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Administration & Management
A survey by The Financial Services Council and DST Global Solutions on superannuation account consolidation
A survey by The Financial Services Council and DST Global Solutions on superannuation account consolidation
This research suggests that funds that target a retirement income replacement goal and are outcome-oriented are likely to be the next generation of funds. And more specifically, lifecycle strategies ...
This research suggests that funds that target a retirement income replacement goal and are outcome-oriented are likely to be the next generation of funds. And more specifically, lifecycle strategies, which not ony focus on the outcome but also take into account participants'risk capacity by gradually increasing allocations to lower risk assets as members approach retirement, are an attractive investment default option for both participants and the super funds.
An effective retirement incomes policy must be one that is based on analysis of demographic data, an understanding of what motivates
human behaviour and political will based on effective, long term ...
An effective retirement incomes policy must be one that is based on analysis of demographic data, an understanding of what motivates
human behaviour and political will based on effective, long term policy, writes the Institute of Public Accountants' Reece Agland.
Investment
Cautious consumers have led discretionary retailers to increase their focus on supply chain efficiencies. However, only chasing cheaper labour costs can backfire. Investors need to understand the direct ...
Cautious consumers have led discretionary retailers to increase their focus on supply chain efficiencies. However, only chasing cheaper labour costs can backfire. Investors need to understand the direct and indirect consequences of unsustainable supply chain practices.
Increasing populations and food shortages around the world mean that food as an asset class is increasingly attractive, writes Tom Stevenson
Increasing populations and food shortages around the world mean that food as an asset class is increasingly attractive, writes Tom Stevenson
Self Managed Super Funds
Graeme Colley, director of education and professional standards at SPAA, explains the finer points of what can and can't be acquired by a self managed super fund
Graeme Colley, director of education and professional standards at SPAA, explains the finer points of what can and can't be acquired by a self managed super fund
Administration and managment
This note examines how lifecyle investing has evolved over time and specifically explores its potential to enhance superannuation member outcomes in Australia.
This note examines how lifecyle investing has evolved over time and specifically explores its potential to enhance superannuation member outcomes in Australia.
In the Australian superannuation industry, member contributions and benefit statements typically focus on the rear view mirror, emphasising past performance rather than looking at the road to retirement.
In the Australian superannuation industry, member contributions and benefit statements typically focus on the rear view mirror, emphasising past performance rather than looking at the road to retirement. This paper explains the risk of such an approach.
This research suggests that funds that target a retirement income replacement goal and are outcome-oriented are likely to be the next generation of funds. And more specifically, lifecycle strategies ...
This research suggests that funds that target a retirement income replacement goal and are outcome-oriented are likely to be the next generation of funds. And more specifically, lifecycle strategies, which not ony focus on the outcome but also take into account participants'risk capacity by gradually increasing allocations to lower risk assets as members approach retirement, are an attractive investment default option for both participants and the super funds.
A survey by The Financial Services Council and DST Global Solutions on superannuation account consolidation
A survey by The Financial Services Council and DST Global Solutions on superannuation account consolidation
Investment
Rick Di Mascio investigates how effective fund managers run their winners, and demonstrates that it is a key characteristic of skillful managers. This is the first in a series of research papers on skill ...
Rick Di Mascio investigates how effective fund managers run their winners, and demonstrates that it is a key characteristic of skillful managers. This is the first in a series of research papers on skill, and follows on from previous Inalytics reasearch on behavioral bias exhibited by the typical active manager.
This paper will consider the size, scope and investment features of the residential property sector. What are the potential benefitsof investment in the sector? Why are there few, if any, investment ...
This paper will consider the size, scope and investment features of the residential property sector. What are the potential benefitsof investment in the sector? Why are there few, if any, investment products specialising in the sector? How can effective investment be achieved?
This paper looks at ways to work your asset portfolio harder, clarifying the mechanisms by which developments in secuity markets can impact an insurance company; identifying which variables are within ...
This paper looks at ways to work your asset portfolio harder, clarifying the mechanisms by which developments in secuity markets can impact an insurance company; identifying which variables are within management control, verus which are not; as well as mapping out ways to focus and improve investment decisions.
SMSFs
With over half of all SMSF members aged 55 and over, and one-fifth aged 65 or over, it's more important than ever to plan for the succession of SMSF benefits. This paper will canvass some of the ...
With over half of all SMSF members aged 55 and over, and one-fifth aged 65 or over, it's more important than ever to plan for the succession of SMSF benefits. This paper will canvass some of the key drivers of SMSF estate planning in the coming years.
