MLC investment performance review
Updated to 31 March 2010
General advice warning and disclaimer
Any advice in this communication has been prepared without taking account of individual objectives,
financial situation or needs. Because of this you should, before acting on any information in this
communication, consider whether it is appropriate to your objectives, financial situation and needs. You
should obtain a Product Disclosure Statement or other disclosure document relating to any financial
product issued by MLC Investments Limited (ABN 30 002 641 661) and MLC Nominees Pty Ltd (ABN 93
002 814 959) as trustee of The Universal Super Scheme (ABN 44 928 361 101), and consider it before
making any decision about whether to acquire or continue to hold the product. A copy of the Product
Disclosure Statement or other disclosure document is available upon request by phoning the MLC call
centre on 132 652 or on our website at mlc.com.au.
An investment in any product offered by a member company of the National group does not represent a
deposit with or a liability of the National Australia Bank Limited ABN 12 004 044 937 or other member
company of the National Australia Bank group of companies and is subject to investment risk including
possible delays in repayment and loss or income and capital invested. None of the National Australia
Bank Limited, MLC Limited, MLC Investments Limited or other member company in the National
Australia Bank group of companies guarantees the capital value, payment of income or performance of
any financial product referred to in this publication.
Past performance is not indicative of future performance. The value of an investment may rise or fall with
the changes in the market. Please note that all return figures reported are before management fees and
taxes, and for the period up to 31 March 2010, unless otherwise stated.
The specialist investment management companies are current as at 31 March 2010. Funds under
management figures are as at 31 March 2010, unless otherwise stated. Investment managers are
regularly reviewed and may be appointed or removed at any time without prior notice to you.
AGENDA
1. Overall results
2. The market environment
3. Drill down by asset class
Slide 3
1. Overall results
Key Messages:
• Markets have rebounded strongly, however risks remain.
• Clients participated fully in the recovery due to our disciplined
investment approach.
• Market rebound has justified advice to clients to remain fully
invested and focused on long-term goals.
• Appointed managers have generally enhanced returns though
security selection.
• Our diversified portfolios’ 5-year returns remain positive.
MLC Horizon 4 – Super
MLC Horizon 4 - Balanced Portfolio
Performance to
31-Mar-10
MLC MasterKey Super / Gold Star / Business
Super
(before taking into account fees and tax)
MLC MasterKey Super Fundamentals
(takes into account fees and tax)
MLC MasterKey Super Gold Star / Business
Super*
(takes into account fees and tax)
3 Months
%
1 Year
%
3 Years
% p.a.
5 Years
% p.a.
2.6
28.7
-1.0
6.0
1.8
25.6
-2.1
-
1.7
24.7
-2.6
3.6
*MLC MasterKey Business Super commenced on 30 April 2001 and issues the same unit price as that reported for MLC MasterKey Superannuation Gold Star.
The returns outlined above do not include allowance for fee rebates you may be entitled to should you be part of a large employer plan.
Highlights:
• 5-year returns remain positive, and 1 year returns rebounded very strongly.
• All asset classes provided positive returns for both the year and quarter.
• Australian Shares (+45%) and Hedged Global Shares (+51.8%) performed strongly. (ref
slide 12)
• Hedged Global Shares outperformed unhedged Global Shares by +32.2% over the year on
account of a rising $A. (ref slide 12)
• Global Private Assets have continued to rally in the latest quarter, one year return is now
+11.5%. (ref slide 34)
• Horizon 4 debt returns (+10.9% for the year) have been driven by strong returns from higher
credit risk bonds which continue to benefit from robust corporate earnings and buoyant
investor risk appetites.
Slide 5
MLC Horizon 4 – total returns
Historical Absolute Performance
MLC MasterKey Super Gold Star Horizon 4 Balanced Portfolio
(after taking into account fees and tax)
30%
Return % p.a.
20%
10%
0%
-10%
-20%
-30%
89 990 991 992 993 994 995 996 997 998 999 000 001 002 003 004 005 006 007 008 009 010
19
1
1
1
1
1
1
1
1
1
1
2
2
2
2
2
2
2
2
2
2
2
1 Year Ended 31 March
Slide 6
5 Years Ended 31 March
MLC Horizon 4 – asset class contribution
Contribution to Total Return by Asset Class
MLC Horizon 4 Balanced Portfolio
(before taking into account fees and tax)
(annualised for periods greater than 1 year)
Return Contribution %
35
30
25
20
15
10
5
0
-5
Australian
Shares
Global Shares Global Shares
- Hedged
- Unhedged
3 months to Mar-2010
Slide 7
Global
Property
Securities
Global Private
Assets
1 year to Mar-2010
LTAR
3 years to Mar-2010
Debt
Securities
Total
5 years to Mar-2010
MLC Horizon 5 – Super
MLC Horizon 5 - Growth Portfolio
Performance to
31-Mar-10
MLC MasterKey Super / Gold Star / Business
Super
(before taking into account fees and tax)
MLC MasterKey Super Fundamentals
(takes into account fees and tax)
MLC MasterKey Super Gold Star / Business
Super*
(takes into account fees and tax)
3 Months
%
1 Year
%
3 Years
% p.a.
