance inside superannuationbecause of the tax deduction. It doesn’tmake sense to have a deduction in superand not outside of super. I worry that itmight be the wrong choice if we areconcerned about making sure thatAustralians who really need insurance getit. Having worked in that industry for a longtime in my younger years, I know it’s acommodity that’s sold – not a commoditythat’s bought. Even if you recommend it ina plan you’re not necessarily going to sellit; I think the take-up rate is lower than itshould be.

What is acceptable in FOFA?MT One of the things we did a week ago wasa small, very unscientific survey in MoneyManagement, trying to decide what ourreaders thought of FOFA as a whole. One ofthe findings was that it was almost univer-sally disliked. In truth, there was enoughpositivity about fiduciary duty to suggestthat it wasn’t 100 per cent disliked but Ithink opt-in and everything else gave it abad odour with our readers – and the plan-ners amongst our readers. A general ques-tion: As panellists, what are the palatablethings about FOFA; what would be accept-able to the industry?

BC I was going to make one additionalcomment on the risk in super piece but it

leads into the positive aspects of theannouncement as well, and that is aroundscaled advice. We’re yet to see exactly whatthe dimensions of scaled advice will be. Asa concept I think in terms of access toadvice, simplicity of advice, more effectiveconversations between an adviser and aconsumer, the concept of scaled adviceseems to work, or tick a lot of those boxes.

As a centrepiece of FOFA I think it’s areal tick in the box. Going against that iswhat we were discussing a little earlieraround the disconnect between risk insideand outside of super that’s actually takenthe conversation the other way; to be lesssimple, less effective. Scaled advice as aconcept and as a principle seems to besomething which we should all be lookingforward to.

MR We support the banning of commis-sions in investments. We think that’s a posi-tive step to remove either perceived or realconflicts of interest at the investment level,particularly where commissions areembedded in product where the clientdoesn’t have control over that transaction.We’d also support scaled advice in princi-ple, subject to seeing the detail of what thatmight look like. We support the best inter-est test; in fact, we’ve been instrumentalin evolving our fiduciary duty into a best

interest test. That’s on the right track,although the detail is yet to be determinedon that as well. We certainly support broad-ening and making advice more accessibleand effective and we think that’s a positivething for consumers. Moving into a two-speed system for insurance is probably aregressive step, and opt-in, albeit a two-year opt-in – we still don’t support that itneeds to be a law.

MP I’m happy with the broad principle,too. When FOFA was first talked about, itwas to increase professionalism and givepeople more access to advice. They’re theprinciples when people talk aboutsupporting FOFA – that’s what everybodyin the industry wants. Only 20 per cent ofpeople see an adviser; we want morepeople to get advice and we want theadviser’s professionalism to increase.

The confusion, though, is when thepackage comes out – there’s so much thatactually tries to erode some of that work.The opt-in for the best interest is great.Remuneration and commission structureshave been banned, so why is there still aneed to have this annual opt-in that justadds to the cost of advice?

The way the industry has been formedfrom a product-manufacturing perspec-tive is pretty complex – lots of systems

trying to look after the tax side, contribu-tion side, people getting pension paymentsand benefits and now this whole opt-inprocess is another complexity and cost toit. Great that it’s from 12 months to twoyears, but from a CFS perspective, we stillargue there’s no need for that because theother package has progressed a lot furtherto increase professionalism and actuallyget people more access to advice.

Volume bonus payments are still a bitgrey in some areas, as to treatment andgrandfathering and how that will be andhow that manifests. You see smallerlicensees coming out wanting to beproduct manufacturers because that’s theway they can handle that margin. If I wasthe government or regulator I’d look backand ask if that is the actual intent: Are wetrying to change people’s businesses andthen move from their core competency?

MT Gerard, what’s your view?

GD There are a lot of good things aboutthe reforms. Removal of commissions wasnecessary and we probably could have donethat a few years ago. There’s been nothingmore frustrating to me than this very publicdebate about commissions, through theadvertising campaigns of the industry fundsagainst hefty commissions. It was an argu-ment against something they weren’t reallyconvinced with; they didn’t really under-stand what the advice was about, so I thinkremoving it was a good thing.

