MLC Investment Management
Detailed performance
Appendix: Wholesale
31 December 2010
Slide 1
General advice warning and disclaimer
This information has been provided by MLC Limited (ABN 90 000 000 402) a member of the National
Group, 105–153 Miller Street, North Sydney 2060.
Any opinions expressed in this communication constitute our judgement at the time of issue and are
subject to change. We believe that the information contained in this communication is correct and that
any estimates, opinions, conclusions or recommendations are reasonably held or made as at the time
of compilation. However, no warranty is made as to their accuracy or reliability (which may change
without notice) or other information contained in this communication.
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 performance reported is before management fees
and taxes, unless otherwise stated.
The specialist investment managers are current as at the date this communication was prepared.
Investment managers are regularly reviewed and may be appointed or removed at any time without
prior notice to you.
This communication contains general information and may constitute general advice. Any advice in
this communication has been prepared without taking account of individual objectives, financial
situation or needs. It should not be relied upon as a substitute for financial or other specialist advice.
Before making any decisions on the basis of this communication, you should consider the
appropriateness of its content having regard to your particular investment objectives, financial situation
or individual 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 [include
AFSL for PDSs/FSGs/Annual Reports]) 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.
Slide 2
Agenda
1.
2.
3.
Slide 3
Slide 3
Economic and Market Environment
MLC Horizon Performance
Asset Class Performance
1. Market & Economic Environment
• Global Prospects
• Cautiously optimistic about prospects for global growth,
but it remains a highly uncertain environment
• Modest rates of developed world growth (de-leveraging
process) but no new recession (The macro news is not
all bad)
• Emerging markets drive global growth (many EMs had a
good GFC!)
• A more conservative investment environment
(transparency, liquidity)
• Modest investment returns, heightened volatility
Slide 4
G4 growth: worst recession in decades
followed by anaemic recovery
US
Growth in real GDP %
6
4
2
0
q/q%
-2
y/y%
-4
-6
Q1 1999
Q1 2002
Q1 2005
Eurozone
Q1 2008
Japan
Growth in real GDP %
7.5
5.0
2.5
0.0
-2.5
q/q%
-5.0
-7.5
y/y%
-10.0
-12.5
Q1 1999
Q1 2002
Q1 2005
Growth in real GDP %
6.0
4.0
2.0
0.0
-2.0
q/q%
-4.0
y/y%
-6.0
Q1 1999
Q1 2002
Q1 2005
Q1 2008
UK
Q1 2008
Growth in real GDP %
6.0
4.0
2.0
0.0
q/q%
-2.0
-4.0
y/y%
-6.0
-8.0
Q1 1999
Q1 2002
Q1 2005
Q1 2008
Source: Datastream
Slide 5
Note: Data provided to 31 December 2010
Business conditions and consumer confidence
G3 Economy-wide* Business
Conditions
2
Deviations from long-term average
G3 Consumer
3
American confidence
still
sentiment
very subdued
Deviations from long-term average
2
1
1
0
0
-1
-1
-2
-2
US
EA-16
Japan
-3
-3
US
EA-16
Japan
*weighted average of manufacturing and nonmanufacturing/services indices
-4
Q2 1997 Q2 2000 Q2 2003 Q2 2006 Q2 2009
Slide 6
-4
Q2 1997 Q2 2000 Q2 2003 Q2 2006 Q2 2009
Source: Datastream, MLC Investment Management
Note: Data provided to 31 December 2010
It’s the labour market stupid
US unemployment rate
12
No net growth in US employment
since 2000
% of labour force
10
140000
8
135000
6
Non-farm payrolls '000
130000
4
125000
2
0
Jan-70
Jan-77
Jan-84
Jan-91
Jan-98
Jan-05
120000
Jan-98 Jan-00 Jan-02 Jan-04 Jan-06 Jan-08 Jan-10
Working part-time due to poor
business conditions
5
Involuntary part-time due to bus conds (as % of lab. force)
Discouraged worker numbers have
soared
1.00
4
0.80
3
0.60
2
0.40
1
0.20
0
Jan-70
Slide 7
Jan-77
Jan-84
Jan-91
Source: Datastream.
Jan-98
Jan-05
Discouraged workers as % of labour force
0.00
Jan-94
Jan-97
Jan-00
Jan-03
Jan-06
Jan-09
Note: Data provided to 31 December 2010
V-shaped cycle in emerging markets
Industrial production
130
Q2 2008 equals 100
Exports
Q2 2008 equals 100
130
Asia
LATAM
Brazil
Eastern Europe
125
Asia
LATAM
Brazil
Eastern Europe
120
115
110
120
110
100
105
90
100
95
80
90
70
85
80
60
Q2 2008 Q4 2008 Q2 2009 Q4 2009 Q2 2010 Q4 2010
Q2 2008 Q4 2008 Q2 2009 Q4 2009 Q2 2010 Q4 2010
Source: Datastream, MLC Investment Management
Slide 8
Note: Data provided to 31 December 2010
Chinese and Indian growth remains
staggering
16
Real GDP y/y%
14
China
India
12
10
8
6
4
2
0
Q2 2005
Slide 9
Q2 2006
Q2 2007
Q2 2008
Source: Datastream, MLC Investment Management
Q2 2009
Q2 2010
Note: Data provided to 31 December 2010
Australian Prospects
• Massive terms of trade boost, huge pipeline of
construction work, BUT..