5 Years
% p.a.
2.6
32.6
-2.7
5.6
1.8
29.6
-3.5
-
1.7
28.6
-4.0
3.4
*MLC MasterKey Business Super commenced on 30 April 2001 and issues the same unit price as that reported for MLC MasterKey Superannuation Gold
Star.The returns outlined above do not include allowance for fee rebates you may be entitled to should you be part of a large employer plan.
Highlights:
• 5-year returns remain positive, and 1 year returns rebounded very strongly.
• All asset classes provided positive returns for both the year and quarter.
• Australian Shares (+45%) and Hedged Global Shares (+51.8%) performed strongly. (ref slide
12)
• Hedged Global Shares outperformed unhedged Global Shares by +32.2% over the year on
account of a rising $A. (ref slide 12)
• Global Private Assets have continued to rally in the latest quarter, one year return is now
+11.5%. (ref slide 34)
• Horizon 5 debt returns (+12.4% for the year) have been driven by strong returns from higher
Slide 8 credit risk bonds which continue to benefit from robust corporate earnings and buoyant investor
risk appetites.
MLC Horizon 5 – total returns
Historical Absolute Performance
MLC MasterKey Super Gold Star Horizon 5 Growth Portfolio
(after taking into account fees and tax)
30%
Return % p.a.
20%
10%
0%
-10%
-20%
-30%
1998
1999
2000
2001
2002
2003
2004
1 Year Ended 31 March
Slide 9
2005
2006
2007
5 Years Ended 31 March
2008
2009
2010
MLC Horizon 5 – asset class contribution
Contribution to Total Return by Asset Class
MLC Horizon 5 Growth Portfolio
(before taking into account fees and tax)
Return Contribution %
(annualised for periods greater than 1 year)
35
30
25
20
15
10
5
0
-5
Australian
Shares
Global Shares Global Shares
- Hedged
- Unhedged
3 months to Mar-2010
Slide 10
Global
Property
Securities
Global Private
Assets
1 year to Mar-2010
LTAR
3 years to Mar-2010
Debt
Securities
Total
5 years to Mar-2010
2. The market environment
Market environment - asset class returns
for the period ending 31 March 2010
Asset Class Performance
100.00%
80.00%
60.00%
40.00%
20.00%
0.00%
-20.00%
-40.00%
Australian
Shares
Global
Shares
(hedged)
Global
Shares
(unhedged)
Quarter to Mar-10 % p.a.
Emerging
Markets
Australian
Property
Securities
1 Year to Mar-10 % p.a.
Global
Property
Securities
Australian
Bonds
3 Year to Mar-10 % p.a.
Global
Bonds
(hedged)
Global High
Yield Bonds
(hedged)
InflationLinked
Bonds
Cash
5 Year to Mar-10 % p.a.
Index data source: Australian Shares - S&P/ASX 300 Accumulation Index; Global Shares (hedged) - MSCI All Countries (A$ hedged); Global Shares (unhedged) - MSCI All Countries; Australian Property Securities S&P/ASX 300 LPT Accumulation Index; Global Property Securities - UBS Global REIT (hedged); Australian Bonds - UBS Composite Bond (all mats); Global Bonds (hedged) - BCGA Global Agg (hedged); Global High
Yield Bonds (hedged) - BCGA US Corp HY BB/B (hedged), Australian Inflation Linked Bonds - UBS Inflation Linked Bonds (all mats); Cash - UBS Australian Bank Bill;
Slide 12
Recovery, but still a complex and uncertain
environment
• A very uneven global recovery is underway
Solid, V-shaped upswing in the emerging economies
A modest U-shaped recovery in the US
Japan, Europe are still lagging
Australian economy continuing to improve, after an extraordinary
period of outperformance
• But unresolved imbalances still remain
Household indebtedness in the English-speaking world
Unsustainable budget deficits and rising public debt in the US, UK,
and peripheral European economies
Inflexible currencies in key emerging economies (e.g. China)
• Equity and credit market recovery is welcome, but prospective
returns are now lower as a result (markets no longer cheap!)