The best advice businesses I’ve seenhave done a great job of transitioning tofee-based. I think their clients like it, so it’snot ultimately a difficult thing. Opt-in canbe a bit clunky. I agree that if you’ve createda greater fiduciary responsibility andyou’ve removed commissions, conflictingremuneration, you have to ask: Why isthere a necessity to have an opt-in everytwo years? Two years is better than oneyear; however, the ability to get out at anytime would have been a better solution. Aslong as we have the right, once a year, tostop paying for advice – and that is builtinto the contract –would have been abetter outcome.

The rebating is also interesting; youeither had to allow rebates to go through todealers or you had to stop rebatescompletely. Leaving it to platforms mightsimply make people change their businessmodel to try and get their remunerationback to where it might be; it may be anunintended consequence but I’d suggestthat’s just going to layer-up more costs.

There’s an advantage to it; an integratedplayer, the large banks, have an advantageover the smaller player because they’ve gotan integrated model and they don’t mindwhere the revenue comes in – whether itcomes in at a dealer level or at a productlevel; whereas the smaller dealers who arefocused more around a dealer model haveto become the product manager. It’screated a slightly uneven playing field andI’m not sure that was the right outcomeoverall.

MT What’s your feeling on it Brad?

BF The parts that people agree on areconsistent. We really haven’t got any closerto having the consumer at the front of the

Marianne Perkovic and Gerard Doherty

Brett Clarke

Continued on page 28


FOFA roundtable

decisions. What the minister has done isput some decisions out there, some ofwhich sound good. But in practice they justhaven’t been thought through: How anadvice business is going to be able todeliver, and whether there is anydiscernible benefit to the client.

If we looked at something like opt-in, Iwould have thought it made more sensefor a client to be able to opt-out of payingfor an arrangement. A client already hasthat ability; I get a letter saying, “this is whatyou’re paying” and it gives them a strongerreminder that they’ve got that right. Whenit comes to choice of payment, we thinkthat’s been taken away from the client, asare some of the tax benefits of beinginsured – when we’re the most under-insured of the developed nations.

There’s not a lot there that says that theminister has really addressed the problemsthat led to FOFA. There’s nothing aboutbetter policing of the financial adviceworld, nothing about product failuresbeing prevented, there’s nothing aboutASIC taking action when they hear thatthings aren’t right in the advice space.There’s really not much there that changes– in practice – what actually led to FOFA. Asa by-product, we’re just going to make itharder for people to have a financial rela-tionship where their personal needs aretaken into account in giving of the advice,rather than a broad-brush, simplified,dumbed-down style that will come withscaled advice.

MR A couple of by-products of FOFAthat none of us have touched on aresubject to different sorts of discussionpapers and are out there for consultationnow. They are: the last-resort compensa-tion scheme, and the educational andtesting regime housing CP153. It’s inter-esting that they weren’t actually capturedin the announcements and yet are goingto have a major impact, both financiallyand time-wise, on an adviser’s business.If you roll those into it, potentially theycan be positive initiatives, but once againthe detail hasn’t been seen. We’ve still gota lot of work to do; whilst we thought wewere nearing the end of the consultationperiod, perhaps that consultation periodneeds to be opened up and continued.

FOFA’s impact on practice valuationsMT I saw something from Radar Resultsand one of its findings. I know they werepushing their case, but one of the inter-esting findings was that the multiples bywhich you value a financial planning busi-ness had actually declined 10 per cent asa result of the uncertainty around FOFA.The broader question is: Is FOFA cloud-ing the business minds of the financialplanning industry so that they’re notmaking the sort of decisions that theyshould be making?

GD Decisions for their clients, or deci-sions for their businesses?

MT Both I would think, but probablyprimarily for their businesses.

GD Our guys who talk to financial plan-ners would say there’s a lot of inwardlooking – there has to be. There’s been

uncertainty; there’s nothing worse in anybusiness, waiting to find out what agovernment is going to do to the rules.Uncertainty, coupled with the difficultfinancial period we’ve all been through,has made it very inward-focused and you’dprobably get that from your members, andfrom your financial advisers.

I’ve been around long enough to haveseen this sort of thing happen many timesin the past. The strong guys will emergefrom this quickly, they’ll make a mentaldecision: “I’ve just got to cope with thisand I’ll rebuild my business around what-ever the new rules are and I’ll go motoringahead to get an advantage.” A lot of themare thinking, “I don’t want to be in hereanymore.” If it’s only a 10 per cent drop onvaluations, that’s not a bad outcome.