–
–
–
–
Monetary and fiscal policy are being tightened
Strong $A is a two-edged sword
Consumers are confident, but are spending very cautiously
Global environment is still fragile
• Two-speed economy returns – WA, Queensland set to
outperform?
• Queensland floods will detract from near-term growth,
but rebuilding will add significantly to growth over the
next year and beyond.
Slide 10
Consumers confident but cautious?
Slide 11
Note: Data provided to 31 December 2010
MLC Horizon 4 Balanced Portfolio
MLC Wholesale Horizon 4 - Balanced Growth Portfolio
Performance Overview to
31-Dec-10
MLC Wholesale/Masterkey Investment
Service Fundamentals
(takes into account fees)
3 Months
%
1 Year
%
3 Years
% p.a.
5 Years
% p.a.
10 Years
% p.a.
3.0
4.7
-2.4
2.3
4.8
Source: MLC Investment Management
Highlights:
•
Returns for the December quarter built on the previous quarters solid results, with leading indicators
in the US suggesting growth is picking up in the worlds largest economy.
•
The strong second half of the year (+8.7% before fees and taxes) more than offset the weak first
half, with MLC Horizon 4 posting lacklustre, but nonetheless positive 1 year returns.
•
As at December, MLC Horizon 4 is above median over all time periods. Additionally, over 1 year the
fund is firmly positioned in the 1st quartile, highlighting the significant rebound in MLC’s returns post
the global financial crisis.
•
Over the quarter the standout strategies were Global REITS (+7.0%) and Hedged Global Shares
(+8.4%), both benefited from currency hedging, with the Australian Dollar rising 5.8% over the
period. Both these strategies were also amongst the top performers for the year, recording +23.9%
and +14.3% respectively.
•
Our strategic allocation to Australian inflation linked bonds was the strongest performing debt sector
in Australia. With inflation rates rising, performance was strong, recording 8.1% (before fees and
taxes) for the year.
Slide 12
2. MLC Horizon Performance
MLC Horizon 4 Balanced Portfolio– total
returns
Historical Absolute Performance
MLC Wholesale Horizon 4 Balanced Portfolio
(after taking into account fees)
20%
15%
10%
Return % p.a.
5%
0%
-5%
-10%
-15%
• 5 year returns have always been positive
-20%
-25%
-30%
2000
2001
2002
2003
2004
2005
1 Year Ended 31 December
2006
2007
2008
2009
2010
5 Years Ended 31 December
Source: MLC Investment Management
Slide 13
MLC Horizon 4 strategy – asset class
contribution
Contribution to Total Return by Asset Class
MLC Wholesale Horizon 4 Balanced Portfolio
(before taking into account fees)
Return Contribution %
(annualised for periods greater than 1 year)
7
6
5
4
3
2
1
0
-1
-2
Australian
Shares
Global Shares - Global Shares - Global Property
Hedged
Unhedged
Securities
3 months to Dec-2010
1 year to Dec-2010
LTAR
Debt Securities
3 years to Dec-2010
Total
5 years to Dec-2010
Source: MLC Investment Management
Slide 14
MLC Horizon 4 Balanced Portfolio – peer
relative performance
MLC Wholesale Horizon 4 Balanced Portfolio
Comparison with the Mercer Wholesale-Balanced Growth Universe
Performance before tax and after fees for periods ended December 2010
Rates of Return(%)
8
4
Q2
Q2
0
Q1
Q2
-4
Q2
-8
3 Months (% )
MLC0260AU
95th Percentile
Upper Quartile
Median
Lower Quartile
5th Percentile
Number of Funds
1 Year (% )
3.0 (17)
4.7
4.0
3.3
3.0
2.6
2.1
45
6.3
4.4
3.2
2.6
1.2
44
3 Years (% pa)
5 Years (% pa)
7 Years (% pa)
-2.2 (15)
2.3 (19)
6.2 (17)
-1.0
-2.0
-2.7
-4.0
-5.8
41
3.7
2.8
2.2
1.5
0.8
41
7.1
6.5
6.2
5.6
5.1
38
(9)
Data Source: Morningstar and Lipper, A Thomson Reuters Company
Slide 15
*Based on Mercer Wholesale – Balanced Growth universe historical data to 31 December 2010.
MLC Horizon 5 Growth Portfolio
MLC Wholesale Horizon 5 - Growth Portfolio
Performance Overview to
(before taking into account fees)
MLC Wholesale/Masterkey Investment
Service Fundamentals
(takes into account fees)
3 Months
1 Year
3 Years
5 Years
10 Years
3.8
5.0
-3.7
2.3
-
3.7
4.1
-4.5
1.3
4.0
Source: MLC Investment Management
Highlights:
•
Returns for the December quarter built on the previous quarters solid results, with leading indicators in
the US suggesting growth is picking up in the worlds largest economy.
•
The strong second half of the year (+9.7% before fees and taxes) more than offset the weak first half
with MLC Horizon 5 posting lacklustre, but nonetheless positive 1 year returns.