This paper explores the intricacies of borrowing within a self managed super fund, taking an in-depth look at limited recourse borrowing, acquirable assets and single acquirable assets and the use of ...
This paper explores the intricacies of borrowing within a self managed super fund, taking an in-depth look at limited recourse borrowing, acquirable assets and single acquirable assets and the use of property within a SMSF.
Insurance
Advisers working in business insurance have a lot to consider; not only deductibility of premiums, but also the implications of capital gains tax. In this paper, Jon de Fries examines the issue in regards ...
Advisers working in business insurance have a lot to consider; not only deductibility of premiums, but also the implications of capital gains tax. In this paper, Jon de Fries examines the issue in regards to ownership, asset and revenue protection.
Investment
The Global Financial Crisis (GFC) has put global asset allocation back into focus. Some have blamed the downfall on asset allocation while others have blamed it on investment judgment. Some investors have ... The Global Financial Crisis (GFC) has put global asset allocation back into focus. Some have blamed the downfall on asset allocation while others have blamed it on investment judgment. Some investors have altogether given up attempting to balance risk and return across asset classes and are now exploring purely risk-based approaches. The PineBridge Asset Allocation Team believes that more success will be found by re-examining how theory has been applied (or misapplied among strategic asset allocators who perhaps mistakenly assume a constant risk/return relationship and constant correlations).
The Australian Prudential Regulation Authority has recently issued guidance to superannuation trustees regarding the labelling of superannuation investment options. The guidance places a welcome emphasis ... The Australian Prudential Regulation Authority has recently issued guidance to superannuation trustees regarding the labelling of superannuation investment options. The guidance places a welcome emphasis on the need for funds to substantiate claims made when describing the risk in their investment options.
Administration and management
In this whitepaper, Payling and Kim explore the impact changes that are occurring in the industry superannuation sector. In considering the impact of these changes, growth opportunities for fund executives ... In this whitepaper, Payling and Kim explore the impact changes that are occurring in the industry superannuation sector. In considering the impact of these changes, growth opportunities for fund executives are identified.
Self-managed superannuation funds
The Australian Taxation Office (ATO) Draft Tax Ruling TR2011/D3 has created some debate within the industry regarding when a pension ceases upon the death of a member. The impact of this draft ruling has ... The Australian Taxation Office (ATO) Draft Tax Ruling TR2011/D3 has created some debate within the industry regarding when a pension ceases upon the death of a member. The impact of this draft ruling has meant for many trustees and their advisers to consider the use of anti-detriment within a SMSF to significant reduce and/or eliminate the impact of capital gains tax that would occur as a result of the fund changing back to accumulation phase.
There has been some considerable debate between the use of managed accounts over managed funds in the last few years, much of which has centered on whether managed accounts are a better structure than ... There has been some considerable debate between the use of managed accounts over managed funds in the last few years, much of which has centered on whether managed accounts are a better structure than managed funds. This debate appears to largely conclude that as an investment vehicle holding underlying assets that are reasonably liquid and tradable, managed accounts are the clear winner as they can provide transparency of investments, portability, liquidity and also often the ability to tailor outcomes to an investor’s specific rules, preferences or constraints.
Insurance
In this time of fiscal responsibility, businesses need to weigh the costs and benefits of any expenditure. At the same time, employers want to retain good employees and accordingly, many employers ... In this time of fiscal responsibility, businesses need to weigh the costs and benefits of any expenditure. At the same time, employers want to retain good employees and accordingly, many employers are looking to provide life insurance benefits as incentives. When weighing up the cost and benefits, which option is better – should the insurance benefits be inside or outside of superannuation?
The Australian compulsory superannuation regime has now been in operation for approximately 20 years and, to date, largely focused on accumulation strategies with little thought given to the decumulation ... The Australian compulsory superannuation regime has now been in operation for approximately 20 years and, to date, largely focused on accumulation strategies with little thought given to the decumulation of assets during retirement.
Marketing and Management
The aim of this qualitative study was to explore the intentions of employees working within the Australian higher education sector towards the retirement transition process. Work and non-work variables ... The aim of this qualitative study was to explore the intentions of employees working within the Australian higher education sector towards the retirement transition process. Work and non-work variables associated with retirement transition were explored within the context of Atchely's (1989) continuity theory. The findings suggest research participants experience a strong association between their job role and their sense of self-esteem and personal value, which is consistent with continuity theory. It is suggested that bridge employment may be useful in facilitating the adjustment to retirement and is also a way for universities to resolve staffing issues associated with retiring older workers. The implication of facilitating retirement decision-making through the provision of targeted education programs is also discussed.