BC There’s been a period of tremendousinstability for a couple of years really: TheGFC, then, flowing out of the GFC, theregulatory debate and discussions, theconsumer impacts as well. If it’s only beena 10 per cent reduction during this time-frame, I would argue that is not a badoutcome. One of the first questions advis-ers will ask these days is your view andassessment of the recent announcements,what you believe it means for the industryand how you can help them modify theirbusinesses.

GD If you were valuing a financial plan-ning business, we now face the oneunknown of no experience of what’s goingto happen in an opt-in environment. Soif you’ve got 100 per cent of clients todaythat go through the first two years of opt-in, is that 100 per cent going to be down to80 per cent or 70 per cent?

MR With all these changes there’s realpotential to have a pre- and post-valua-tion mechanism. If there is proper grand-fathering – and these are prospectiverather than retrospective changes – thenyou might have a valuation model on yourgrandfathered portion of the business thatmight well differ from your going-forwardsituation. The two big impacts are therevenue impact and the sustainability ofthat impact. Also, whether or not there’llbe more clients coming to the business asa result of FOFA – and you’d have to ques-

tion that. The second big impact is theexpense line and there’s absolutely no doubtthat FOFA, CP153 and, particularly, last-resort compensation scheme, is going toadd to the cost – and opt-in is going to addto the cost of running these businesses.

BC A big point is the grandfatheringprovisions. It’s difficult to unpack that rightnow on the strength of the announcementbut if they evolve, as is indicated in theannouncement, and they’re reasonablystrong, it will mean that the post-FOFAimpacts will emerge more slowly overtime.

MR I’m still to see the fine detail. I’m alittle sceptical.

BC I am as well, but as it’s written todaythey do look beneficial.

MR We’re advocating that if there is tobe grandfathering, it’s at the client level –not at the transactional level. That singledecision will make a big difference as tohow strong these grandfathering provi-sions will be.

BF We need to go one step further whenwe start thinking about business valua-tions and that is to the lenders who havebeen financing business acquisitions andsuccession plans. We’ve got falling busi-ness values, we’ve potentially got borrow-ers who are no longer meeting their condi-tions and then we’ve got loans beingpulled in, books put on the market.

The people in the best position to buythose books are the large institutions andthat could lead then to greater concentra-tion in the advice space – another poorconsumer outcome. What the AFA is doingis trying to provide practical leadership,in that we’ll help people work throughthose issues. But none of us can drawthose conclusions fully at this pointbecause there is too much grey in what’sbeen put out there, so far as to how any ofthis is actually going to work in practice –opt-in being a key one.

MP In buying businesses people are verycautious; being part of a large institution,we have lots of businesses coming to usto buy them and there’s a lot of caution

because the businesses that come havegot those revenue streams that they’veheavily relied on – commission andcommission structures. If FOFA tried toeliminate the financial advisers whopractice in some certain way, then it mayhave done a good thing to remove thosebusinesses.

But there are still some businesses outthere that we’ve had a look at that peoplewould be happy to buy because you cansee the clients have been engaged;they’ve got very good review processesand they have fee-for-service models. Ifthey’ve got the right platform structure,the client has had to have bought intothat fee structure on an annual basis.There’s probably the majority that havelots of issues but I think you still have tofocus. There are still really great qualitybusinesses out there that will strengthenwith these changes.

BF There are. But we had to be verycareful that those advisers who have spent30 years building up their business – andwere perhaps in their early 60s four yearsago – and then wore the GFC and sawbusiness values fall because of their charg-ing model, then they see FOFA affect thebusiness value again. If they’re looking fora way out into retirement, it might just begetting really difficult for them to be ableto afford to take that step, depending whattheir personal circumstances are. We needto have an eye on that when we’re lookingat how the valuations are affected by anyof the legislation.

MP We’re the by-product of how theindustry operates, and the reality is advis-ers use the mechanisms that have beenput in place in industry, so the industryhas had products that had commission inthem, and facilitated that. I agree forpeople who have been part of the indus-try for a long time, who have only donewhat actually has been offered, it is hard tochange the rules now and for those peopleto retire – I appreciate that. Unfortunate-ly, businesses won’t go near those becauseof concern as to how the business willsurvive post-2012. We probably won’t geta good sense of the impact to businessesuntil 2012 when we start to see it allplaying out. MM

Continued from page 27

Left to right: Mike Taylorand Mark Rantall

money management (26 may 2011)

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