3. Drill down by asset class
Australian shares
Australian shares - performance
MLC Australian Share Fund
Performance to
31-Mar-10
MLC Masterkey Super Fundamentals / Gold Star /
Business Super
(before taking into account fees and tax)
MLC Masterkey Super Fundamentals
(takes into account fees and tax)
MLC Masterkey Super Gold Star / Business
Super*
(takes into account fees and tax)
S&P/ASX 300 Accumulation Index
(S&P/ASX 200 Index prior to Nov 2002)
3 Months
%
1 Year
%
3 Years
% p.a.
5 Years
% p.a.
1.3
45.0
-1.3
8.6
1.1
41.1
-1.2
-
0.9
40.0
-1.9
7.0
1.3
41.9
-2.6
8.0
*MLC MasterKey Business Super commenced on 30 April 2001 and issues the same unit price as that reported for MLC MasterKey Superannuation Gold
Star. The returns outlined above do not include allowance for fee rebates you may be entitled to should you be part of a large employer plan.
Highlights:
• Absolute one year return is very strong, capturing the market recovery which commenced
in March 2009.
• Rolling one year returns have been above index with a very high degree of consistency
since September 2008 – a good result in varying market circumstances.
• 7/10 appointed managers outperformed – a range of styles contributed. Stock selection
will be more important from here.
• Positive stock contributors: o/w News Corporation (+65%), Brambles (+53%), Fairfax
Media (+77%), ANZ (+61%) which helped offset u/w Commonwealth Bank (+62%).
Slide 15
Australian shares – total returns
Historical Absolute Performance
MLC MasterKey Super Gold Star Australian Share Fund
(after taking into account fees and tax)
40%
30%
Return % p.a.
20%
10%
0%
-10%
-20%
1 Year Ended 31 March
Slide 16
5 Years Ended 31 March
20
10
20
09
20
08
20
07
20
06
20
05
20
04
20
03
20
02
20
01
20
00
19
99
19
98
19
97
19
96
19
95
19
94
19
93
19
92
19
91
19
90
19
89
-30%
Dec-90
Jun-91
Dec-91
Jun-92
Dec-92
Jun-93
Dec-93
Jun-94
Dec-94
Jun-95
Dec-95
Jun-96
Dec-96
Jun-97
Dec-97
Jun-98
Dec-98
Jun-99
Dec-99
Jun-00
Dec-00
Jun-01
Dec-01
Jun-02
Dec-02
Jun-03
Dec-03
Jun-04
Dec-04
Jun-05
Dec-05
Jun-06
Dec-06
Jun-07
Dec-07
Jun-08
Dec-08
Jun-09
Dec-09
Annualised Excess Return
(S&P/ASX 300 Accumulation Index)
Australian shares – excess returns
Rolling Performance in Excess of the Index
MLC Australian Share Fund
(before taking into account fees and tax)
14%
12%
10%
8%
6%
4%
2%
0%
-2%
-4%
-6%
1 Year
Slide 17
3 Years
5 Years
Australian Shares – manager contribution
Manager Performance in Excess of the Index
MLC Australian Share Fund
14%
12%
(annualised for periods greater than 1 year)
Excess Return vs S&P/ASX 300 Accumulation Index
(before taking into account fees and tax)
10%
8%
6%
4%
2%
0%
-2%
-4%
-6%
MapleBrown
Abbott
Lazard
Dimensional Contango
Quarter to Mar-10
Slide 18
Contributors:
• Dimensional:
• Balanced:
• Maple-Brown Abbott:
Woolworths
• Concord:
• JF Capital Partners:
• Northcape:
• Wallara:
Detractors:
• Lazard:
• Northward:
• Contango:
Concord
JF Capital
1 Year to Mar-10
Wallara
Balanced
Equity
3 years to Mar-10
Northcape Northward Australian
Capital
Share Fund
5 Years to Mar-10
o/w small caps, Macquarie Group, Amcor, OneSteel, Qantas, Alumina, Boral
o/w Wesfarmers, Orica, ANZ Bank, Qantas
o/w Fairfax Media, APN News & Media, News Corp., Lion Nathan (takeover) and u/w
o/w James Hardie, ANZ Bank, Macquarie Group, JB Hi-Fi, Arrow Energy
o/w Navitas, News Corp., Independence Group, Rio Tinto, u/w/ Telstra
o/w ANZ Bank, Brambles, Incitec Pivot, Seek, Fairfax Media
o/w Challenger, OneSteel, Orica, James Hardie, Macquarie Group, Seek
o/w Telecom NZ, Telstra, Intoll, u/w Commonwealth Bank, Tabcorp
o/w Woolworths, Nufarm u/w ANZ Bank, Wesfarmers
o/w Orica, Seek, Lion Nathan, Oz Minerals, u/w Fosters
3. Drill down by asset class
Global shares
Global shares - performance
MLC Global Share Fund
Performance to
31-Mar-10
MLC MasterKey Super Fundamentals / Gold Star /
Business Super
(before taking into account fees and tax)
MLC MasterKey Super Fundamentals
(takes into account fees and tax)
MLC MasterKey Super Gold Star / Business Super*
(takes into account fees and tax)
MSCI All Country World Index
(MSCI World Index prior to July 2002)
3 Months
%
1 Year
%
3 Years
% p.a.
