Australia's managed funds 2017 update

If you are looking for a quick overview of the Australian asset management industry, this is the document for you. Australia's A$2.8 trillion investment management industry is the largest in the Asian region. Since the introduction of Australia's mandatory retirement income scheme in 1992, the investment management industry with assets under management has grown by a compound annual growth rate of 10%. Total assets of Australia's funds under management have almost doubled over the past decade and increased more than ten-fold since 1992 (in A$ terms).

The world's 500 largest asset managers

AssetManThis document, with joint research by Pensions & Investments and Willis Towers Watson, published in October 2017 offers a wonderful decade-long analysis of the changing face of asset management around the world. With data to the end of 2016, the report notes that independent asset managers comprised 10 of the top 20 asset managers, followed by seven banks and three insurer-owned managers. It also noted that 78.4% of all assets are actively managed (down by 2.3% since the previous report) while passive AUM increased 5.9% during the same period. To read more, click here.

Some good news from the Stats SA Living Conditions Survey

StatsSA logoThis Stats SA survey somehow escaped coverage by main news channels. It reports on the subjective poverty levels based on data collected by Stats SA in 2009 and 2015. Over the years,Stats SA has produced a number of reports based on various definitions and measures of poverty. These include objective measures, relative measures, multi-dimensional measures as well as subjective poverty measures. Subjective poverty, the main focus of this report is defined as the self-assessed economic status of people relative to others. The results indicate that nationally, the percentage of people who lived in a household perceived as poor has declined from 39,2% in 2009 to 35,0% in 2015. For more, click here.

The Debt Train Will Crash

JohnMauldin2This article by John Mauldin is a summary of the series on debt, pensions and retirement. He writes that in his view, excessive debt is dragging the world economy toward an epic crash. The tracks ahead are clear for now but will not remain so. This article underlines just how big the problem is. To read more, click here

Rising corporate debt; peril or promise?

McKinseyThis recent publication from the McKinsey Global Institute (MGI) notes that since the 2008 financial crisis, global debt has continued to rise. Much of this increase is due to a surge in government borrowing, but corporate debt has risen over this period by nearly as much. Corporate bond issuance has increased 2.5 times over the past decade, creating a broader and deeper market in many countries. This document examines the fact that total debt (including household, nonfinancial corporate, and government debt) has grown by three-quarters since the financial crisis, from $97 trillion in 2007 to $169 trillion in the first half of 2017 in constant exchange rate terms and the consequences of this.To read more, click  here.

Global Competitiveness Report 2017-2018

WorldEconomicForumThe World Economic Forum Global Competitiveness Report 2017-2018 ranked South Africa (SA) 44th out of 137 countries in terms of its financial market development, a drastic fall since 2016, when SA was ranked 12th out of 140 countries. This rating is made up of eight metrics each of which has separate rankings. In 2016 SA was ranked first for 'financing through local equity markets' and second for 'regulation of securities exchanges'. In the latest rankings SA's score for these two metrics was 25th and 46th respectively. To read more click here

Europe has train wrecks too

John MauldinOne of our favourite writers, US-base John Mauldin uses the results of a study from the World Economic Forum study on retirement shortfalls in eight countries as the starting point for his remarks in this article. The WEF report states that if the  retirees were to be funded at 70% of their last income, there would be a $400 trillion retirement savings shortfall by 2050. Unless the countries concern find the cash, he writes, they will break their promises to workers. To read more, click here.

Dealing with portfolio headwinds. When do you panic?

Peter smallerScary investment returns over the last ten years? Peter Nurcombe-Thorne advises retirement savers when they should panic. Tip: the answer is that tweaking your portfolio is OK, but panicking is not. But this assumes that your retirement portfolio has been designed to withstand the storms. To read more, click here .

Which should you choose; to top up your RA or invest in a tax-free account?