Intuitively the answer to this question would appear to be yes as unlike many other countries around the world, Australia operates a mandatory retirement savings scheme called the Superannuation Guarantee ... Intuitively the answer to this question would appear to be yes as unlike many other countries around the world, Australia operates a mandatory retirement savings scheme called the Superannuation Guarantee (SG). As a result, Australia is in a better position than many. However, does the SG give rise to false confidence?
Administration, Policy and Governance
You can almost hear the collective sigh of relief as 2009 draws to a close. After surviving the near collapse of the global banking system in 2008, this year has seen unprecedented scrutiny of all aspects ... You can almost hear the collective sigh of relief as 2009 draws to a close. After surviving the near collapse of the global banking system in 2008, this year has seen unprecedented scrutiny of all aspects of the financial services industry. With several federal government reviews evaluating Australia's retirement income system, the superannuation industry faces inevitable change in the years ahead.
The Henry review presents a once-in-a-generation opportunity to reform Australia's tax and transfer system to meet the challenges of the future. With an aging population it is essential Australia has an ... The Henry review presents a once-in-a-generation opportunity to reform Australia's tax and transfer system to meet the challenges of the future. With an aging population it is essential Australia has an equitable and efficient retirement income system that allows individuals to enjoy a decent standard of living in retirement. Australia's tax and transfer system is integrally linked to our superannuation system by influencing incentives to save and determining final retirement income outcomes.
The Ideal Fund - Reengineering the fund value proposition, June 2009 is research from PricewaterhouseCoopers Luxembourg and Caceis Investor Services. It is based on the Undertakings for Collective Investments ... The Ideal Fund - Reengineering the fund value proposition, June 2009 is research from PricewaterhouseCoopers Luxembourg and Caceis Investor Services. It is based on the Undertakings for Collective Investments in Transferable Securities (UCITS) framework which covers mutual funds in the European Union (EU) and is designed to stimulate debate and serve as a catalyst to drive positive change in the long-term investment industry in the EU.
On 13 May 2008, the Australian Government announced a comprehensive review of Australia's taxation system, to be chaired by Dr Ken Henry, commonly referred to as the Henry Review. The final report is due ... On 13 May 2008, the Australian Government announced a comprehensive review of Australia's taxation system, to be chaired by Dr Ken Henry, commonly referred to as the Henry Review. The final report is due for delivery in December 2009, and together with the Harmer review, represents a significant assessment of retirement income policy.
The existing superannuation system is built on a contradictory notion of the way people make financial decisions. On the one hand, the concept of compulsory superannuation suggests that Australians are ... The existing superannuation system is built on a contradictory notion of the way people make financial decisions. On the one hand, the concept of compulsory superannuation suggests that Australians are myopic, irrational and have to be forced to save. On the other hand, when forced into the system, fund members are assumed to be informed and discerning investors, able to make rational decisions about how to allocate their retirement savings among a host of competing alternatives. Only one of these opposing views can be correct and it is the responsibility of policymakers to design systems that accommodate real-world human behaviour.
Superannuation has become one of the most important assets to be taken into consideration as part of a client's estate planning arrangements. This article examines the ways in which superannuation ... Superannuation has become one of the most important assets to be taken into consideration as part of a client's estate planning arrangements. This article examines the ways in which superannuation can be dealt with in the event of the death of a member, including the restrictions as to whom and how the funds can be paid. The paper also considers the taxation consequences of the payment of superannuation entitlements. Kate McQueeny and Angela Cornford-Scott of deGroots Lawyers work through considerations in how best to ensure a client's superannuation entitlements pass to their intended beneficiary in accordance with their wishes. The article also examines some of the difficulties that can be encountered when dealing with self managed superannuation funds, particularly in relation to who assumes control of that fund in the event of the death of the member and the problems highlighted in the case of Katz v Grossman in this regard.
Increasing competition between funds to both increase and retain membership numbers has driven funds to seek ways to differentiate their online services.
With this in mind, our 2008 survey sought to identify ... Increasing competition between funds to both increase and retain membership numbers has driven funds to seek ways to differentiate their online services.
With this in mind, our 2008 survey sought to identify those survey respondents who provide extra functionality and/or services to their members via the internet. In the 2010 survey, we considered in further detail what funds were offering their pensioner members and the types of calculators being offered. The 2010 survey also sought information around the cost of providing the fund's online presence and also how the fund's website is promoted to current and potential members.