•
As at December, MLC Horizon 5 is above median over 1and 3 years. Over longer time periods the
portfolio is slightly below median, caused by the relative overweight to Global Equity (which has
underperformed Australian markets over the last decade – a situation MLC does not expected to reoccur¹)
•
Over the quarter the standout strategies were Global REITS (+7.0%) and Hedged Global Shares
(+8.4%), both benefited from currency hedging, with the Australian Dollar rising 5.8% over the period.
Both these strategies were also amongst the top performers for the year, recording +23.9% and +14.3%
respectively.
•
Our strategic allocation to Australian inflation linked bonds was the strongest performing debt sector in
Australia. With inflation rates rising, performance was strong, recording 8.1% (before fees and taxes) for
the year.
¹ Refer to MLC Strategic Overlay for asset class risk and return expectations
Slide 16
MLC Horizon 5 Growth Portfolio – total
returns
Historical Absolute Performance
MLC Wholesale Horizon 5 Growth Portfolio
(after taking into account fees)
30%
20%
Return % p.a.
10%
0%
-10%
-20%
-30%
• 5 year returns have always been positive
-40%
2000
2001
2002
2003
2004
2005
1 Year Ended 31 December
2006
2007
2008
2009
2010
5 Years Ended 31 December
Source: MLC Investment Management
Slide 17
MLC Horizon 5 strategy– asset class
contribution
Contribution to Total Return by Asset Class
MLC Wholesale Horizon 5 Growth Portfolio
(before taking into account fees)
6
Return Contribution %
(annualised for periods greater than 1 year)
5
4
3
2
1
0
-1
-2
-3
-4
-5
Australian
Shares
Global Shares - Global Shares - Global Property
Hedged
Unhedged
Securities
3 months to Dec-2010
1 year to Dec-2010
LTAR
Debt Securities
3 years to Dec-2010
Total
5 years to Dec-2010
Source: MLC Investment Management
Slide 18
MLC Horizon 5 Growth Portfolio – peer
relative performance
MLC Wholesale Horizon 5 Growth Portfolio
Comparison with the Mercer Wholesale-High Growth Universe
Performance before tax and after fees for periods ended December 2010
Rates of Return(%)
8
Q3
3
Q2
Q2
-2
Q3
-7
Q2
-12
3 Months (% )
MLC0265AU
95th Percentile
Upper Quartile
Median
Lower Quartile
5th Percentile
Number of Funds
1 Year (% )
3 Years (% pa)
3.7 (11)
4.1
-4.3
4.7
3.9
3.7
3.4
2.6
23
5.7
4.4
3.0
1.7
0.6
23
(8)
-2.7
-4.1
-4.9
-6.3
-9.8
22
(7)
5 Years (% pa)
1.3 (13)
2.9
2.2
1.8
1.0
-0.2
18
Data Source: Morningstar and Lipper, A Thomson Reuters Company
Slide 19
*Based on Mercer Wholesale – High Growth universe historical data to 31 December 2010.
7 Years (% pa)
5.9
7.5
6.5
6.0
5.5
4.9
14
(9)
MLC Horizon 6 Share Portfolio
MLC Wholesale Horizon 6 - Share Portfolio
Performance Overview to
31-Dec-10
MLC Wholesale/Masterkey Investment
Service Fundamentals
(takes into account fees)
3 Months
%
1 Year
%
3 Years
% p.a.
5 Years
% p.a.
4.5
3.7
-6.2
0.8
Source: MLC Investment Management
Highlights:
•
Returns for the December quarter built on the previous quarters solid results, with leading indicators
in the US suggesting growth is picking up in the worlds largest economy.
•
The strong second half of the year (+11.2% before fees and taxes) more than offset the weak first
half with MLC Horizon 6 posting lacklustre, but nonetheless positive 1 year returns.
•
As at December, MLC Horizon 6 is predominantly above median. Additionally over 1 and 7 years
the fund is firmly positioned in the 1st quartile.
•
Over the quarter the standout strategy was Hedged Global Shares (+8.4%) which benefited from
currency hedging, with the Australian Dollar rising 5.8% over the period. This strategy was also
amongst the top performers for the year, recording +14.3%.
•
Other noteworthy performance came from LTAR which finished the year strongly recording +4.2%,
returns since inception remain well ahead of the neutral strategy, with the portfolio delivering
annualised outperformance of 4.1%.
Slide 20
MLC Horizon 6 Share Portfolio– total
returns
Historical Absolute Performance
MLC Wholesale Horizon 6 Share Portfolio
(after taking into account fees)
40%
30%
Return % p.a.