Peter smallerFrom time to time Rosebank Wealth Group is asked to answer Moneyweb readers' questions. Recently Peter Nurcombe-Thorne answered this question:

I am currently 54 years old and contributing to a pension fund and RA. I am also contributing towards a tax-free fund of R33 000 per year. I am however not using the full 27.5% contribution towards the pension/RA funds on my total remuneration as per Sars. My question: Would it be better to first use the tax benefit as allowed by Sars before investing into a tax-free fund? Financially I am not able to contribute the full 27.5% plus the R33 000.

To read his answer click here.

A wonderful analysis of long term returns

CredSuisseThe Credit Suisse Global Investment Returns Yearbook 2018 offers investors a wonderful bird's eye view of the performances of different asset types in 23 countries from 1900 to 2017. It shows that equities have been the best long-run investment and that globally, the returns and risks from housing have come second, followed by bonds. Over the time period, gold has given poor returns, high volatility, and been a poor inflation hedge and collectibles such as art, wine and musical instruments have beaten cash and government bonds. To read more, click here.

Are my financial advisor's fees justified?

Peter smallerRWG's Peter Nurcombe-Thorne was asked to answer a question posed to Moneyweb on whether or not a 1% ongoing fee (over and above other administration fees) was justified. To read his answer, click here.

Five tips for the ideal long-term retirement portfolio

Wild SeaIn a recent article published by Moneyweb, RWG Director Peter Nurcombe-Thorne wrote that it might be useful to think of saving for your retirement like planning a forty-year journey on a yacht, across wild and unpredictable oceans. To read more, click here.

South African expanded unemployment rate up to record high of 36.7%

StatsSA logoIn mid-May Statistics South Africa released the Quarterly Labour Force Survey. It showed that the SA unemployment rate remained unchanged at 26.7% in the first quarter of 2018, helped by an increase in formal sector employment. However, it reported that the number of discouraged workers had risen to an all-time record high. The number of unemployed people and discouraged work seekers (the expanded unemployment rate) is now 36.7%. To read more, click here.

Weird and wonderful offshore shares

Peter smallerLet's assume you have made the decision to invest offshore, because you know that the JSE's market cap is less than 1% of listed companies in the world and you should diversify your portfolio. You also know that now is a good time to invest offshore because we are reaping the 'Ramaphoria' dividend and the rand is relatively strong. So what next? The main requirements for your new investments would be that the underlying holdings add diversity to your existing portfolio while offering good value. Click here to read more.

Notes from the field: Good job

Ben HuntIn this article Ben Hunt writes that the words 'Good job', whether said from a parent to a child, or a teacher to a pupil or a coach to an athlete are overused and sometimes dishonest. He says that this extends to investment advisors who unthinkingly support different products. The alternative to this dishonesty is convexity, which he says is a philosophy about identifying what you are particularly good at, and then executing on it. For more click here.

Outrageous predictions for 2018

Peter smallerAt Rosebank Wealth Group we keep a sceptical eye on a wide range of predictions, forecasts and scenarios published by analysts across the world. One of the more interesting is an annual list of ten outrageous predictions published by Saxo Bank, a Danish bank. Saxo's purpose in creating the list is to ensure that they remain alert to unlikely possibilities, forcing them to broaden their thinking. We like this approach. To read more, click here.

Interview with Davie Krige, founder of Cederberg Capital

DawieKrige 3Dawie Krige, founder of London based Cederberg Capital was recently interviewed by well-known South African Alec Hogg, founder of Moneyweb and Biznews.com. In 2017 Krige's fund enjoyed a performance of 75% putting it in the league of the top 1% of all funds in the world. The fund focusses exclusively on investing in companies based in Greater China. RWG clients who are invested in the GAAF funds have exposure to this fund. The interview below is a shortened version of the interview and is reproduced courtesy of Biznews.com. To read a shortened version, please click here, to read the whole interview please click here. Photo courtesy of Biznews.

