Investors’ Seminar
November 2014
“How Risky Are Our
Investments?”
Disclaimer
This is not Advice. Please see Mark before considering any changes. Mark will put any recommendations in writing
The information contained in this presentation has been prepared for general use only and does not take into account your personal
investment objectives, financial situation or particular needs. Before you make any decision about whether to invest in a financial
product, you should obtain and consider the Product Disclosure Statement of the financial product.
The information provided by HFS has been done so in good faith and has been derived from sources believed to be accurate at the
time of compilation. Changes in circumstances, including unlawful interference and unauthorised tampering, after the date of
publication may impact on the accuracy of the information. Neither HFS d nor any member of HFS accepts responsibility for any
inaccuracy or for investment decisions or any other actions taken by any person on the basis of the information included. Past
performance is not a reliable indicator of future performance.
Neither HFS nor any member of HFS guarantees the performance of the Funds, the repayment of capital or any particular rate of
return. The performance of any unit trust depends on the performance of its underlying investment which can fall as well as rise and
can result in both capital losses and gains. Consequently, due to market influences, no assurance can be given that all stated
objectives will be achieved.
Investors’ Seminar
November 2014
How Risky Are Our Investments?
Past performance; Economic data
Forecasts
Ideal Cash & Term Deposit Levels
Top 10 Holdings
IOO – iShares S&P
Global 100
XAO – S&P All Ords
What could go Wrong?
1. Drawdown Levels may significantly
increase
2. Dividends may not provide sufficient
cash-flow to the RHS
3. The Security of the RHS may cease
4. The businesses part-owned in the LHS
may not produce adequate Earnings
5. A loss of the long-term focus and the
patience – cannot “stay the journey”
What Are The Risks?
Volatility – it’s not a risk; it’s a certainty
Risk Capacity
Risk Attitude
Longevity Risk
Inflation Risk
Liquidity Risk
Credit Risk; Diversification Risk; Market Risk
Market Timing Risk
Past Performance
Lonsec
Asset Classes - Historical Returns to
30 September 2014
Returns (%p.a.)
Australian
Equities
Global
Equities
% pa
Australian
Listed
Property
% pa
Australian
Fixed
Interest
% pa
% pa
% pa
5 years
6.6
11.2
8.6
6.7
3.9
10 years
8.2
5.0
1.7
6.3
4.9
15 years
8.7
2.0
5.9
6.4
5.1
20 years
9.4
6.0
7.5
7.4
5.4
Cash
Current market statistics and valuations
Consensus expectations for EPS growth and P/Es
10
October
2014
PE FY
2015 (f)
x
PE FY EPS Growth
2016 (f) FY 2015 (f)
x
%
MARKET
14.0
12.9
5.4
EPS
Growth
FY 2016
%
8.6
Financials
12.8
12.2
7.2
4.8
- REITS
14.5
13.8
6.8
4.6
Industrials
16.5
14.9
9.8
10.68
Resources
12.6
11.0
-3.6
14.5
Top 50
Mid Cap 50
13.8
15.2
12.8
13.3
3.7
10.5
7.2
14.4
Small Ords
15.3
12.9
21.8
17.9
Source: Ausbil calculation based on consensus broker earnings forecasts, 10 October 2014
8
Forecast Returns
Lonsec
30 September 2014
Asset Class 10 Year Forecasts
Yield
% pa
Growth
% pa
Total
% pa
Australian
Equities
4.5
4.2
8.7
Global Equities
2.5
5.8
8.3
Australian
Listed Property
6.0
2.0
8.0
Australian
Fixed Interest
4.4
0.2
4.6
Cash
4.2
-
4.2
Australian long term returns
Average annual total returns after inflation
1900-2013
%
Real bond returns
Real equity total
returns
Real equity capital gains less
inflation
Income compounding effect
19502013
%
1950s
1960s
1970s
1980s
1990s
2000s
%
%
%
%
%
%
20102013
%
1.5
1.0
-6.3
0.9
-5.1
2.1
9.9
3.7
5.0
7.4
6.1
9.0
10.6
-4.2
8.6
9.0
5.5
4.0
1.6
0.8
2.4
4.6
-10.6
4.0
4.6
1.4
-0.3
5.8
5.3
6.6
6.0
6.4
4.6
4.4
4.1
4.3
Source: Credit Suisse / London Business School :
‘Global Investment Returns Yearbook 2014’
10
The Ideal Level Of Cash
& Term Deposits
Segmentation Bar Placement – the key
issues are:
A. Drawdown Goals – allocate
considerable time to this
B. Market Issues (a) Dividends from the
LHS; (b) Worst Case long-term share
prices in LHS
LHS – Long-Term
Investing
10 Year Investing vs 1 Year Investing
“Rolling Smoothed” 10 Year Returns
Hayden Investment Paradox
Allowance for Inflation is crucial
because we must retain our Purchasing
Power
Specialist Stock-picker
AS
IS
P
TD
Cash
XYZ Manager
Specialist Stock-picker
We want to:
1. Buy a designated portfolio of shares
2. Contract a high-quality specialist Investment
Manager to manage the portfolio and instigate
changes to ensure best forecast (prognostic) returns
How do we ensure a high quality result
A. Analyse the portfolio of shares
B. Analyse the skill-set of the Investment Manager
The Boxes to Tick
Realistic Goals
Structure/Strategy (Tax etc)
Super Fund Admin
Asset Mix 1 -Cash/TermDeposits
Asset Mix 2–Growth Section (LHS)
Stock-Picker Selection
What can Investors
expect from HaydenFS?
A. Revision of the Segmentation Bar
Placement – to ensure the ideal level of
Cash & Term Deposits
B. Revision of the Investment Managers
and Specialist Stock-Pickers
Peace-of-mind
for Investors
1. Part-own a lot of great businesses. We
have a portfolio of businesses that is well
diversified across locations, industries
and size.
2. Employing (contracting) some very wise
people to monitor and change our
portfolio of investee businesses when
necessary.