20%
10%
0%
-10%
-20%
-30%
-40%
-50%
2003
2004
2005
2006
1 Year Ended 31 December
2007
2008
2009
2010
5 Years Ended 31 December
Source: MLC Investment Management
Slide 21
MLC Horizon 6 strategy– asset class
contribution
Contribution to Total Return by Asset Class
MLC Wholesale Horizon 6 Share Portfolio
(before taking into account fees)
(annualised for periods greater than 1 year)
Return Contribution %
6
4
2
0
-2
-4
-6
-8
Australian Shares
Global Shares Hedged
3 months to Dec-2010
Global Shares Unhedged
1 year to Dec-2010
LTAR
3 years to Dec-2010
Total
5 years to Dec-2010
Source: MLC Investment Management
Slide 22
MLC Horizon 6 Share Portfolio – peer
relative performance
MLC Wholesale Horizon 6 Share Portfolio
Comparison with the Mercer Wholesale-All Growth Universe
Performance before tax and after fees for periods ended December 2010
Rates of Return(%)
7
Q1
2
Q2
Q1
-3
Q3
-8
Q2
-13
3 Months (% )
1 Year (% )
3 Years (% pa)
5 Years (% pa)
7 Years (% pa)
MLC0397AU
4.5
3.7
-6.2
0.8
5.9
95th Percentile
Upper Quartile
Median
Lower Quartile
5th Percentile
Number of Funds
5.5
4.6
4.4
3.8
2.5
18
(7)
(5)
5.7
3.7
2.7
1.3
-1.1
18
-2.9
-5.6
-6.2
-7.3
-9.0
17
(9)
(9)
2.9
1.4
1.0
0.4
-1.6
16
Data Source: Morningstar and Lipper, A Thomson Reuters Company
Slide 23
*Based on Mercer Wholesale – All Growth universe historical data to 31 December 2010.
6.0
5.9
5.6
5.1
3.5
10
(2)
3. Asset Class Funds Performance
MLC Australian Share Fund performance
MLC Wholesale Australian Share Fund
Performance to
31-Dec-10
MLC Wholesale/Masterkey Investment Service
Fundamentals
(takes into account fees)
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.
3.6
-0.2
-4.7
3.5
4.7
1.9
-5.0
4.4
Source: MLC Investment Management
Highlights:
•
•
•
•
•
The market’s return was disappointingly low for the year (+1.9%) and relatively poor compared to some major global
markets (e.g. US +12.8%, UK +9%, Germany +16.1% in local currency terms). Note this follows a +37% return in
2009.
The market return has remained narrowly based with resources & mining related companies, particularly smallmedium sized miners, the best performers (e.g. OZ Minerals +45%, Iluka +155%, Alumina +35%). The performance
gap between the ASX300 Resources and Industrials indices was wide (15%) with most industrial sectors losing
ground.
For the year, two managers outperformed (Dimensional & JCP Investment Partners) with JCP by far the best (5.3%
above index) due in part to their ownership of selected medium sized mining companies.
Market events this year highlight the worth of a multi-manager approach – some managers have captured the return
upside of resources while others have focused on the industrial stocks who have been left behind (“buying straw hats
in winter”).
Looking ahead, most of MLC’s managers are predicting a better year for the market, depending on whether
consensus 2012 earnings growth forecasts (currently +14%) prove to be too optimistic and are revised down.
Valuation of industrials look especially attractive.
Slide 24
MLC Australian Share Fund – total
returns
Historical Absolute Performance
MLC Wholesale Australian Share Fund
(after taking into account fees)
40%
30%
Return % p.a.
20%
10%
0%
-10%
-20%
-30%
-40%
2000
2001
2002
2003
2004
2005
1 Year Ended 31 December
2006
2007
2008
2009
2010
5 Years Ended 31 December
Source: MLC Investment Management
Slide 25
Australian shares strategy – excess
returns
Rolling Performance in Excess of the Index
Australian Share Strategy
(before taking into account fees and tax)
16%
Consistency of strategy outperformance
1 year 65%
3 year 75%
5 year 81%
Annualised Excess Return
(S&P/ASX 300 Accumulation Index)
14%
12%
10%
8%
6%
4%
2%
0%
-2%
-4%
Mar-91
Sep-91
Mar-92
Sep-92
Mar-93
Sep-93
Mar-94
Sep-94
Mar-95
Sep-95
Mar-96
Sep-96
Mar-97
Sep-97
Mar-98
Sep-98
Mar-99
Sep-99
Mar-00
Sep-00
Mar-01
Sep-01
Mar-02
Sep-02
Mar-03
Sep-03
Mar-04
Sep-04
Mar-05
Sep-05
Mar-06
Sep-06
Mar-07
Sep-07
Mar-08
Sep-08
Mar-09
Sep-09
Mar-10
Sep-10
-6%
1 Year to Dec 2010
3 years to Dec 2010
5 Years to Dec 2010
Source: MLC Investment Management
Slide 26
Australian shares strategy – manager
contribution
Manager Performance in Excess of the Index
Australian Share Strategy
6%
(annualised for periods greater than 1 year)
Excess Return vs S&P/ASX 300 Accumulation Index
(before taking into account fees and tax)
4%
2%
0%
-2%
-4%
-6%
MapleBrown
Abbott
Lazard
Dimensional Contango
Quarter to Dec-10
Concord
1 Year to Dec-10
JCP
Wallara
Balanced
Equity
3 years to Dec-10
Northcape Northward Australian
Capital Share Fund
5 Years to Dec-10
Source: MLC Investment Management
Contributors for the year:
• JCP Investment Partners and Dimensional outperformed. JCP’s strongest performance contributors versus
index were overweight InToll (takeover target), Independence Group, Newcrest Mining, CSL and Whitehaven
Coal.