Five things to watch at Davos 2018

WorldEconomicForumThe World Economic Forum's (WEF) annual meeting is scheduled to take place from January 23-26, 2018 with the theme 'creating a shared future in a fractured world'. The 48th meeting is set to host 3 000 participants including presidents, prime ministers and business leaders. Records of attendees released for the first time report that 58 South Africans have been confirmed as attending the meeting (down from 61 in 2017). This article, published by Time magazine, highlights five things to watch out for. To read more, click here.

Reward work, not wealth

OxfamOxfam always releases its report on wealth disparity to coincide with the gathering at Davos. This year's report says that 2017 saw the biggest increase in billionaires in history, one more every two days. 82% of all wealth created in the last year went to the top 1%, and nothing (sic) went to the bottom 50%. It says that in South Africa, the top 10% of society receives half of all wage income, while the bottom 50% of the workforce receives just 12% of all wages. Oxfam suggests that global economy will falter if there are too many billionaires and that rising inequality will cause the rise to populism, racism and fear mongering. The Oxfam report confirms that a majority of people want to live in far more equal societies. To read more, click here.

How small companies can compete on the world stage

SmallBusinessBill Ready, COO of PayPal writes that small businesses play a critical role in the global economy, contributing to economic opportunity, diversity and the overall health of our communities. If current trends continue, however, we may soon wake up in a world where many of these businesses have closed and only a few of the very largest players remain open. This article includes some interesting statistics on the percentage of small business relative to the total businesses in India, China, the United States and the UK. To read more, click here.

These nine charts will tell you everything you need to know about global migration

MigrantJohn McKenna writes that the millions of migrants who flooded through New York's Ellis Island in the early 20th century helped turn the city and America into an economic powerhouse. Migration across the British Empire was central to its success at the heart of the Industrial Revolution. He says that many of the world's most high-profile entrepreneurs have hailed from migrant backgrounds: Steve Jobs' father was a migrant from Syria and mentions South African Tesla founder Elon Musk, who moved to North America to study in Canada and the United States. To read more, click here.

Eight leadership lessons from history

NapoleonHistorian Margaret MacMillan writes that the world's political leaders including Napoleon, Empress Wu, Franklin D. Roosevelt, Oliver Cromwell, Akbar and Stalin provide us with examples of strong leaders. They left their mark, for better or for worse. But history cannot provide a formula for how to become an effective leader. But it can suggest patterns and parallels, raising questions, and giving warnings about why things go wrong. To read more, click here.

Why 2018 must be the year for women to thrive

WomenBusinessChristine Lagarde, managing director of the IMF and Erna Solberg, Prime Minister of Norway write that the economic facts speak for themselves: raising women's labour force participation to that of men can boost GDP, for example, by as much as 9% in Japan and 27% in India. IMF research has uncovered myriad other macroeconomic benefits. It says that reducing gender gaps in employment and education can help economies diversify their exports. Appointing more women onto banking supervision boards can challenge cozy group-think thereby supporting greater bank stability and financial sector resilience. Click here for more.

Good-bye,GDP. Hello, six-part balance sheet?

GDPEconomist Diane Coyle says that the idea that Gross Domestic Product (GDP) is inadequate as a measure of economic well-being dates back to the 1960s. At the time, environmentalists and feminist scholars pointed out some obvious shortcomings: the failure to account for environmental externalities and the failure to count valuable non-market services such as work in the home. But it is only in the past decade that the need to go 'beyond GDP' in measuring economic progress has become increasingly mainstream. To read more, click here.

These charts show how migration is changing cities

MigrantMigrants tend to head to global cities. Dubai and Brussels have the highest number of foreign-born population at 83% and 62% respectively. According to the World Economic Forum, South Africa is the 17th most popular recipient of refugees by number, but new arrivals measured as a percentage of the population are less than 5%. Nearly one in five (19%) of the world's total migrants went to live in the United States. Germany and Russia together took in one in 10 (9.7%). To read more, click here.