5 Years
% p.a.
1.0
19.6
-8.6
0.5
-0.2
17.0
-9.0
-
-0.4
16.2
-9.5
-1.3
1.2
18.3
-7.9
1.0
*MLC MasterKey Business Super commenced on 30 April 2001 and issues the same unit price as that reported for MLC MasterKey Superannuation Gold
Star.The returns outlined above do not include allowance for fee rebates you may be entitled to should you be part of a large employer plan.
Highlights:
• All markets provided positive returns for the year, which was captured by the managers
who all provided absolute double-digit returns for the year.
• The portfolio benefited by having exposure to emerging markets, which returned +58.4%
for the year.
• It has been one year since the MLC Global Share strategy underwent an enhancement
with the appointment of four new managers. The short term results from the new
managers are in line with how they were expected to perform in a rising market. Sands
Capital (+44.3%), Harding Loevner (+18.9%) and Tweedy, Browne (+18.6%) outperformed
Slidethe
20
benchmark, while Mondrian (+13.4%) lagged the broader market over the year.
Global shares – total returns
Historical Absolute Performance
MLC MasterKey Super Gold Star Global Share Fund
(after taking into account fees and tax)
40%
30%
Return % p.a.
20%
10%
0%
-10%
-20%
1 Year Ended 31 March
Slide 21
5 Years Ended 31 March
20
10
20
09
20
08
20
07
20
06
20
05
20
04
20
03
20
02
20
01
20
00
19
99
19
98
19
97
19
96
19
95
19
94
19
93
19
92
19
91
19
90
19
89
-30%
Dec-90
Jun-91
Dec-91
Jun-92
Dec-92
Jun-93
Dec-93
Jun-94
Dec-94
Jun-95
Dec-95
Jun-96
Dec-96
Jun-97
Dec-97
Jun-98
Dec-98
Jun-99
Dec-99
Jun-00
Dec-00
Jun-01
Dec-01
Jun-02
Dec-02
Jun-03
Dec-03
Jun-04
Dec-04
Jun-05
Dec-05
Jun-06
Dec-06
Jun-07
Dec-07
Jun-08
Dec-08
Jun-09
Dec-09
Annualised Excess Return
(MSCI All Country World Index)
Global shares – excess returns
Rolling Performance in Excess of the Index
MLC Global Share Fund
(before taking into account fees and tax)
20%
15%
Slide 22
10%
5%
0%
-5%
-10%
-15%
1 Year
3 Years
5 Years
Global shares – manager contribution
Manager Performance in Excess of the Index
MLC Global Share Fund
(before taking into account fees and tax)
25%
(annualised for periods greater than 1 year)
Excess Return vs MSCI All Country World Index
30%
20%
15%
10%
5%
0%
-5%
-10%
Capital
International
Wellington
Management
Walter Scott
Quarter to Mar-10
Harding
Loevner
Sands Capital
1 Year to Mar-10
Mondrian
3 years to Mar-10
Tweedy,
Browne
Dimensional
Global Share
Fund
5 Years to Mar-10
Contributors:
• Returns from Sands Capital (+25.9% over the benchmark) and Dimensional (+15.7% over the
benchmark) were driven by the riskier parts of the market rallying the most during the year.
• Harding Loevner's excess performance (+1.3% over the benchmark) for the quarter was driven by
good stock selection in the Health Care, Information Technology, and Consumer Discretionary
sectors.
Detractors:
• Capital (-7.9% below the benchmark) and Walter Scott (-6.7% below the benchmark) lagged the
market over the year in an environment where companies with higher risk levels rose above
conservatively placed quality companies.
• Mondrian (-3.0% below the benchmark) underperformed for the quarter due to allocations to the
Spanish
and Singaporean markets. Further, weak security selection within the US, UK, Australia
Slide
23
3. Drill down by asset class
Australian property
Australian property - performance
MLC Property Securities Fund
Performance to
31-Mar-10
MLC MasterKey Super Fundamentals / Gold Star /
Business Super
(before taking into account fees and tax)
MLC MasterKey Super Fundamentals
(takes into account fees and tax)
MLC MasterKey Super Gold Star / Business
Super*
(takes into account fees and tax)
S&P/ASX 300 Property Accumulation Index
(S&P/ASX 200 Property Index prior to Nov 2006)
3 Months
%
1 Year
%
3 Years
% p.a.