Insurance and Advice
It wasn't too long ago when group life insurance was a small sector with just a handful of serious players. With the proliferation of group and industry super funds, the group risk market is today worth ... It wasn't too long ago when group life insurance was a small sector with just a handful of serious players. With the proliferation of group and industry super funds, the group risk market is today worth close to $2.4 billion – and rising. Paul Trigg of ING writes about how technological innovation and simpler products have changed the insurance landscape, particularly in group risk, putting it at the frontline of the underinsurance battle. He highlights how more than half of Australians are now covered by a group insurance contract but that there is still a fair way to go to before everyone gets the right insurance cover.
Trigg says the industry needs to offer simple, affordable insurance and easier top-up options, which will prove valuable in tackling the country's underinsurance problem.
According to recent Lifewise / NATSEM research, 95 per cent of Australian families don’t have adequate insurance cover. This dramatic level of underinsurance provides a significant opportunity ... According to recent Lifewise / NATSEM research, 95 per cent of Australian families don’t have adequate insurance cover. This dramatic level of underinsurance provides a significant opportunity for financial advisers, especially when the client’s superannuation contributions can be used to pay premiums.
Investment
Superannuation funds with high allocations to unlisted assets considerably outperformed in the recent bear market. The question is, are unlisted assets truly ‘lower risk’ than their ... Superannuation funds with high allocations to unlisted assets considerably outperformed in the recent bear market. The question is, are unlisted assets truly ‘lower risk’ than their listed equivalents? In this paper, Gareth Abley of MLC Implemented Consulting looks at the evidence that supports the argument that the positive performance of unlisted assets are due to valuation lag. Regardless of this, he argues that the psychological benefits of “smoothed” unlisted returns are quite real to the individual investor. He then explains the trade off between these psychological benefits and some of the hidden financial costs which are not as commonly known.
In recent times, more and more people are approaching their financial advisers to set up their own self managed superannuation funds (SMSFs) to invest in property. This is hardly surprising as most people ... In recent times, more and more people are approaching their financial advisers to set up their own self managed superannuation funds (SMSFs) to invest in property. This is hardly surprising as most people want to be masters of their own destiny and the relatively new “instalment warrant” provisions may now provide an opportunity for superannuation funds to borrow. As an added bonus, superannuation funds generally enjoy a concessional tax environment under the current law, which makes property investment in superannuation funds tax attractive.
In the light of the economic crisis, pensions are now very much a boardroom issue, with CFOs looking to reduce pension risks and to control costs. For companies with pension plans in multiple countries ... In the light of the economic crisis, pensions are now very much a boardroom issue, with CFOs looking to reduce pension risks and to control costs. For companies with pension plans in multiple countries, this is no easy undertaking. Due to the diversity of international pension regulations, companies have to run separate pension plans for every country in which they operate. This makes it difficult for them to gain a clear overview of their pension assets and liabilities (increasing risk) – and to take advantage of their international scale (increasing costs). In order to address these issues, a number of solutions have been developed in order to help companies to improve their international pensions management.
Despite the effects of the 2008 financial crisis, the global retirement market is expected to grow by 66 per cent by 2020, representing an annual growth rate of 4.7 per cent. Total pension assets will ... Despite the effects of the 2008 financial crisis, the global retirement market is expected to grow by 66 per cent by 2020, representing an annual growth rate of 4.7 per cent. Total pension assets will increase from €22 trillion to €36 trillion, according to the August Allianz Demographic Pulse report.
Azhar Abidi from Industry Funds Management, argues that when investing in long-term assets like infrastructure, investors need to ensure that they take into account all possible issues that these ... Azhar Abidi from Industry Funds Management, argues that when investing in long-term assets like infrastructure, investors need to ensure that they take into account all possible issues that these assets might face over time.
Policy
One major aspect of the Age Pension system is its impact on retirement incomes generally, and the needs they are required to satisfy. We are told that our Three Pillars policy is the envy of many countries ... One major aspect of the Age Pension system is its impact on retirement incomes generally, and the needs they are required to satisfy. We are told that our Three Pillars policy is the envy of many countries, but in practice Australia does not actually have a retirement "system", rather we have a set of independent components each with own history and evolution. The purpose of this paper is to consider a range of aspects to the Age Pension and how the government may consider reforms to address particular problems.