• Dimensional’s returns benefited from the performance superiority of small companies as well as Amcor, IncitecPivot and Alumina
Detractors for the year:
• Maple-Brown Abbott, Balanced Equity Management, Concord Capital, Wallara, Northward Capital and
Northcape all underperformed.
Slide 27
MLC Global Share Fund - performance
MLC Wholesale Global Share Fund
Performance to
31-Dec-10
MLC Wholesale/Masterkey Investment Service
Fundamentals
(takes into account fees)
MSCI All Country World Index
(MSCI World Index prior to July 2002)
3 Months
%
1 Year
%
3 Years
% p.a.
5 Years
% p.a.
2.7
-1.1
-10.2
-4.5
2.8
-0.7
-8.6
-2.8
Source: MLC Investment Management
Highlights:
•
Global share investors had to endure another indifferent period with absolute returns being slightly
negative for the year driven by the worries over the global economy and a rising Australian dollar.
•
The strategy again benefited from exposure to Emerging Markets, not only through locally listed
companies but also Multi-nationals sourcing revenue from these regions. Emerging Markets outperformed
developed markets by over 5%.
•
The strategy remains defensively positioned, in view of manager consensus about global uncertainty. With
the risk rally seemingly over, better capitalised companies with monopoly businesses and products should
do better moving forward. The portfolio is suitably positioned to take advantage of this.
•
The portfolio’s defensive characteristics were a drag on performance, especially during the last quarter
when global share markets, led by the US, rallied substantially.
•
With corporate cash levels near record highs 2011 is likely to see high levels of mergers and acquisitions
as companies look to deploy their capital.
Slide 28
MLC Hedged Global Share Fund performance
MLC Wholesale Hedged Global Share Fund
Performance to
31-Dec-10
MLC Wholesale/Masterkey Investment Service
Fundamentals
(takes into account fees)
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.
7.8
13.3
-7.0
-
9.1
14.1
-3.4
3.3
Source: MLC Investment Management
Highlights:
•
•
•
•
•
•
•
Slide 29
Absolute returns were positive for the quarter and year driven by the rising Australian dollar ($A).
The $A had another strong year, it was up +8.8% when measured against a basket of currencies.
Global share investors had to endure another indifferent period with absolute returns being slightly negative for the
year driven by the worries over the global economy.
The strategy again benefited from exposure to Emerging Markets, not only through locally listed companies, but also
Multi-nationals sourcing revenue from these regions. Emerging Markets outperformed developed markets by over
5%.
The strategy remains defensively positioned, in view of manager consensus about global uncertainty. With the risk
rally seemingly over, better capitalised companies with monopoly businesses and products should do better moving
forward. The portfolio is suitably positioned to take advantage of this.
The portfolio’s defensive characteristics were a drag on performance, especially during the last quarter when global
share markets, led by the US, rallied substantially.
With corporate cash levels near record highs 2011 is likely to see high levels of mergers and acquisitions as
companies look to deploy their capital.
MLC Global Share Fund – total returns
Historical Absolute Performance
MLC Wholesale Global Share Fund
(after taking into account fees)
30%
20%
Return % p.a.
10%
0%
-10%
-20%
-30%
-40%
2000
2001
2002
2003
2004
2005
1 Year Ended 31 December
2006
2007
2008
2009
2010
5 Years Ended 31 December
Source: MLC Investment Management
Slide 30
Global shares strategy – excess returns
Rolling Performance in Excess of the Index
Global Share Strategy
(before taking into account fees and tax)
25%
Consistency of strategy outperformance
1 year 55%
3 year 59%
5 year 61%
Annualised Excess Return
(MSCI All Country World Index)
20%
15%
10%
5%
0%
-5%
-10%
Mar-91
Sep-91
Mar-92
Sep-92
Mar-93
Sep-93
Mar-94
Sep-94
Mar-95
Sep-95
Mar-96
Sep-96
Mar-97
Sep-97
Mar-98
Sep-98
Mar-99
Sep-99
Mar-00
Sep-00
Mar-01
Sep-01
Mar-02
Sep-02
Mar-03
Sep-03
Mar-04
Sep-04
Mar-05
Sep-05
Mar-06
Sep-06
Mar-07
Sep-07
Mar-08
Sep-08
Mar-09
Sep-09
Mar-10
Sep-10
-15%
1 Year to Dec 2010
3 years to Dec 2010
5 Years to Dec 2010
Source: MLC Investment Management
Slide 31
Global shares strategy – manager
contribution
Manager Performance in Excess of the Index
Global Share Strategy
(before taking into account fees and tax)
(annualised for periods greater than 1 year)
Excess Return vs MSCI All Country World Index
15%
10%
5%
0%
-5%
-10%
Capital
International
Carnegie
Walter Scott
Quarter to Dec-10
Harding
Loevner
Sands Capital
1 Year to Dec-10
Mondrian
3 years to Dec-10
Tweedy,
Browne
Dimensional
Global Share
Fund
5 Years to Dec-10
Source: MLC Investment Management
Contributors for the year:
•
•
•
Sands Capital’s continued excellent performance was on the back of good company selection and being underweight Western Europe
and Developed Asia. The top contributors included Las Vegas Sands, Salesforce.com and Naspers Ltd.
