Okay, this might be a little dry but first and foremost we look after your money so with all the ups and downs we now have a good chance to look at the real damage – no…, denial is not an option and spoiler alert, it isn’t that bad.

The data below is to give you a view of the 12 month window and what has happened.  Let’s just say, a very exciting 12 months!

Indices are basically an aggregate number and in isolation don’t mean much. What you look for is the growth or contraction.  The first table is just the index number at the specific dates

Index1 May 201919/20 Feb 202030 April 2020
ASX200 SPI (Aust)6466.57230.45597.7
S&P 500 (US)2923.733386.152912.43
FTSE (UK)7385.267457.025901.21
Nikkei (Japan)21923.7223479.1520193.69
CAC (France)5538.866111.244572.18
DAX (Germany)12345.4213789.0010861.64
Euronext 100 (Europe)1078.51182.1899.87

Not excited yet?

This second table shows index growth to 19_20 Feb, then growth for the 12 months and the drop from its peak in February

IndexPerf to 19_20 Feb (9 ½ Mths)Annual Perf to 30 Apr2020Drop since 19th, 20th Feb
ASX200 SPI (Aust)11.8%-13.4%-22.6%
S&P 500 (US)15.8%-0.4%-14.0%
FTSE (UK)1.0%-20.1%-20.9%
Nikkei (Japan)7.1%-7.9%-14.0%
CAC (France)10.3%-17.5%-25.2%
DAX (Germany)11.7%-12.0%-21.2%
Euronext 100 (Europe)9.6%-16.6%-23.9%

The middle column (Annual Performance to 30 April 2020) is where we should be focused and these indices are the price indices only – they don’t include dividends.  As an example the Australian All Ords Accumulation index dropped -12.06% for the twelve months vs the ASX200 price index above, dropping by -13.4%

That all looks pretty horrendous but that would be the result if you had 100% of your assets in one of those Indices?

Active managers tend to outperform in reversing markets as they only hold a small number of carefully selected quality stocks. Our active International and Australian Equity managers, as a case in point, have had very little exposure to banking, listed property and energy sectors, which have had substantial losses. Virgin Australia, because of its high debts, also did not make it through their screens.

Add diversification through real return managers, fixed income and cash and you have a very different result.

Our conservative balanced fund (the AAN Core) over the twelve months to 30 April 2020 has had a positive return of 2.56%

The AAN Growth fund which has a 90% exposure to growth assets has actually had a return of positive 1.69% for the twelve months to 30 April 2020.

So what is all the fuss about?

Well our investment team has done a lot better than a lot of other options out there.  If you go looking for returns on things like Australian Super Balanced, Rest Super Balanced or Host Plus Balanced you will struggle to find current performance numbers.

  • Host Super only have a return ‘target’ and show their performance ending 30 June 2019.
  • Australian Super Balanced website talks to its returns to 31 Dec 2019 but you can download their unit prices since 2008 – not very user friendly –  but when you actually do your own numbers using their prices, their annual number is approx. -3.0% to 29 Apr 2020.
  • Similar exercise with REST Super though they do have a Financial Year to date number.  When you look at the underlying unit prices, the balanced option is approximately -4.0% for the year to 30 Apr 2020.

While negative, these numbers are not that bad?  The bigger concern in these funds is the exposure to illiquid assets (Real Property, Alternative assets and Private equity) and the write downs that are yet to be incorporated into the unit prices.

  • These illiquid assets have bolstered their performance in good times as they don’t have to revalue them on a daily basis, but the ‘early release of super scheme’ introduced for Covid-19 has forced them to actively review the values.
  • The initial write downs of -7.5% on unlisted property was received with a lot of scepticism as listed property – which is basically the same assets but listed on the sharemarket – dropped by over -40%.  Alternative assets like airports and tollways have seen similar drops to listed property (-40% to -50%) and Private Equity is even harder to value as the investments they were funding are probably on hold so you really can’t know what they are worth.

As a group we relearned these illiquid lessons in 2008 and the GFC but as an ‘elder statesman’ (according to my colleagues), I have been burnt by illiquid assets in the early 90’s and again in 2001-02, so we simply try and avoid them.

For our clients this strategy has worked for us again in this crisis so we will just stick to our knitting.

Quick Office Update

The team is increasing the time in the office and we plan to be back at 75% of our time in the office next week moving to 100% around May 18th.

Brooke and Josh (aka Smoky and the Bandit) are still running the NSW/QLD border patrols most days and Hannah (who has been working from Melbourne) will be happily back to the GC weather next week.

School closures are not helping our working mums and dads but free day care has Mel and Sach excited.

We are still mainly working with clients via video conferencing but have some clients who really prefer face to face and we can accommodate that in the boardroom.  Just one group of clients at a time.  (We get a bit excited when people visit us nowadays).

We have actually had a very productive April and welcomed a surprising number of new clients to the RFS fold.  Thank-you once again for the warm introductions. 

No movie night this year – probably not a surprise – Courtneay was suggesting the Yatala drive-in, which is open, but we were worried about what you lot might get up to in the privacy of your own vehicles?  Fingers crossed we have the chance to do something later in the year.

To our friends in Tassie, Canberra, Melbourne and SA, stay warm over the weekend.  Up here, we are going to the beach and we can have picnics again so we will be thinking of you?

Stay safe and well…

Best regards.