The Distribution of Pain

JohnMauldin1 FullIn this article columnist John Mauldin writes about painful social and economic divisions in the United States and the possible consequences of the widening gulf. He describes how the "Protected" classes make public policy and the "Unprotected" classes live with those policies. He writes that people don't like pain and will change their behavior to avoid or relieve it. 'Like the drowning who desperately seek something to hold onto, they will vote for politicians who say they can relieve that pain, regardless of whether they actually can,' he writes. For more click here.

Graduating? First job? Some tips on how to allocate your first salary

Peter smallerPeter Nurcombe-Thorne writes that many young graduates are 'ambushed' by determined commission-driven product pushers at this time of the year. And this is made worse because so few employees have help from their employers; only 40% have access to a retirement funds as a condition of service and only 25% have employer managed medical schemes. This leaves most workers to make their own decisions. If you are about to earn your first salary, how should you go about dividing your income between life insurance, disability and income protection insurance, investments and retirement saving? To read more, click here.

The world has turned upside down

USflagIn this article John Mauldin notes that the volatility of the stock market, as measured by the VIX is at an all-time low. Low volatility indicates faith or complacency in markets, which Mauldin argues is currently misplaced. He suggests that the number and scale of recent catastrophic natural and man-made disasters, geopolitical instability and political failure in Washington D.C., the investing temperature should be higher. The low volatility is thus sending out a false signal that nothing can go wrong. We know that this is unsustainable. To read more, click here.

Hoisington Quarterly Review and Outlook, Third Quarter 2017

USflagAccording to Lacy Hunt and Van Hoisington, analysts from Hoisington Investment Management (a Texas-based investment adviser) consumers in the United States account for two-thirds of US GDP. 'Consumer spending is funded either by income growth, more debt, or some other reduction in saving. Recent trends in each of these categories, do not bode well for this critical sector of the U.S. economy,' they write. They expect that the expected December federal rate-hike will put upward pressure on the short-term interest rates causing inflation to fall, pushing long Treasury bond yields lower. This view flies in the face of most other current views on inflation. To read more, click here.

Hurricane Maria Is Killing Puerto Rico's GoldenGoose, but It Was Already Dying

PatrickCoxThis interesting article from Tech Digest, written by Patrick Cox explains that the biggest bill payer in Puerto Rico is 'big pharma'. It accounts for more than half the territory's manufacturing, 25% of its GDP, employs about 100,000 people and accounts for 75% of exports. Post-hurricane, drug companies want improved infrastructure and reliable electricity supply. To read more, click here.

Uncle Sam's unfunded promises

Pensions2In this article columnist and investment strategist John Mauldin takes a hard look at the unfunded liabilities and debt of the US government. 'Even though the federal unfunded pension liabilities dwarf those of state and local pensions, I want to make it clear that I believe the state and local problems will be far more intractable,' he writes. He explains that all workers pay taxes that supposedly fund the benefits Americans may someday receive. But Federal debt as a percentage of GDP has almost doubled since the turn of the century. To read more, click here.

User alert: Monitoring of virtual currencies

NationalTreasuryVirtual currencies are becoming increasingly popular among users to purchase goods and services, to transfer funds to third parties or to hold as investments. Rosebank Wealth Group has, to date, been approached by two people wanting to invest in virtual currency funds. Here is an interesting article from National Treasury on the government view of cryptocurrencies and what FSP's should consider if they wish to consider advising on or using them. To read more, click here.

Life in the "real" China

ChinaConsumerDawie Krige, CEO of London based Cederberg Capital, recently spent a month living in Guilin, a mid-sized Chinese city. This was a repeat of a similar trip he did two years ago (a longitudinal study of sorts). 'Time spent in the "real" China has had one major effect: it strengthened our conviction in the long-term prospects of our dominant Chinese consumer and internet companies, because of the sustainability of rapid growth combined with their reasonable valuations', he writes. To read more click here.

