August research round up

PortfolioConstruction Forum asked the major funds research houses for an update on their on their most recent projects.

Lonsec

• In the short term, the impact of the Government’s proposed carbon tax on many companies and households should be low to moderate, as only major emitters are included and the carbon tax is set at a low level, according to a recent Lonsec Perspective. However, Lonsec argues that from 2015, the impact will increase and, overall, the impost of a carbon tax will be a net economic negative for Australian households, businesses and equity markets. It is unlikely to alter the growth in global carbon emissions, unless the biggest emitters (US, China, India and Russia) employ similar emission schemes themselves.
• The performance fee structure of most managers in the Australian equities long/short fund peer group is appropriate, according to Lonsec. However, some managers do employ “inappropriate low performance hurdles”, the house found in its examination of performance fees.
  While managers that employ performance fees should reduce their MER (base fee), long/short products tend to have relatively high MERs compared to the traditional long-only Australian equity large cap sector. “To some extent, this is justified, given the relatively low capacity limit of these products and the additional costs associated with employing shorting skills,” Lonsec writes.
  Nonetheless, some managers would “forge improved alignment of interests with investors” if they reduced their MER to reflect the existence of a performance fee, the research house concludes.
• Lonsec has appointed Amanda Gillespie to the role of general manager of research to lead the firm’s research team, replacing Grant Kennaway. Gillespie has been with Lonsec for 10 years, and was previously head of the firm’s investment consulting division, a role that will now be filled by Lukasz de Pourbaix, who has worked as a senior investment consultant with Lonsec since 2008. In addition, Anh Nguyen has commenced with Lonsec as a quantitative analyst.

Mercer

• Mercer has appointed Russell Clarke to the newly created position of global chief investment officer (CIO), mainstream assets (equities, property, fixed interest and multi-asset portfolios), with regional CIOs reporting to him. Clarke will report to Mercer’s global CIO, Andrew Kirton.
  Andrew Howard has been appointed to Clarke’s previous position as CIO, Asia-Pacific, and Phil Graham has been appointed Deputy CIO, Asia-Pacific. Howard has been a senior portfolio manager with Mercer for seven years, working closely with Clarke. Graham has been a senior portfolio strategist since 2007.

Morningstar

• Former Lonsec general manager of research, Grant Kennaway, is to join Morningstar in the newly created position of head of fund research, Asia-Pacific. Kennaway will be responsible for developing Morningstar’s fund research business in the Asia-Pacific region. Morningstar has also appointed Nigel Crampton as head of sales.

Standard & Poor’s Fund Services 

• Standard & Poor’s Fund Services (S&P) has launched S&P Portfolio Services, offering retail intermediaries a non-tailored approved product list and model portfolio suite of best of breed funds. The service includes monthly performance reporting and quarterly economic commentary. Boutique financial services firm, 2020 Directinvest, has adopted tools for use with its DIY investor client base.
• Global listed infrastructure funds performed strongly in 2010, with positive inflows, according to S&P’s latest review of the sector. “Growth continues to come from an international trend to private ownership and management of these assets and, unsurprisingly, there has been strong growth in emerging markets,” the researcher said.
  It affirmed its ratings on nine infrastructure funds, upgraded one, and assigned two new ratings to infrastructure offerings from Magellan and RARE Infrastructure.
• S&P managing director, Mark Hoven, resigned in July, citing a shrinking of his duties after the firm opted not to implement a strategy to become a global business, including the merger of its European and Australian fund ratings businesses. Hoven joined Standard & Poor's in 2001 as head of market development. Head of research, Leanne Milton, will run S&P on a day-to-day basis, while vice president sales, Jose Ordonez, will manage the commercial aspects.

van Eyk Research 

• Not all investment strategies are suited to a separate management account (SMA)-style product, according to van Eyk. The type of strategy used and how it was implemented in a SMA helped determine the success of an individual portfolio, van Eyk found in its recent review of 19 Australian Equities SMAs.
  The SMA structure is better suited to a concentrated portfolio of a small number of stocks, to reduce turnover and keep transactions costs and tax liability as low as possible, the research house said. Neither a boutique model of SMA, nor those marketed by large fund managers, was found to be clearly superior.
  van Eyk found that boutiques may have a better handle on the implementation issues, but larger providers are often better resourced, and can have greater access to sources of investment and market information.
  van Eyk awarded five ‘A’ ratings, eight ‘BB’ ratings and six ‘B’ ratings across the 19 SMAs it reviewed.
• van Eyk has signed a two-year agreement with advisory dealer group, Genesys Wealth Advisers. The deal gives Genesys advisers access to van Eyk’s web-based iRate research software, including fund manager ratings and sector reviews, alliance partner research, the direct share module, risk ratings and risk profiles.
• Not all investment strategies are suited to a separate management account (SMA)-style product, according to van Eyk. The type of strategy used and how it was implemented in a SMA helped determine the success of an individual portfolio, van Eyk found in its recent review of 19 Australian Equities SMAs.
  The SMA structure is better suited to a concentrated portfolio of a small number of stocks, to reduce turnover and keep transactions costs and tax liability as low as possible, the research house said.
  Neither a boutique model of SMA, nor those marketed by large fund managers, was found to be clearly superior. van Eyk found that boutiques may have a better handle on the implementation issues, but larger providers are often better resourced, and can have greater access to sources of investment and market information. van Eyk awarded five ‘A’ ratings, eight ‘BB’ ratings and six ‘B’ ratings across the 19 SMAs it reviewed.