5 Years
% p.a.
-0.9
42.7
-18.9
-3.6
-1.2
40.2
-19.3
-
-1.3
39.0
-19.7
-5.6
-1.6
42.0
-23.3
-7.2
*MLC MasterKey Business Super commenced on 30 April 2001 and issues the same unit price as that reported for MLC MasterKey Superannuation Gold Star. The
returns outlined above do not include allowance for fee rebates you may be entitled to should you be part of a large employer plan.
Highlights:
• The sector has stabilised due to massive capital raisings. A number of REITs have
resumed development activity.
• Strong return rebound by the sector but it is still 58% below mid-2007 peak.
• Strong track record of index outperformance intact (through variable market
conditions)
• The Fund’s one year performance was due largely to Resolution Capital’s
outperformance (70% allocation) while Challenger underperformed (though still ahead
over 3 and 5 years)
• Ownership of non-Australian REITs via mandate discretion given to Resolution has
been very rewarding in addition to Australian REIT stock selection.
Slide 25
Australian property – total returns
Historical Absolute Performance
MLC MasterKey Super Gold Star Property Securities Fund
(after taking into account fees and tax)
40%
30%
20%
Return % p.a.
10%
0%
-10%
-20%
-30%
-40%
-50%
1 Year Ended 31 March
Slide 26
5 Years Ended 31 March
20
10
20
09
20
08
20
07
20
06
20
05
20
04
20
03
20
02
20
01
20
00
19
99
19
98
19
97
19
96
19
95
19
94
19
93
19
92
19
91
19
90
19
89
-60%
Dec-90
Jun-91
Dec-91
Jun-92
Dec-92
Jun-93
Dec-93
Jun-94
Dec-94
Jun-95
Dec-95
Jun-96
Dec-96
Jun-97
Dec-97
Jun-98
Dec-98
Jun-99
Dec-99
Jun-00
Dec-00
Jun-01
Dec-01
Jun-02
Dec-02
Jun-03
Dec-03
Jun-04
Dec-04
Jun-05
Dec-05
Jun-06
Dec-06
Jun-07
Dec-07
Jun-08
Dec-08
Jun-09
Dec-09
Annualised Excess Return
(S&P/ASX 300 LPT Index)
0%
-2%
-4%
-6%
2%
Jun-91
Dec-91
Jun-92
Dec-92
Jun-93
Dec-93
Jun-94
Dec-94
Jun-95
Dec-95
Jun-96
Dec-96
Jun-97
Dec-97
Jun-98
Dec-98
Jun-99
Dec-99
Jun-00
Dec-00
Jun-01
Dec-01
Jun-02
Dec-02
Jun-03
Dec-03
Jun-04
Dec-04
Jun-05
Dec-05
Jun-06
Dec-06
Jun-07
Dec-07
Jun-08
Dec-08
Jun-09
Dec-09
Annualised Excess Return
Dec-90
(S&P/ASX 300 LPT Index)
Australian property– excess returns
Rolling Performance in Excess of the Index
MLC Property Securities Fund
(before taking into account fees and tax)
8%
Rolling Performance in Excess of the Index
MLC Property Securities Fund
(before taking into account fees and tax)
6%
4%
8%
6%
4%
2%
0%
-2%
-4%
1 Year
1 Year
3 Years
3 Years
5 Years
-6%
Slide 27
5 Years
Australian property – manager contribution
Manager Performance in Excess of the Index
MLC Property Securities Fund
(before taking into account fees and tax)
4%
(Annualised for periods greater than 1 year)
Excess Return vs S&P/ASX 300 LPT Index
5%
3%
2%
1%
0%
-1%
-2%
-3%
Resolution Capital
Quarter to Mar-10
Slide 28
Challenger
1 Year to Mar-10
3 years to Mar-10
Property Securities Fund
5 Years to Mar-10
Contributors:
• Ownership of non-Australian REITs via mandate discretion given to Resolution has been very
rewarding (e.g. US mall owner Simon Property Group, US diversified Vornado, Hong Kong
Land and Manhattan office REIT SL Green). Other positives were o/w Challenger Diversified
Prop. Group & Challenger Kenedix Japan Trust and u/w Dexus Property Group.
Detractors:
• Underweight Goodman Group (recapitalised recently), Charter Hall Office REIT (formerly
Macquarie Office Trust), Centro Properties, ING Industrial Trust and Mirvac Group.
