Australia, Personal Finance - Written by on Friday, April 1, 2011 10:58 - 0 Comments

Smart Investor: Earning It, April 2011

Smart Investor, April 2011

Earning It

ROADTEST

Templeton Global Bond Plus Fund

Who runs the fund?

Franklin Templeton Investments, one of the world’s largest fund managers. Its global fixed income group alone has over 100 investment professionals in it all over the world; portfolio manager head Michael Hassenstab has been with the firm 12 years.

The basics: A global bond fund with a high alpha mandate. It is research-heavy, uses a value-based approach, and looks for global interest rate, currency and sovereign credit trends in order to drive returns.

The process: It focuses on government and government-related bonds, but can put up to 25% into sub-investment grade investments. Its tracking error can be up to 6% away from it benchmark – this means it can take quite big bets relative to the mainstream. Hedged against currency movements.

The bottom line: According to Morningstar it is the best-performing global bond fund in Australia over the year to January 31, returning 17.43%, and also the three years to that date, returning 14.15%. Those are huge returns for a bond fund and over the last year have doubled the benchmark. But, necessarily, it does take risks bigger than a mainstream bond fund to get there.

Fees: If you invest wholesale, meaning a minimum $25,000 investment, fees are just 0.83%. Or you can go through one of the many platforms that carry the fund, and invest less, but will pay a platform fee.

Verdict: Hasn’t put a foot wrong in years.

NEW FUND

NakedFunds Australian Share Fund

What is it?

An Aussie equity fund with a cheeky name and a twist.

What’s the twist?

Disclosure. Most mutual funds will disclose, at periodic intervals, what their top holdings are, but not when and how much they buy and sell along the way. The premise of the new fund is that all that’s revealed (naked, you might say): there is an online forum through which you can review day by day what the holdings are. It does say, though, that in some circumstances investments won’t be displayed if the managers think it will disadvantage the fund.

Anything else?

The other twist is that as part of its investment process, the managers use what it calls collective wisdom insights. Through this online forum, members are asked to answer questions about investments, the theory being that it improves the managers’ sense of industry trends and the quality of various products and services. Investors in the fund who take part can get rebates.

So it lets the fund holders decide what to be in?

Well, it’s part of the process. The overall approach is to have a concentrated portfolio of 30 to 45 companies, without tracking a benchmark, with investments split between top 20 large liquid holdings, and high growth opportunities among smaller cap stocks, plus cash if appropriate.

Who runs it?

The founder and CEO is Tim Bryden, who has worked at BT Funds Management, General Electric and Intech. The senior equities analyst is Emily Stewart, and Michael Monaghan – who was CEO of Deutsche Asset Management for Australia – has an advisory role.

What does it aim to do?

The mandate is to beat the All Ords Accumulation Index over five-year periods.

And what does it cost?

1.8% per year. There are no performance fees.

GIZMO

ZOMM Wireless Leash.

My wife managed to get 26 days into 2011 before losing her phone. This was a personal best. For her birthday, I will be buying her a ZOMM wireless leash.

It’s a great idea. You link it through Bluetooth to your various phone/blackberry gizmos, and then if you walk too far away from it – because you’ve left it in a bar, for example – it will start vibrating, flashing and hollering. This has certain ancillary benefits too: you can effectively use it as a speakerphone, or for personal safety with a built in panic alarm. One disadvantage: it’s probably just as easy to lose your wireless leash as your phone (in fact, you’ll probably leave them in the same place). Buy from the zomm.com website for US$99.99.

FUND WATCH

GVI Global Industrial Share Fund

Unsurprisingly, the industrial share fund shuns financials in favour of energy, industrial materials and telecommunications, which between them make up almost exactly half the fund. And it seems to work: compared to the main global benchmark, the MSCI World ex-Australia (in this case its benchmark is the version with dividends reinvested), it’s outperformed over one, three and five years – not that any of those numbers are very impressive in local terms.

The fund likes Europeans. The top holding, GDF Suez, is a French-headquartered gas and power business; the second biggest, Siemens, is a German engineering conglomerate. The biggest American holding is the US transportation group CSX, while Asia’s biggest contribution is Singapore Airlines. The fund’s mandate allows it to hold 20 to 70 securities, and judging by the relatively small percentages of the top holdings, it appears to be towards the top end of that range.

The theory of industrials is they provide steady performance, pay high dividends, and are well geared towards economic growth when it returns. The investment case has proven it can outperform the broader market – if only the broader market itself would show some gumption.



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