Harding Loevner’s annual performance was aided by stock performance in Health Care, Financial and Consumer Discretionary.
Tweedy, Browne's returns were driven in large part by strong returns in oil and gas holdings, several of the banks and insurance
companies, and machinery stocks. From a regional perspective, the U.S. holdings did well.
Detractors for the year:
•
•
Capital International detracted over the year due to security selection across a range of sectors, with Roche (Health care) and Eletricite
De France (Utilities) detracting the most.
Mondrian's security selection in the UK and Europe was a drag for the year. BP and UniCredit were amongst the largest detractors within
the strategy.
Slide 32
MLC Property Securities Fund performance
MLC Wholesale Property Securities Fund
Performance to
31-Dec-10
MLC Wholesale/Masterkey Investment Service
Fundamentals
(takes into account fees)
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
0.3
-17.0
-7.0
-1.2
-0.7
-21.4
-9.8
Source: MLC Investment Management
Highlights:
•
Sector returns remain subdued even though REITs’ financials are back on solid ground and
business as usual activity (property transactions, development activity, mergers &
acquistions) is more evident. The AREIT sector return lagged that of most global REIT
markets.
•
Three and five year returns remain in negative territory.
•
Quarter and 1 year Fund returns generally in line with index and significantly better for 3 & 5
year periods.
•
Good stock selection by Resolution Capital (overweight Challenger Diversified,
underweighting Mirvac, Commonwealth Property Office Fund and nil exposure to Centro
Properties and Valad Property Group) was beneficial in addition to the ownership of nonAustralian REITs Link REIT (Hong Kong), Hong Kong Land (Singapore listed), Hufvudstaden
(Denmark) and Aeon Mall (Japan).
Slide 33
MLC Property Securities Fund – total
returns
Historical Absolute Performance
MLC Wholesale Property Securities Fund
(after taking into account fees)
40%
30%
5 Year Return % p.a.
20%
10%
0%
-10%
-20%
-30%
-40%
-50%
-60%
2000
2001
2002
2003
2004
2005
1 Year Ended 31 December
2006
2007
2008
2009
2010
5 Years Ended 31 December
Source: MLC Investment Management
Slide 34
Australian property strategy – excess
returns
Rolling Performance in Excess of the Index
Australian Property Securities Strategy
(before taking into account fees and tax)
8%
Annualised Excess Return
(S&P/ASX 300 LPT Index)
6%
4%
2%
0%
-2%
Consistency of strategy outperformance
1 year 79%
3 year 93%
5 year 94%
-4%
Mar-91
Sep-91
Mar-92
Sep-92
Mar-93
Sep-93
Mar-94
Sep-94
Mar-95
Sep-95
Mar-96
Sep-96
Mar-97
Sep-97
Mar-98
Sep-98
Mar-99
Sep-99
Mar-00
Sep-00
Mar-01
Sep-01
Mar-02
Sep-02
Mar-03
Sep-03
Mar-04
Sep-04
Mar-05
Sep-05
Mar-06
Sep-06
Mar-07
Sep-07
Mar-08
Sep-08
Mar-09
Sep-09
Mar-10
Sep-10
-6%
1 Year to Dec 2010
3 years to Dec 2010
5 Years to Dec 2010
Source: MLC Investment Management
Slide 35
MLC Global Property Fund - performance
MLC Wholesale Global Property Fund
Performance to
31-Dec-10
3 Months
%
1 Year
%
3 Years
% p.a.
MLC Wholesale/Masterkey Investment Service
7.1
23.4
-2.2
Fundamentals
(takes into account fees)
7.0
23.8
-4.2
UBS Global Investors Index (hedged)
*Longer Global Property strategy return history due to presence in Horizon portfolio strategies.
5 Years
% p.a.
0.9
Source: MLC Investment Management
Highlights:
•
The GREIT sector continues to perform strongly with most markets performing well – Japan +29.5%,
US +28.4%, Europe +17.2%, Singapore +12.5%, UK +6.6%
•
Sector fundamentals are attractive: GREIT financials are generally in good shape; debt and equity fund
sources have improved; and the property supply/demand equation is favourable.
•
December quarter returns were in line with index in the quarter with Morgan Stanley the standout
performer of the three appointed managers.
•
For the year the after fees and tax return lagged the benchmark. Resolution and Morgan Stanley
outperformed their respective benchmarks while LaSalle’s portfolio, which tends to be more diversified,
underperformed slightly.
•
The Fund’s largest stock holdings versus index continues to be dominated by Asian REITs and Real
Estate Operating Companies, including Mitsubishi Estate (Japanese property developer and property
manager), Hong Kong Land Holdings (Singapore listed office stock), Sun Hung Kai Properties (Hong
Kong developer), Mitsui Fudosan (Japan real estate developer and manager) and Kerry Properties
(Hong Kong property developer).