• Performance recovery of higher risk, poorer quality REITs which the managers tend to avoid.
3. Drill down by asset class
Global property
Global property - performance
MLC Global Property Fund
Performance to
31-Mar-10
MLC MasterKey Super Fundamentals
(before taking into account fees and tax)
MLC MasterKey Super Fundamentals
(takes into account fees and tax)
UBS Global Investors Index (hedged)
3 Months
%
1 Year
%
3 Years
% p.a.
5 Years
% p.a.
6.5
85.2
-
-
6.0
87.4
-
-
6.8
81.9
-
-
Highlights:
• Substantial performance recovery and return outcome for the year (though still
negative on a 3 year basis). The US (+109%) and Singapore (+79%) REIT markets
were the best regional market performers in local currency terms, Japan (+15%) the
lowest.
• The MLC strategy captured the one year return surge, and more.
• Largest country REIT market overweights remain Hong Kong, Singapore and Japan
while USA, Australia and Europe continue to be underweighted.
• Morgan Stanley continues to outperform strongly (40% of portfolio in Asian REITs).
Resolution’s excess return recently went negative (price weakness of their largest
holding Link REIT) while La Salle’s return is also under benchmark.
Slide 30
Global property – excess returns
Rolling Performance in Excess of the Index
MLC Global Property Fund
8%
6%
4%
2%
0%
-2%
1 Year
Slide 31
Mar-10
Sep-09
Mar-09
Sep-08
Mar-08
Sep-07
Mar-07
-4%
Sep-06
Annualised Excess Return
UBS Real Estate Investors Trust Index (hedged)
(before taking into account fees and tax)
Global property – manager contribution
Manager Performance in Excess of the Index
MLC Global Property Fund
16%
14%
(annualised for periods greater than 1 year)
Excess Return vs UBS Real Estate Investors Trust Index
(before taking into account fees and tax)
12%
10%
8%
6%
4%
2%
0%
-2%
-4%
LaSalle Investment
Management
Quarter to Mar-10
Morgan Stanley
1 Year to Mar-10
Resolution Capital
3 years to Mar-10
Global Property Fund
5 Years to Mar-10
Contributors:
• Asian stock selection by Morgan Stanley (40% of their portfolio)
• O/w Manhattan office specialist SL Green
• U/w Australian REITs
Detractors:
• O/w Japan
• O/w Link REIT (Hong Kong retail, due to management change related price
weakness), Unibail (Europe retail), Hammerson (UK)
Slide 32
3. Drill down by asset class
Global private assets
Global private assets – performance
MLC Global Private Assets
Performance to
31-Mar-10
MLC Global Private Assets
(diversified fund component,
before taking into account fees and tax)
MSCI All Country World Index Hedged into AUD
(MSCI World Index Hedged prior to July 2002)
3 Months
%
1 Year
%
3 Years
% p.a.
5 Years
% p.a.
8.3
11.5
6.0
11.6
5.4
52.8
-3.9
5.3
Highlights:
• One year return of +11.5% on a hedged basis reflects the strength of the $A and the
positive momentum of valuations.
• The strategy has provided positive absolute returns since inception (+8.7% p.a.) and
represents a premium of +5.6% when compared to the listed global share markets
reflected by the MSCI ACWI return of +3.6%. When comparing this relative
performance, listed markets are more volatile than unlisted assets.
• The majority of MLC’s Managers are first or second quartile and have acquired
quality assets that have proven more resilient through the crisis.
• China is continuing to present some attractive opportunities and MLC has backed
Managers seeking to invest in select state owned enterprises.
Slide 34
3. Drill down by asset class
Long-Term Absolute Return
Portfolio
Long-Term Absolute Return – performance
MLC Long-Term Absolute Return Portfolio
Performance to
31-Mar-10
MLC MasterKey Super Fundamentals /
Gold Star / Business Super
3 Months
%
1 Year
%
3 Years
% p.a.
5 Years
% p.a.
4.1
32.6
1.5
-
2.8
29.4
-1.3
-
2.7
28.4
-1.9
-
3.3
51.7
-6.2
-
0.5
2.1
2.9
-
(before taking into account fees and tax)
MLC MasterKey Super Fundamentals
(after taking into account fees and tax)
MLC MasterKey Super Gold Star / Business
Super*
(after taking into account fees and tax)
MLC LTAR Neutral Strategy
(before taking into account fees and tax)
Inflation (CPI)**
*MLC MasterKey Business Super commenced on 5 December 2005 and issues the same unit price as that reported for MLC MasterKey Superannuation Gold
Star. The returns outlined above do not include allowance for fee rebates you may be entitled to should you be part of a large employer plan.
