Australia, Personal Finance - Written by Chris Wright on Tuesday, November 1, 2011 13:11 - 0 Comments
Smart Investor: Earning It, November 2011
Smart Investor, November 2011
Pimco Australian Bond Fund
Who runs the fund? Pimco, one of the biggest and most well-regarded fixed income managers in the world. In Australia the fund is offered through Equity Trustees.
The basics: Invests in government, semi-government, corporate, mortgage and other fixed interest securities in Australian and New Zealand dollars.
The process: In practice, though any Aussie bonds are fair game, the bulk of it is pretty conservative: 56% in AAA assets, 23% in AA, 14% in A and only 7% below that level. That gives just enough zest to put the estimated yield above high-yielding cash accounts; as of June 30 it was 6.7%. On a world scale, that’s pretty impressive, given that any fund that holds US Treasuries as its conservative anchor is no longer doing it with AAA-rated assets – one of the many reasons Australia is increasingly being seen as a safe haven for global money.
The bottom line: Doing very well. According to Morningstar it is the best Australian bond fund available over the three years to August 31, logging 10.99% a year. One year numbers, at 6.99%, are more the middle of the pack but Pimco is consistently impressive no matter how far you look back: it’s also the best in the industry over seven years, at 7.19%.
Fees: Bought using the Equity Trustees version, management costs are 0.72% per year.
Verdict: Consistently impressive and steady. Looks a good choice for the longer term.
Bennelong Avoca Emerging Leaders Fund
What is it?
A small-cap and mid-cap equity fund.
Who runs it?
Avoca Investment Management does the stock picking. It’s a new group formed by John Campbell and Jeremy Bendeich, both of whom were portfolio managers on UBS’s small companies fund. They have set up in partnership with Bennelong Funds Management, a boutique manager formed in 2001, originally to run the Bennelong group’s commercial property and equity interests, and now an Aussie equity/absolute return fund manager in its own right.
What’s the strategy?
Holds 30 to 50 stocks usually, and a maximum of 70. Uses deep fundamental investment research – that is, studying individual companies and their valuations closely. Also has sector and stock concentration rules which are designed to minimise volatility of returns, but also presumably means there’s a limit to how strongly managers can express a view.
Is it a good time to be in small caps?
In volatile markets like these, the prevailing wisdom is usually to stick with the big, robust, defensive names; small caps usually get hit hardest during choppy times. That said, they also tend to fall far enough to create bigger opportunities for investors – if they’re clued up enough to spot them.
What are the costs?
1.25% per year management fee plus a hefty 17.5% performance fee based on returns above that 1.25% over the benchmark (the S&P/ASX Small Ordinaries Accumulation Index).
This month we acknowledge the research of Jonathan Margolis, author of the influential Technopolis guide to all things gizmo-related. He recently set out to find the best external hard drive, for back up while on the road, and this is what he came up with.
Buffalo – distributed in Australia through Uniden and through retailers including Bing Lee, Myer and RetraVision – makes light, sleek and very brainy portable back-up drives most of which come in 500GB, 1TB or even 1.5TB sizes. The HD-PCU2, for example, which is much nicer looking than its ugly name would suggest, weighs just 210 grams and measures 11.4 x 7.7 x 1.7 cm. A new extra-durable Ministation Plus was launched in the US in July for US$111.99; ask your retailer if they can stock it.
UBS Australian Share Fund
This fund is following five years of outperformance with a bit of a shocker in 2011. Long-term numbers are what matter – and an almost 4% per year outperformance over the last three years is impressive – but being almost 4% behind the benchmark over the last 12 months is less good news.
Why should that be? The fund’s top 10 positions look very similar to any other regular Aussie equities fund: big positions in miners and financials. 36% of the fund in financial services is a big chunk and that is probably dragging the fund back in current market turmoil; a lowish allocation to consumer defensives is also likely taking away from the downside insulation.
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