Notes from the field: Always go to the funeral

bhunt2 2In this article investment columnist Ben Hunt writes about the importance of going to funerals to honour the dead. He then uses the life-affirming process of attending the funerals of those we mourn as a metaphor for properly 'burying' bad investments. 'On the investing side', he writes, 'the lesson is that every discretionary investment needs a proper funeral at some point. That means a proper funeral, well attended. You communicate with your team and your clients. You tell them how and why the death occurred, and you invite them to learn more. To read more, click here.

Financial hell: 57% in Australia cannot afford an extra $100 if interest rates rise.

MishShedlockMike 'Mish' Shedlock is a registered investment advisor representative for Washington-based SitkaPacific Capital Management, an absolute return asset manager. Mish provides economic and market analysis for the firm and is the author of the widely followed 'Mish's Global Economic Trend Analysis'. In this article he predicts that when top finally blows off the Australian housing bubble, the results will be devastating. To read more, click here.

Global Retirement Reality

JohnMauldin2 2This article written by John Mauldin is a 'must read'. Mauldin is often referred to as 'Maudlin' as he tends to emphasize the downside more than the upside, but in this article he hits the nail on the head. He takes a look at the retirement provision and shortfalls in many European countries and makes the case that over the next ten to thirty years, retirement promises and expectations will have to be re-evaluated. Problems of our making over the last hundred years will cause the retirement system as we know it to implode. We can only hope that common sense and sanity influence the necessary reforms. To read more click here.

Does a US recovery which excludes tens of millions of Americans deserve to be called a recovery?

USflagThe Distressed Communities Index (DCI) is a tool for measuring the vitality of U.S.communities. This 2017 report examines place-based disparities in the American economic experience and assesses the relationship between them and a host of other important factors, such as health outcomes, public assistance spending,demographics, and educational attainment. It was brought to our attention by an article by Mish Shedlock (click here). "It is fair to wonder whether a recovery that excludes tens of millions of Americans and thousands of communities deserves to be called a recovery at all," he writes. The whole report can be accessed if you click here.

Response to 'There They Go Again ... Again' by Howard Marks

howard-markS2 2On 26th July 2017 Howard Marks, (Los Angeles-based investor and commentator credited for calling the 2007 financial crisis), wrote an article  "There They Go Again . . . Again". It features below on our website, posted on 1st August 2017. He writes that this article generated the most responses from readers in the 28 years he has commented on investments and the economy. Some were critical of his view, some asked questions. In this very well worth reading piece, he further disects options open to investors at this time. Click here to read more.

Sweating pensions in the post-retirement phase

RetirePeter Nurcombe-Thorne, Director at Rosebank Wealth Group writes that for those concerned about funding their retirement, splitting the years of retirement into distinct phases could make planning easier. His article considers the options of those who have already retired and have to find ways to eke out their savings. To read more, click here.

Highly unusual US treasury yield pattern not seen since summer of 2000

MishShedlockIn this article columnist Mish Shedlock point out that the patterns of US treasury yields have shifted. 'There's something going on that we have not seen on a sustained basis since the summer of 2000', he writes. His graphs show that there are rising yields for three and six-month bonds, but falling yields on five-year bonds. In his view this is signals that the US economy is not strengthening as generally thought. For more, click here.

"10-Year Treasury Yields Headed to Zero Percent": Saxo Bank CIO

SteenJakobsenSteen Jakobsen, the Chief Investment Officer and Chief Economist of Swiss-based Saxo Bank is more pessimistic than most economists right now. In this article he writes that investors should prepare themselves for still-lower government yields, the flattening of yield curves (financial sector underperformance), and expected returns for stocks that on a good day with tailwinds will do 2-3% per annum versus 9-10% historically. To read more, click here.

The value of financial advice

InnovationResearch conducted by researchers at the International Longevity Centre in the UK and released in July 2017 found that those who received financial advice in the 2001-2007period had accumulated significantly more liquid financial assets and pension wealth than their unadvised equivalent peers by 2012. The research was based on data from the largest representative survey of individual and household assets in Great Britain, the Wealth and Assets Survey. For more, click here.