**The Consumer Price Index figures are currently only available to 31 December 2009
Highlights:
• Returns were positive for most risky assets - with the exception of Australian REITs over the last
quarter. Most notable were the positive returns from private markets and the multi-asset class real
return strategy, managed by Ruffer.
• The Portfolio underperformed the Neutral Strategy because we started to take a relatively defensive
asset allocation stance in the first half of 2009 and market returns have continued to be strong.
• This stance is consistent with LTAR’s objective of ensuring that the long-term return is robust
regardless of market performance – this implies reducing risk exposure when the risk of a long-term
adverse outcome is relatively high. We believe this continues to be the case.
36
•SlideLTAR’s
longer-term returns are significantly ahead of the Neutral Strategy.
3. Drill down by asset class
Diversified Debt Fund
Note: Horizon 1 to 5 debt strategy results are in the detailed quarterly commentary documents.
Diversified Debt assets - performance
MLC Diversified Debt Fund
Performance to
31-Mar-10
MLC MasterKey Super Fundamentals
(before taking into account fees and tax)
MLC MasterKey Super Fundamentals
(takes into account fees and tax)
50% UBS Composite Bond Index (All Maturities)
and 50% Barclays Capital Global Aggregate Bond
Index (hedged)
3 Months
%
1 Year
%
3 Years
% p.a.
5 Years
% p.a.
2.4
9.2
-
-
1.7
6.6
-
-
2.0
6.4
7.5
6.6
Highlights:
• The Fund’s returns have been driven by strong returns from higher credit risk bonds which
continue to benefit from robust corporate earnings and buoyant investor risk appetites.
• Credit spreads (the difference between yields on high yield bonds and government bonds)
are now close to long-term averages so the prospective for further gains has reduced.
Investments in non-investment grade bonds are a variable component of our debt strategy
and we continue to assess the risk/return trade-off of investing and will make adjustments
accordingly.
• Almost all managers have outperformed their respective benchmarks over the year.
• During the quarter we announced changes to the debt strategy that are designed to
strengthen their defensive characteristics and improve our ability to preserve capital when
growth assets are weak. Details are available at mlc.com.au/debtstrategy
Slide 38
Diversified Debt – excess returns
Rolling Performance in Excess of the Index
MLC Diversified Debt Fund
(before taking into account fees and tax)
Annualised Excess Return Above
50% UBS Comp Bond / 50% BCGA Index
6.0%
4.0%
2.0%
0.0%
-2.0%
-4.0%
-6.0%
-8.0%
Quarter
Slide 39
1 Year
Mar-10
Dec-09
Sep-09
Jun-09
Mar-09
Dec-08
Sep-08
Jun-08
-10.0%
Diversified Debt – sector contribution
Contribution to Total Return by Asset Class
MLC Diversified Debt Fund
(before taking into account fees and tax)
Return Contribution %
(annualised for periods greater than 1 year)
10.0%
8.0%
6.0%
4.0%
2.0%
0.0%
-2.0%
Australian
Bonds
Australian
InflationLinked
Bonds
Global
Bonds
(Global
(Global Non- Global Multi- Global High Global Bank
Government Government
Sector
Yield Bonds
Loans
Bonds)
Bonds)
Bonds
Quarter to Mar-10
Global
Mortgages
Total
1 Year to Mar-10
Due to changes to the debt strategy (announced 15 February 2010) occurring during the quarter, returns will be available for the
new debt sectors from the June quarter onwards.
Contributors:
• Global high yield bonds and global multi-sector bonds have continued to outperform lower credit risk bonds in Australia and globally. 1
year returns have been extremely strong after the market bottomed just over a year ago.
• Global bonds, which have more exposure to higher credit risk securities, have outperformed Australian bonds over the year and the
quarter.
Detractors:
• The Fund is more exposed to interest rate changes because it’s a longer-term focussed strategy. It was therefore more affected by
increasing government bond yields in almost all developed countries.
• Global government bonds have been relatively weak this year due to concerns about the increase in supply. Governments, particularly in
the developed world, have had to borrow massive sums to fund fiscal stimulus packages and the market is increasingly concerned about
their ability to service their debt. The market is currently more concerned about some of the developed countries, like the US, defaulting
than many companies and governments of emerging countries.
• Over the year Australian inflation-linked bonds detracted from performance, however they were removed from the Diversified Debt Fund
Slide 40
in September 2009. That’s why the graph doesn’t include a return for the last quarter.