Slide 36
Global property strategy – excess
returns
Rolling Performance in Excess of the Index
Global Property Strategy
10%
8%
6%
4%
2%
0%
-2%
Consistency of strategy outperformance
1 year 84%
3 year 100%
5 year 100%
-4%
-6%
-8%
1 Year
3 years
Oct-10
Jul-10
Apr-10
Jan-10
Oct-09
Jul-09
Apr-09
Jan-09
Oct-08
Jul-08
Apr-08
Jan-08
Oct-07
Jul-07
Apr-07
Jan-07
-10%
Oct-06
Annualised Excess Return
UBS Real Estate Investors Trust Index (hedged)
(before taking into account fees and tax)
5 years
Source: MLC Investment Management
Slide 37
Global property strategy – manager
contribution
Manager Performance in Excess of the Index
Global Property Strategy
10%
(annualised for periods greater than 1 year)
Excess Return vs UBS Real Estate Investors Trust Index
(before taking into account fees and tax)
8%
6%
4%
2%
0%
-2%
-4%
-6%
LaSalle Investment
Management
Quarter to Dec-10
Morgan Stanley
1 Year to Dec-10
Resolution Capital
3 years to Dec-10
Global Property Fund
5 Years to Dec-10
Source: MLC Investment Management
Slide 38
MLC LTAR Portfolio - performance
MLC Wholesale Long-Term Absolute Return Portfolio
Performance to
31-Dec-10
MLC Wholesale/Masterkey Investment
Service Fundamentals
(takes into account fees)
MLC LTAR Neutral Strategy
(before taking into account fees)
Inflation (CPI)
3 Months
%
1 Year
%
3 Years
% p.a.
5 Years
% p.a.
4.6
10.4
-1.3
2.8
5.2
9.3
-6.1
1.4
0.7
2.8
3.0
3.0
Source: MLC Investment Management
Highlights:
•
LTAR returns over the past year have been positive in absolute terms, and are 2.5% ahead of
the neutral strategy.
•
Given the defensive positioning of the Fund, excess returns were negative over the
September (-1.1%) and December (-0.40%) quarters, on the back of equity market strength.
Returns since inception remain ahead of the neutral strategy, with the portfolio delivering
annualised outperformance of 2.6%.
•
Hedged global equities, Ruffer’s Multi Asset Strategy and hedged global listed property had
the strongest returns over the quarter. Bridgewater Pure Alpha not only performed well during
the quarter, but was also up 34% for the year. Unhedged global equities continued to lag due
to the strength of the Australian dollar.
Slide 39
MLC Diversified Debt Fund – performance
MLC Wholesale Diversified Debt Fund
Performance Overview to
31-Dec-10
MLC Wholesale/Masterkey Investment Service
Fundamentals
(takes into account fees)
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.
0.2
7.6
-
-
-0.3
7.7
-
-
Source: MLC Investment Management
Highlights:
•
•
•
•
Slide 40
Increased liquidity and low expectations of economic growth prospects led to yields in global government
and non-government bonds falling over the year. In the last quarter yields rose due to expectations of an
improvement in economic growth.
Australian bonds did not fare as well as global markets, with yields rising over the quarter and year.
With yields at historical lows in the US and Japan, the risk of them rising is much higher than falling. That’s
why we continue to maintain our Strategic Overlay position which shortened the duration (interest rate risk)
of the Fund’s global government bond exposure early in 2010.
In October we reduced exposure to non-investment grade bonds (global high yield, banks loans and
mortgages) as there is less upside potential from high yield bonds after the extremely strong returns in
2009 and 2010.
Diversified Debt strategy* – excess
returns
Rolling Performance in Excess of the Index
Diversified Debt Strategy
(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%
-10.0%
Quarter to Dec 2010
Dec-10
Sep-10
Jun-10
Mar-10
Dec-09
Sep-09
Jun-09
Mar-09
Dec-08
Sep-08
Jun-08
-12.0%
1 Year to Dec 2010
Source: MLC Investment Management
Slide 41
* This strategy is for the MLC Diversified Debt Fund only
Diversified Debt strategy* – sector contribution
Contribution to Total Return by Asset Class
Diversified Debt Strategy
(before taking into account fees and tax)
10.0%
Return Contribution %
(annualised for periods greater than 1 year)
9.0%
8.0%
7.0%
6.0%
5.0%
4.0%
3.0%
2.0%
1.0%
0.0%
-1.0%
Australian
Bonds
Global Bonds
Global
Government
Bonds
Global NonGovernment
Bonds
Quarter to Dec-10
Global MultiSector Bonds
Global High
Yield Bonds
Global Bank
Loans
Total
Global
Mortgages
1 Year to Dec-10
Due to changes to the debt strategy (announced 15 February 2010) returns for new debt sectors are only available for the quarter. 1-year
returns will be available from March 2011. Due to this, the Global Bond classification represents the longer period return for that sector.
Source: MLC Investment Management
Contributors:
• Falling yields in overseas government bond markets has been a positive environment for the Fund. In the last
quarter, however, as growth expectations improved, yields increased.
• Non-government bonds yields also fell over the year which was a positive for the Fund.
• The flexible strategy we put in place to manage exposure to debt securities, almost a year ago, has helped the
Fund deliver strong returns at a time when growth assets are weak. The overweight position in non-investment
grade bonds contributed positively to returns. We’ve now reduced this position as return potential is no longer
as high given the strong returns we’ve captured since the credit crisis.
