Some commentators point to fee structures of US ETFs and question why an investor or adviser would even consider NZ managed fund solutions. In this article we provide a “real life” comparison of Pathfinder's Global Water Fund up against US water equity ETFs. Is the PIE fund or US ETF a better structure? The link is below - we're happy to discuss this one further!
In case you missed it on goodreturns.co.nz the link below is to our latest responsible investment commentary. We look at how consumer values are changing and how this impacts businesses. The response by investors and financial advisers may involve new socially responsible investments and with this in mind we consider the risk of “greenwashing” by product providers. Here's the link:
John Berry, co-founder and director
There have been half a dozen "great" bull markets since WW2. Without getting into a lot of specifics about valuation, earnings growth, different interest rate environments etc, it is useful to compare the length and scope of each bull run. Surprisingly, the current market run is not an outlier. It's long, but not as long as the longest bull market, and its been a good per annum return, but not as high as the highest.
Family offices (the private wealth and investment arm of ultra-high net worth families) are often regarded as the "smart money". They typically have the scale to hold a wide range of assets directly, the connections to access investments that retail investors don't see and the skill to construct globally diversified portfolios. So how will a family office allocate across its portfolio?
A recent Wall Street Journal article showed a family office "model portfolio" - the surprise is around the size of alternative asset holdings. Private equity, venture capital, direct property, commodities, hedge funds and art total up to 50% of the model portfolio. The more conventional stocks, bonds and listed property come in at 41% (with cash making up the balance).
The particularly high allocation to private equity and venture capital shows the benefit of being a well capitalised investor with a long term horizon. They can exchange liquidity (the ability to quickly sell an asset) for the higher returns that unlisted assets like private equity often bring.
An NZ equivalent long term investor is the NZ$44 billion NZ Super Fund which has a lower (but still significant) 17% allocation to similar assets - infrastructure, commodities, property, private equity and "private markets". Alternative assets are a key focus of well diversified investors with a long term time frame.
John Berry, Director
In a consumer driven economy what matters is how people actually feel. Despite reports by political commentators and the media generally, since Trump’s election the US economy has had a postive vibe. Consumers in the post-election US continue to be more confident than their counterparts in Europe, the UK and Japan. A Capital Economics survey (see the graph below) highlights the different sentiment in the UK and US after “shock” results from both the Brexit referendum and US election.
Why the divergence between the UK and US? Even though both results were unexpected, the economic outcomes are completely different. Trump has proposed tax cuts, deregulation and a significant increase in infrastructure spending. These are all expansionary economic policies. By contrast Theresa May is faced with the potential downsizing of big banks and multinationals, renegotiating trade and less economic integration with the European Union. These are all contractionary scenarios.
It all comes down to growth prospects. For Trump, tax cuts and increased spending encourage consumers to be more confident about the economy. They expect more job choice, higher pay, and thus more spending power. This should lead to greater growth through the multiplier effect. Theresa May, on the other hand, is facing an economy expecting low growth over the medium to long-term due to truncated trade and lack of European integration – essentially UK consumers are becoming less confident about their jobs and more hesitant to spend. In this environment Sterling is likely to remain weak.