Diversified Debt – manager contribution
Manager Absolute Performance
MLC Diversified Debt Fund
(before taking into account fees and tax)
Manager Performance %
(annualised for periods greater than 1 year)
50%
45%
40%
35%
30%
25%
20%
15%
10%
5%
0%
Antares
UBS
Goldman Wellington
Sachs Management
Domestic Domestic
Global
Composite Composite Sovereign
Global
Credit
Rogge
Amundi
Franklin
Templeton
PIMCO
W. R. Huff
Global
Credit
Global
MultiSector
Global
MultiSector
Global
MultiSector
Global
Global
High Yield High Yield
Debt
Debt
Quarter to Mar-10
Oaktree
Shenkman Stone Tower
Capital
Global
Bank
Loans
NonAgency
Mortgages
1 Year to Mar-10
Due to changes to the debt strategy (announced 15 February 2010) occurring during the quarter, returns from
the 7 new managers will be available from the June quarter onwards.
Contributors:
• The graph reflects the extremely strong returns achieved by managers in the global high yield and multi-sector bond
sectors this past year.
• All but one of the managers outperformed their respective benchmarks over the year because they maintained their
exposure to higher credit securities during the recovery.
• NSIM and UBS outperformed their Australian bond benchmarks, boosting returns from one of the weaker sectors
this year.
Detractors:
Slide
• 41
Oaktree marginally underpeformed in a sector that produced a massive return this year.
3. Drill down by asset class
MLC IncomeBuilderTM
MLC IncomeBuilderTM - performance
MLC IncomeBuilderTM Fund
Performance to
31-Mar-10
MLC MasterKey Super Fundamentals / Gold Star /
Business Super
(before taking into account fees and tax)
MLC MasterKey Super Fundamentals
(takes into account fees and tax)
MLC MasterKey Super Gold Star / Business Super*
(takes into account fees and tax)
S&P/ASX 200 All Industrials Accumulation Index
3 Months
%
1 Year
%
3 Years
% p.a.
5 Years
% p.a.
1.5
43.9
-3.3
6.4
1.3
38.9
-3.2
-
1.2
37.8
-3.8
5.1
1.4
43.8
-5.6
5.4
*MLC MasterKey Business Super commenced on 30 April 2001 and issues the same unit price as that reported for MLC MasterKey Superannuation Gold
Star.The returns outlined above do not include allowance for fee rebates you may be entitled to should you be part of a large employer plan.
Highlights:
• Quarterly distributions are still below those of 1-2 years ago due to the profit
environment and companies (especially banks) acting cautiously re their dividend
policies.
• Aggregate return (pre fees & tax) above benchmark for all periods shown above.
• Positive stock contributors for the year include Lion Nathan (takeover late 2009),
Fairfax Media and underweighting/not owning CSL, QBE Insurance and Woolworths.
These and others offset overweighting Telstra, Fosters, Primary Health Care,
Metcash and underweighting Commonwealth Bank.
Slide 43
MLC IncomeBuilderTM – distribution performance
14
5.34
3.59
10
0.02
1.68
8
0.08
6
1998
1999
2000
2.98
2009
1997
2.83
8.97
2008
2.73
4.87
8.21
2007
2.23
4.24
7.64
8.71
6.74
2006
2.46
1.31
2004
1.86
3.04
1996
2
0.99
2003
0.35
0.43
2002
4
2005
0.35
2001
Cents Per Share
12
0
Financial Year End 30 J une
Income
Buy Backs
Total Capital Gains
Highlights:
• The above distribution chart (Fund inception to only 2009) shows the Fund’s strong
history of growing underlying annual distribution (Primary objective to grow income
achieved in 12 out of 14 years distribution history since inception).
• Current year (2009-10, not displayed above) distributions have so far been consistently
lower than last year’s due to many companies deciding to reduce dividends in response
to the GFC and associated earnings slowdown.
• The Fund is well positioned for an anticipated recovery in earnings and dividends.
Slide 44
Source: MLC IncomeBuilderTM Unit Trust
MLC IncomeBuilderTM – manager
contribution
Manager Performance in Excess of the Index
MLC IncomeBuilderTM
3.5%
3.0%
(annualised for periods greater than 1 year)
Excess Return vs S&P/ASX 200 All Industrials Index
(before taking into account fees and tax)
2.5%
2.0%
1.5%
1.0%
0.5%
0.0%
-0.5%
Vanguard
Quarter to Mar-10
Maple-Brown Abbott
1 Year to Mar-10
3 years to Mar-10
IncomeBuilderTM
5 Years to Mar-10
Contributors:
• O/w Lion Nathan (takeover late 2009), Fairfax Media and underweighting/not owning
CSL, QBE Insurance and Woolworths.
Detractors:
• O/w Telstra, Fosters, Primary Health Care, Metcash and u/w Commonwealth Bank.
Slide 45