• Global multi-sector bonds and global high yield bonds outperformed lower risk bonds over the year due to the
market’s increasing appetite for risk and desire for higher yield.
Slide 42
* This strategy is for the MLC Diversified Debt Fund only
Diversified Debt strategy* – manager contribution
Manager Absolute Performance
Diversified Debt Strategy
(before taking into account fees and tax)
Manager Performance %
(annualised for periods greater than 1 year)
20%
15%
10%
5%
0%
-5%
Antares (allmaturities)
UBS (allmaturities)
Goldman
Sachs
Wellington
Management
Australian
Bonds
Australian
Bonds
Global
Government
Bonds
Global NonGovernment
Bonds
Quarter to Dec-10
Rogge
Amundi
Franklin
Templeton
PIMCO
W. R. Huff
Global Non- Global Multi- Global Multi- Global Multi- Global High
Government Sector Bonds Sector Bonds Sector Bonds Yield Bonds
Bonds
Oaktree
Shenkman
Capital
Stone Tower
Global High
Yield Bonds
Global Bank
Loans
Global
Mortgages
1 Year to Dec-10
Due to changes to the debt strategy (announced 15 February 2010) returns for new managers are only available for
the quarter. 1-year returns will be available from March 2011.
Source: MLC Investment Management
Contributors:
• Although markets weren’t favourable to many of our managers over the quarter, all but three had positive returns.
• The Fund has a large exposure to global multi-sector bonds which are flexible mandates allowing managers with
broad debt skills to invest in the sectors they believe will outperform. Franklin Templeton and PIMCO, 2 of the
managers in this sector, were stand-outs this quarter and year respectively
• Despite a relatively weak Australian bond market, our Australian bond managers, UBS and Antares, both
outperformed their benchmarks over the quarter and year.
•
.
Detractors:
• One of our strongest performing managers over the year, Oaktree, underperformed their benchmark. When
markets and returns are strong, it’s common for active managers to lag the market as it’s not always quality
investments that are driving returns.
* This strategy is for the MLC Diversified Debt Fund only
Slide 43
MLC IncomeBuilderTM Fund performance
MLC Wholesale IncomeBuilderTM
Performance to
31-Dec-10
MLC Wholesale/Masterkey Investment Service
Fundamentals
(takes into account fees)
Growth Return
Distribution Return (assumes reinvestment of income)
S&P/ASX 200 All Industrials Accumulation Index
3 Months
%
1 Year
%
3 Years
% p.a.
5 Years
% p.a.
0.2
-3.2
-5.6
1.7
-1.0
1.2
0.7
-7.0
3.9
-2.5
-10.9
5.4
-7.5
-4.4
6.1
1.4
Source: MLC Investment Management
Highlights:
•
In line with growing evidence of companies raising their dividends (after cutting dividends to
preserve capital during the GFC), the dividend income received by the Fund over the last three
quarters was higher than the previous year’s corresponding periods.
•
Short term returns after fees and tax were generally less than the market return though are
superior for longer periods. The pre-fees and tax returns of both managers were better than
index.
•
Stock strategies that contributed the most towards the Fund’s index relative returns in the year
were overweight Brambles, Fosters Group, and not owning QBE Insurance Group and
Macquarie Group.
Slide 44
MLC IncomeBuilderTM Fund – distribution
performance
MLC Inc ome Builde rTM Inve s tme nt Trus t (Whole s ale ) Dis tribution Analys is
18
16
14
3.97
12
Cents per unit
2.27
3.96
3.78
10
2.37
1.94
8
0.01
0.58
6
-
4
0.90
0.00
0.25
0.56
0.13
0.32
1998
6.41
2.30
2.68
3.01
3.32
1999
2000
2001
2002
4.21
2003
0.04
0.00
0.30
2
-
0.77
0.00
-
7.10
7.52
2006
2007
7.69
7.16
5.73
4.80
2004
2005
2008
2009
2010
Financial Year End 30 June
Underlying Income
Taxable Capital Gains
Buybacks
Consessional (non-taxed) Capital Gains
Source: MLC Investment Management
Slide 45
IncomeBuilder strategy – manager
contribution
Manager Performance in Excess of the Index
IncomeBuilder Strategy
4.5%
4.0%
(annualised for periods greater than 1 year)
Excess Return vs S&P/ASX 200 All Industrials Index
(before taking into account fees and tax)
3.5%
3.0%
2.5%
2.0%
1.5%
1.0%
0.5%
0.0%
-0.5%
-1.0%
Vanguard
Quarter to Dec-10
Contributors:
•
•
Maple-Brown Abbott
1 Year to Dec-10
3 years to Dec-10
IncomeBuilderTM
5 Years to Dec-10
Source: MLC Investment Management
For the Quarter: Overweight Brambles, AXA Asia Pacific, Seven Group Holdings, ASX and underweight
Woolworths
For the Year: overweight Brambles, Fosters Group, and not owning QBE Insurance Group and Macquarie Group.
Detractors:
•
•
Slide 46
For the Quarter: Overweight Coca-Cola Amatil, Aristocrat Leisure, Fosters Group and not owning CSL and QBE
Insurance Group
For the Year: Overweight Primary Health Care, Telstra, Blue Scope Steel, Aristocrat Leisure and not owning CSL