Self managed superannuation has proven to be a very successful concept, which continues to grow at a rapid rate. The Coalition strongly supports SMSFs as we believe in choice, and self managed superannuation ... Self managed superannuation has proven to be a very successful concept, which continues to grow at a rapid rate. The Coalition strongly supports SMSFs as we believe in choice, and self managed superannuation provides a vehicle for Australians to determine their own investments and thus directly influence their own retirement. Ways to improve SMSFs, however, include improving trustee education though the Coalition does not support appointing a primary trustee to act as the fiduciary or introducing a minimum threshold for new SMSFs.
Sustainability
In this article we provide some clarity on the fundamental components of sustainability in the property industry and identify a new approach to delivering profitable sustainability. We will go over some ... In this article we provide some clarity on the fundamental components of sustainability in the property industry and identify a new approach to delivering profitable sustainability. We will go over some statistics and property rating schemes and look at how at a strategic level we can develop the management of environmental sustainability to be a positive economic outcome maximising long term returns for investors in this and associated industries.
Administration & Compliance
Australia's superannuation funds are among the fastest growing in the world, having quadrupled to A$1.1 trillion of assets under management following more than a decade of compulsory contributions. While ... Australia's superannuation funds are among the fastest growing in the world, having quadrupled to A$1.1 trillion of assets under management following more than a decade of compulsory contributions. While funds management has historically been handled by traditional asset managers, more and more super funds are seeking to benefit their organizations and their clients by bringing funds management in-house.
With the recent press surrounding the use statutory declarations and the consequences of making false declarations, it is worthwhile reviewing how they are used in superannuation. It appears that, while ... With the recent press surrounding the use statutory declarations and the consequences of making false declarations, it is worthwhile reviewing how they are used in superannuation. It appears that, while statutory declarations are commonly used, there is some confusion as to their actual nature and function. While this article argues that the incorrect use of statutory declarations may not prove to be critical, superannuation trustees should be aware of the true nature and function of statutory declarations under both State and Commonwealth law.
September 11, 2001, was the disaster that lead US President Bush to introduce their AML legislation, causing Australia to introduce its own legislation on 12 December 2006. As the Act is principles based ... September 11, 2001, was the disaster that lead US President Bush to introduce their AML legislation, causing Australia to introduce its own legislation on 12 December 2006. As the Act is principles based, it allows businesses to apply a risk based approach in meeting their regulatory requirement to identify, mitigate and manage the risk that their business may reasonably face in facilitating money laundering or financing of terrorism. The risk based approach recognises businesses know their customers, products and business environment the best. How businesses manage those risks will be detailed in their AML/CTF Programme. A business's self-assessment of its risks is not a one-off exercise but an ongoing obligation in order to ensure programmes remain adequate to the current environment. This paper walks businesses entities through the main issues in doing this.
This paper presents my views on how Australia can start to move into more effective policy settings for converting superannuation into lifetome retirement income. This paper presents my views on how Australia can start to move into more effective policy settings for converting superannuation into lifetome retirement income.
Investment
The Commonwealth Government's move to establish a government-owned enterprise - which we have termed 'AussieMac' - to provide a minimum level of back-stop stability to the residential mortgage-backed securities ... The Commonwealth Government's move to establish a government-owned enterprise - which we have termed 'AussieMac' - to provide a minimum level of back-stop stability to the residential mortgage-backed securities (RMBS) market in Australia is welcome. This market has generated significant long-term capital for banks, building societies and non-banks to expand lending for home mortgages and allowed previously tied-up funds to be redeployed to corporates and SMEs. However, recent instability in global financial markets has resulted in the temporary disappearance of the 'primary' RMBS market as a source of funding for lenders. While the closure of this market may ultimately prove to be temporary, its failure has wrought, and continues to inflict, severe havoc on the Australian financial system with no relief as yet in sight. This is in spite of the inherent strength and integrity of Australia's economy and the overwhelming evidence that our mortgage market offers considerable value for institutional investors.
The Indian economy is amongst the largest emerging market economies and presents among the most attractive growth opportunities globally because so much of its growth is domestically driven. Combine this ... The Indian economy is amongst the largest emerging market economies and presents among the most attractive growth opportunities globally because so much of its growth is domestically driven. Combine this with India's large investment program and the demographic dividend of a growing young and educated middle class, and the sectoral mix by way of economic activity, it is largely insulated from the vagaries of the global economic monsoons now impacting world markets. The net result is India is expected to retain its position as the second fastest growing economy in the world, second only to China, making the country a real opportunity for investors looking for sustainable returns in the medium to long term.
