investors’ seminar november 2014 “how risky are our investments?”
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Investors’ Seminar November 2014 “How Risky Are Our Investments?”. Disclaimer. This is not Advice. Please see Mark before considering any changes. Mark will put any recommendations in writing - PowerPoint PPT PresentationTRANSCRIPT
Investors’ Seminar
November 2014
“How Risky Are Our
Investments?”
Disclaimer
This is not Advice. Please see Mark before considering any changes. Mark will put any recommendations in writing
The information contained in this presentation has been prepared for general use only and does not take into
account your personal investment objectives, financial situation or particular needs. Before you make any decision
about whether to invest in a financial product, you should obtain and consider the Product Disclosure Statement of
the financial product.
The information provided by HFS has been done so in good faith and has been derived from sources believed to be
accurate at the time of compilation. Changes in circumstances, including unlawful interference and unauthorised
tampering, after the date of publication may impact on the accuracy of the information. Neither HFS d nor any
member of HFS accepts responsibility for any inaccuracy or for investment decisions or any other actions taken by
any person on the basis of the information included. Past performance is not a reliable indicator of future
performance.
Neither HFS nor any member of HFS guarantees the performance of the Funds, the repayment of capital or any
particular rate of return. The performance of any unit trust depends on the performance of its underlying investment
which can fall as well as rise and can result in both capital losses and gains. Consequently, due to market influences,
no assurance can be given that all stated objectives will be achieved.
Investors’ SeminarNovember 2014
How Risky Are Our Investments?
Past performance; Economic data
Forecasts
Ideal Cash & Term Deposit Levels
Top 10 Holdings
IOO – iShares S&P Global 100
XAO – S&P All Ords
What could go Wrong?
1. Drawdown Levels may significantly increase
2. Dividends may not provide sufficient cash-flow to the RHS
3. The Security of the RHS may cease
4. The businesses part-owned in the LHS may not produce adequate Earnings
5. A loss of the long-term focus and the patience – cannot “stay the journey”
Volatility – it’s not a risk; it’s a certainty
What Are The Risks?
Risk Capacity
Risk Attitude
Longevity Risk
Inflation Risk
Liquidity Risk
Credit Risk; Diversification Risk; Market Risk
Market Timing Risk
Past Performance
Lonsec Asset Classes - Historical Returns to
30 September 2014
Returns (%p.a.)
Australian Equities
% pa
Global
Equities
% pa
Australian
Listed Property
% pa
Australian
Fixed Interest
% pa
Cash
% pa
5 years
6.6
11.2
8.6
6.7
3.9
10 years
8.2
5.0
1.7
6.3
4.9
15 years
8.7
2.0
5.9
6.4
5.1
20 years
9.4
6.0
7.5
7.4
5.4
Current market statistics and valuationsConsensus expectations for EPS growth and P/Es
10 October 2014
PE FY 2015 (f)
x
PE FY 2016 (f)
x
EPS Growth FY 2015 (f)
%
EPS Growth FY 2016
%
MARKET 14.0 12.9 5.4 8.6
Financials 12.8 12.2 7.2 4.8
- REITS 14.5 13.8 6.8 4.6
Industrials 16.5 14.9 9.8 10.68
Resources 12.6 11.0 -3.6 14.5
Top 50 13.8 12.8 3.7 7.2
Mid Cap 50 15.2 13.3 10.5 14.4
Small Ords 15.3 12.9 21.8 17.9
Source: Ausbil calculation based on consensus broker earnings forecasts, 10 October 2014
8
Forecast ReturnsLonsec
30 September 2014
Asset Class 10 Year Forecasts
Yield% pa
Growth
% pa
Total% pa
Australian Equities
4.5
4.2
8.7
Global Equities
2.5
5.8
8.3
Australian Listed Property
6.0
2.0
8.0
Australian Fixed Interest
4.4
0.2
4.6
Cash
4.2
-
4.2
10
Average annual total returns after inflation
Australian long term returns
1900-2013
%
1950-2013
%
1950s
%
1960s
%
1970s
%
1980s
%
1990s
%
2000s
%
2010-2013
%
Real bond returns 1.5 1.0 -6.3 0.9 -5.1 2.1 9.9 3.7 5.0
Real equity total
returns7.4 6.1 9.0 10.6 -4.2 8.6 9.0 5.5 4.0
Real equity capital gains less
inflation1.6 0.8 2.4 4.6 -10.6 4.0 4.6 1.4 -0.3
Income compounding effect 5.8 5.3 6.6 6.0 6.4 4.6 4.4 4.1 4.3
Source: Credit Suisse / London Business School :‘Global Investment Returns Yearbook 2014’
The Ideal Level Of Cash & Term Deposits
Segmentation Bar Placement – the key issues are:
A. Drawdown Goals – allocate considerable time to this
B. Market Issues (a) Dividends from the LHS; (b) Worst Case long-term share prices in LHS
LHS – Long-TermInvesting
10 Year Investing vs 1 Year Investing
“Rolling Smoothed” 10 Year Returns
Hayden Investment Paradox
Allowance for Inflation is crucial because we must retain our Purchasing Power
ASISP
TD
Cash
Specialist Stock-picker
XYZ Manager
We want to:
1. Buy a designated portfolio of shares
2. Contract a high-quality specialist Investment Manager to manage the portfolio and instigate changes to ensure best forecast (prognostic) returns
Specialist Stock-picker
How do we ensure a high quality result
A. Analyse the portfolio of shares
B. Analyse the skill-set of the Investment Manager
Realistic Goals
Structure/Strategy (Tax etc)
Super Fund Admin
Asset Mix 1 -Cash/TermDeposits
Asset Mix 2–Growth Section (LHS)
Stock-Picker Selection
The Boxes to Tick
What can Investors expect from HaydenFS?
A. Revision of the Segmentation Bar Placement – to ensure the ideal level of Cash & Term Deposits
B. Revision of the Investment Managers and Specialist Stock-Pickers
Peace-of-mind for Investors
1. Part-own a lot of great businesses. We have a portfolio of businesses that is well diversified across locations, industries and size.
2. Employing (contracting) some very wise people to monitor and change our portfolio of investee businesses when necessary.