Finances in Retirement: New Challenges, New Solutions

RetireIn 2012 Merrill Lynch and Age Wave began a strategic collaboration to understand how they could help guide Americans towards a more satisfying and comfortable retirement. This report, which was published in February 2017 tracks the changing financial retirement landscape. It shows that more Americans must take greater responsibility to fund their retirement in new ways. It also shows that for 72% of Americans, financing uncertain health costs presents the biggest challenge. Click here to read more.

Leisure in Retirement: Beyond the Bucket List

RetireIn the United States an estimated 10 000 people retire every day. This study, which surveyed 3 700 people, was co-authored by wealth managers Merrill Lynch and think tank Age Wave and was completed in January 2016. It concludes that due to all-time high life expectancy and ‘time affluence’ people are seeing retirement as a new beginning and not a finish line. To read more, click here.

Refreshing when asset managers are open about their mistakes

DawidKrigeAn illuminating question for asset managers in any due diligence process is 'Please tell us about some of the stock picking errors you have made in the last year or so?' Many fund managers are uncomfortable with the question and put a positive spin on their responses. In a refreshing departure from the tradition of hiding mistakes, London and Shanghai-based asset managers Cederberg Capital, led by ex-South African Dawid Krige has showcased investment errors in the passages his London office in a 'wall of shame'. To read more, click here.

The S&P 500: Just Say No

MattKadnar JamesMontier2GMO is a global investment management firm which was founded in North America in 1977 and now has offices in Europe and Asia-Pacific. Two of the firm's asset allocation team, US-based Matt Kadnar and European-based James Montier collaborated on writing this article on passive investing. 

In their view, as more and more investors turn to passively-managed mandates, the opportunity set for active management increases. Secondly, they believe that a decision to allocate to a passive index ignores the most important determinant of long-term returns: valuation. To read more click here.

All roads lead to Rome

Jerry 36SouthIn this article Richard 'Jerry' Haworth ex-South African and CEO and CIO of London-based 36 South Capital Advisers LLP puts the case for diversification into alternative asset-types. He says that low interest rates around the world have created a 'super-correlation' between different asset classes, which are now all bound together. Using a gambling formula called the Kelly Criterion, he argues that a possible investment scenario as markets become more volatile is a two-tailed pay-off. He predicts that only those with 'non-traditional diversification of some sort will survive in a meaningful way'. To read more click here.

Stats SA Quarterly Labour Survey: 43.3% of South Africans of working age are employed.

StatsSA logoThe Quarterly Labour Force Survey (QLFS) is a household-based sample survey conducted by Statistics South Africa (Stats SA). It collects data on the labour market activities of individuals aged 15 years and older who live in South Africa. However, this report only covers labour market activities of persons aged 15–64 years. The latest survey shows that the absorption rate (the proportion of the proportion of the working-age population that is employed) declined to 43.3%. To read more click here.

Happiness is a normal yield curve

JohnMauldin2 2John Mauldin writes that investors should be cautious in the present market. In this article he draws attention to the fact that the S&P 500 cyclically adjusted price-to-earnings (CAPE) valuation has only been higher on one occasion, in the late 1990s. It is currently on par with levels preceding the Great Depression.Other alarm signals are that over the last 10 years, S&P 500 corporations have returned more money to shareholders via share buybacks and dividends than they have earned and that at $8.6 trillion, corporate debt levels are 30% higher today than at their prior peak in September 2008. To read more, click here.

Howard Marks: There they go again - again

HowardMarksLos Angeles-based Howard Marks is an American investor and commentator. After working in senior positions at Citibank he joined TCW (Trust Company of the West) in 1985 before becoming a co-founder and co-chairman of his present company, Oaktree Capital Management. He is credited with calling the 2008 financial crisis and says that 'this is a time for caution'. Read more by clicking here.