Commercial real estate in the US alone has a market cap of roughly $4.5 trillion. For comparison purposes, the Federal Reserve estimates the market cap of corporate stocks at just under $15 trillion and ... Commercial real estate in the US alone has a market cap of roughly $4.5 trillion. For comparison purposes, the Federal Reserve estimates the market cap of corporate stocks at just under $15 trillion and that of corporate bonds at about $9.5 trillion. So, although commercial real estate is a smaller asset class than stocks or bonds, it is still a significant portion of the overall investable universe and, therefore, investors should not be asking, "Why real estate?" but rather, "Why not real estate?" and "How much?" A decision to leave real estate (or, for that matter, any other investable asset class) out of a portfolio is based on a bet that it will not perform as well as the market-driven relative prices imply, and that its contribution to risk reduction will not be enough to justify its inclusion in a portfolio.
Marketing
Super funds have a technical heritage but to survive in tomorrow's much more competitive environment they will have to become true marketing organisations. Negotiating these challenges means coming to ... Super funds have a technical heritage but to survive in tomorrow's much more competitive environment they will have to become true marketing organisations. Negotiating these challenges means coming to terms with choice of fund, industry consolidation, and distributional realignments. While they can respond by becoming better in product innovation, adjusting their features and improving their services and advisory support structures, they can also respond by invigorating their brands, sharpening their focus and better using the new marketing tools that are available to them. By drawing upon this arsenal of resources they can create consumer propositions that will build brand loyalty, will entertain their members and help them get inside the heads of their customers.
Policy
Retirement is a relatively new phenomenon. As a period of leisure it is even more novel. Increasing lifespans and low birth rates mean that retirement is becoming less affordable. Retirement now means ... Retirement is a relatively new phenomenon. As a period of leisure it is even more novel. Increasing lifespans and low birth rates mean that retirement is becoming less affordable. Retirement now means decades of government funded leisure (funded through social security payments and subsidised through tax concessions on self funded retirement). Australian taxpayers are providing a subsidy to fund the leisure of healthy retirees to the tune of around $20 billion per annum and growing. With fewer new entrants into the workforce, employers' perceptions of older employees are likely to change significantly. Participation rates for older employees are trending upwards and baby boomer expectations and attitudes to retirement are different from previous cohorts of retirees. As our societies age, retirement no longer makes sense economically, and arguably it is not good for society. It's time we radically rethink the concept.
Administration
We are all affected by the "War on Talent" in how we run our organisations, whether we are super fund, a platform, an advisory group, an investment manager, an administrator or some other type of service ... We are all affected by the "War on Talent" in how we run our organisations, whether we are super fund, a platform, an advisory group, an investment manager, an administrator or some other type of service provider. Indeed across the highly competitive world of financial and professional services, the apparent difficulty in retaining "Gen Y" has been an all too common catchcry. Major organisations across Australia spanning financial and professional service sectors dedicate a significant portion of their annual recruitment budgets to attracting the best graduate talent from top universities across Australia. However more needs to be done to ensure retention, otherwise we are all at risk of chasing our tails. The challenge for organisations pertains to their ability to understand the key drivers behind their Gen Y staff members and embrace this through tailored retention programs.
Governance
Effective protection against insider trading is critical to market confidence and, over time, liquidity. For a company, failing to demonstrate a working governance system to prevent insider trading not ... Effective protection against insider trading is critical to market confidence and, over time, liquidity. For a company, failing to demonstrate a working governance system to prevent insider trading not only poses risks for the company but also for the broader Australian listed securities market. This paper deals with the key company and market risks associated with poorly governed director and executive security trading. It constitutes a call to action by ten major Australian institutions, which together invest more than A$65 billion in S&P/ASX200 companies. It is based on recent market research undertaken by Regnan, a governance research and engagement firm.
Investment
Imagine you are offered $5 million to play Russian roulette. If you put a revolver with a bullet in one of the six available chambers to your head, there are six possible outcomes - five of which are highly ... Imagine you are offered $5 million to play Russian roulette. If you put a revolver with a bullet in one of the six available chambers to your head, there are six possible outcomes - five of which are highly favourable, and one of which is fatal. While there are six possibilities, in practice only one event occurs. Would you congratulate a Russian roulette winner? Probably not. If Russian roulette sounds deadly, investment markets are more insidious because they lull investors into a false sense of security making it hard to believe that the bullet exists at all. And then just when our confidence is at its highest, our money and more is stuffed into the riskiest assets, and it hits us that markets can fall and be akin to playing Russian roulette.
The continuing volatility in all equity markets and other traditional assets means the move into alternative investments should be an easy decision. With this in mind why is it currently estimated that ... The continuing volatility in all equity markets and other traditional assets means the move into alternative investments should be an easy decision. With this in mind why is it currently estimated that the allocation to alternatives stands at only 6-8 per cent (with much of that in infrastructure and private capital) of the total Australian superannuation pool of some A$1.3 trillion (est.) This should be a concern to those of us exposed to high levels of domestic equities with little or no such portfolio diversification. We need to ask Australian superannuation managers to review their asset allocations and consider lifting their hedge fund exposures up to a possible 10-15 per cent, which will bring them more inline with US endowment funds, a sector they are increasingly seeking to emulate.
Pension liabilities are long-term cash flow obligations of the plan sponsor. Financial accounting and US federal funding standards require that these liabilities are to be valued based on a high-quality ... Pension liabilities are long-term cash flow obligations of the plan sponsor. Financial accounting and US federal funding standards require that these liabilities are to be valued based on a high-quality bond yield curve. The purpose of this paper is to illustrate the application of fixed income portfolio analytics to pension liabilities. The results of such an analysis provide a clear and comprehensive view of pension liability interest rate risk factors. This information can be used to develop pension investment strategies that support a plan sponsor's top-level financial objectives, and to monitor the performance of pension fund assets relative to liabilities on a regular and systematic basis.
Active portfolio management is the art of balancing risk and return. The term "balance" insinuates that half of the art of portfolio construction lies in stock selection and the other half in risk management. Active portfolio management is the art of balancing risk and return. The term "balance" insinuates that half of the art of portfolio construction lies in stock selection and the other half in risk management. However the majority of fund management efforts to manage risk have become very one-sided focusing too much on monitoring tracking error. Because tracking error can be misunderstood by practioners this leads to risk management process that are less than optimal because it removes the flexibility from the manager to add alpha by reducing macro level diversification opportunities. A better approach is to encourage managers to utilise comprehensive and thorough risk analysis in conjunction with investment research enabling them to capture recognisable market opportunities
Investment
Most outcomes in life are impacted by skill (or a lack of it) as well as noise (random chance or luck). What do we mean by this in practice? We mean that a portion of any outcome is likely to relate to ... Most outcomes in life are impacted by skill (or a lack of it) as well as noise (random chance or luck). What do we mean by this in practice? We mean that a portion of any outcome is likely to relate to the process that was put in place to produce it whilst another portion is likely to relate to random factors, or noise. In turn this means that if a particular event is heavily impacted by noise then the associated outcome may not be consistent with the process that was put in place to produce it. More simply, a bad result may arise even if the process behind it was actually quite sound.
Insurance and Advice
Group Insurance has always been a tremendous platform for making insurance more accessible to more people, but increased competition and strong economic conditions have meant Group Insurers have had to ... Group Insurance has always been a tremendous platform for making insurance more accessible to more people, but increased competition and strong economic conditions have meant Group Insurers have had to re-asses their mantra and it is becoming commonplace for Group Insurers to tailor more innovative insurance solutions to suit the needs of the Trustee's members. While Trustees' insurance needs can differ widely Trustees should consider what types of insurance arrangements they are looking to provide their members. Insurance has increasingly become a significant part of their offer to members. Accordingly, choosing the right insurer is one of the more important decisions they need to make.
The concept of "simple super" has significantly shifted the goal posts for consumers and for everyone in the industry. It has also helped eliminate some of the complexity which has built up around superannuation ... The concept of "simple super" has significantly shifted the goal posts for consumers and for everyone in the industry. It has also helped eliminate some of the complexity which has built up around superannuation over the past 20 years. It is to be hoped that over time, this complexity isn't rebuilt. But while initially there were suggestions that it would eliminate the need for financial advice for many, advice is now moving on to dealing with finding the best investment strategy for the client and the best way to implement that strategy. In this context new advice needs are emerging which are creating an increased demand for financial advice, yet there is still the issue of whether the existing regulatory environment will allow all those who need it, to be able to get it.
Administration and Management
Performance measurement and transaction cost analysis can often be confused when assessing the qualities of a transition. Performance measurement is used to measure fund returns over a period, usually ... Performance measurement and transaction cost analysis can often be confused when assessing the qualities of a transition. Performance measurement is used to measure fund returns over a period, usually relative to a benchmark. Transaction Cost Analysis seeks to measure the effectiveness of the trading strategies that are employed for executing the required stock orders in the market. As the understanding of transaction costs has grown, the realisation of high costs being incurred during fund reorganisations has also grown. This has been one of the main drivers behind the growth of transition management and the almost mandatory appointment of specialist transition managers to carry out fund restructuring as a trusted advisor on a superannuation plan's behalf. With increased understanding and use, the need to measure and compare the effectiveness of different transitions, transition managers and approaches has also increased.
When US-based IT consultancy The Standish Group first published The Chaos Report in 1994, it rocked the enterprise IT community to its foundation when it revealed that a staggering 31 per cent of IT projects ... When US-based IT consultancy The Standish Group first published The Chaos Report in 1994, it rocked the enterprise IT community to its foundation when it revealed that a staggering 31 per cent of IT projects would be cancelled before completion while also finding 52 per cent of projects would cost almost double their original estimates. The original Chaos Report serves as a reminder of not only how things used to be, but also of how we were prepared to let them be. While the Chaos Report of 2007 is a big improvement the report still revealed 65 per cent of customers remain unsatisfied with the final results. The questions remain how can the enterprise IT community work together to avoid a return to those dark days of chaos? The answer is through IT governance.
To catch a mouse, use cheese. But how do you catch a rat? Unfortunately for governments and financial businesses, the best money launderers are like rats - and these rats are reaching new heights of creativity ... To catch a mouse, use cheese. But how do you catch a rat? Unfortunately for governments and financial businesses, the best money launderers are like rats - and these rats are reaching new heights of creativity in their pursuit of ill-gotten gains. With the stakes so high, technology has become an essential tool for complying with anti-money laundering (AML) and counter terrorist funding legislation. However, complex analytic processes are only as effective as the quality of the underlying data, but the problem there is no shortage of data - only a shortage of quality data that is intelligently presented in a timely manner. Within that focus are several key areas you need to follow to implement and manage the Know Your Client rule, which is the cornerstone of the AML.
While some financial services companies are focusing on attracting and retaining as many customers as possible, the benefits of this approach are questionable. Research commissioned by Fujitsu shows that ... While some financial services companies are focusing on attracting and retaining as many customers as possible, the benefits of this approach are questionable. Research commissioned by Fujitsu shows that while customers welcome a great buying experience, they would trade this in for great service. Yet, despite this, the sales promise is rarely delivered. We call this "toxic servicing" and it is poisoning the profits of financial services organisations, be they banks, super funds or wealth managers. Customers are significantly frustrated by what they see as woeful standards of customer service. Fujitsu's research points to this issue as the most critical element of increasing profitability today. But the toxicity isn't limited to a handful of operators - it is prevalent sector-wide and those businesses that tackle the issue most effectively will realise a strong competitive advantage.
Self Managed Super Funds
Over the past three years AMP Capital and Investment Trends have undertaken extensive research into the characteristics, motivation and behaviours of SMSF investors and their advisers. March 2007 saw the ... Over the past three years AMP Capital and Investment Trends have undertaken extensive research into the characteristics, motivation and behaviours of SMSF investors and their advisers. March 2007 saw the release of the latest survey which looked at the role of accountants in the SMSF market. In the year to September 2006, SMSF assets grew 19 per cent to $218.4 billion (APRA), driven largely by the strong performance of equity markets. Yet of the accountants surveyed, 36 per cent reported an increase in enquiries about SMSFs following the introduction of super choice in contrast with financial planners who only reported a 23 per cent increase. While 90 per cent of accountants see the ongoing growth of SMSFs as an opportunity for their business, it was interesting to note how different firms are responding to that opportunity.
The major attraction of an SMSF is that individual members become, as trustees, their own fund manager. But there are several issues trustees need to consider when devising an investment strategy for their ... The major attraction of an SMSF is that individual members become, as trustees, their own fund manager. But there are several issues trustees need to consider when devising an investment strategy for their SMSF including the acquisition of assets rules, including what the fund is investing in and who the asset is being acquired from. This is why deciding on whether an asset of the fund is being acquired from a related party has become a common query from planners. Making sure the fund follows the sole purpose test, the arms length transaction test and in specie transfer rules are just as important and highlight why trustees need maintain their investment strategy and regularly review it.
Investment
Administration and Management
Marketing and Communications
Self-Managed Superannuation Funds
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