MLC MasterKey Investment Service
Fund Snapshot
MLC Long-Term Absolute Return Portfolio Class B
Fund Overview
About the Fund
Key Information
The MLC Long-Term Absolute Return portfolio aims to maximise its return
(above inflation, and after deducting investment fees and superannuation tax)
over rolling 20 year periods, while ensuring a high likelihood of it being positive
over that timeframe.
APIR Code MLC0668AU
Status O ns al e
Product Size as at 30 Nov 2012
$2.51M
Important Announcements
31 Jan 2012
Indicative Investment Fee
The Indicative Investment Fee shown in the Fund Overview is at a point in time
and represents an annualised fee. Consequently, the recent changes made
to the Investment Fees will not be fully reflected in the Fund Profile Tool until
Commencement Date
5 Dec 2005
a) the data is refreshed in March 2012 and then
b) subsequent monthly recalculations occur (for the next 12 months).
1 Dec 2011
Gearing Costs
Gearing costs (both the facility cost and the interest paid) are borne by the portfolio. This is consistent with product
disclosure and in line with industry practice. Up until 1 December 2011, the facility cost has been reported as part of the
management costs. We have moved in line with industry practice and will no longer include the facility cost in the
reported management costs.
This change means investors will experience a reduction in their reported management costs, however, there will be no
impact to the portfolio's investment return as a result of this change (as investment returns are quoted net of
management costs and other charges).
Fund Breakdown
By Asset Class as at 31 Dec 2012
The information displayed reflects the actual asset allocation based on the holdings within the fund at the effective date.
Global Shares (unhedged) 31.7%
Low Correlation Strategy 25.1%
Multi-Asset Class Real Return Strategies 18.9%
Emerging Market Shares (unhedged) 15.1%
Defensive Global Shares - Unhedged 14.6%
Australian Shares 8.9%
Australian Inflation-Linked Bonds 3.0%
Cash 1.9%
Global Shares (hedged) 1.6%
Page 1 of 6
MLC MasterKey Investment Service
Fund Snapshot
MLC Long-Term Absolute Return Portfolio Class B
By Manager as at 31 Dec 2012
Asset Class
Manager
Percentage
Investment Amount
Australian Inflation-Linked Bonds
Antares
3.0%
$297
Australian Shares
Antares
1.6%
$160
JCP
1.5%
$151
Northcape
1.1%
$108
Other
1.4%
$143
Vanguard
1.8%
$178
Vinva
1.5%
$148
-20.9%
-$2,086
1.9%
$194
Borrowings
State Street Brokerage Services
Cash
Cash
Defensive Global Shares - Unhedged
International Value Advisors
14.6%
$1,460
Emerging Market Shares (unhedged)
Capital International
15.1%
$1,508
Global Shares (hedged)
Carnegie Asset Management
0.2%
$20
Delaware Investment Advisers
0.2%
$18
Dimensional
0.2%
$20
Harding Loevner
0.2%
$25
Mondrian
0.2%
$16
Sands Capital
0.2%
$19
Tweedy, Browne
0.2%
$19
Walter Scott
0.2%
$22
Carnegie Asset Management
2.1%
$209
Delaware Investment Advisers
1.9%
$188
Dimensional
2.1%
$211
Harding Loevner
2.6%
$258
Mondrian
1.7%
$167
Sands Capital
2.0%
$202
Global Shares (unhedged)
Tweedy, Browne
2.0%
$199
Walter Scott
17.4%
$1,737
Low Correlation Strategy
Other
25.1%
$2,509
Multi-Asset Class Real Return Strategies
PYRFORD International LTD
9.3%
$933
Ruffer
9.6%
$960
Other
Total
Other
0.0%
$5
100.0%
$10,000
Borrowings reflect the amount the Portfolio borrows to invest in assets and is also known as gearing.
Page 2 of 6
MLC MasterKey Investment Service
Fund Snapshot
MLC Long-Term Absolute Return Portfolio Class B
Stock Holdings
Top Stocks for Fund as at 30 Sep 2012
The Top Stocks for Fund have a one month reporting delay.
Stock Description
Industry
Country
Percentage
Investment Amount
BHP BILLITON
Materials
Australia
0.7%
$73
WESTPAC BANKING CORP
Financials
Australia
0.7%
$71
GOOGLE INC
Information Technology
USA
0.7%
$68
INDITEX GROUP
Consumer Discretionary
Spain
0.6%
$57
ANZ BANKING GROUP
Financials
Australia
0.5%
$53
NATIONAL AUSTRALIA BANK
Financials
Australia
0.5%
$50
NESTLE SA
Consumer Staples
Switzerland
0.5%
$49
HSBC GROUP
Financials
United Kingdom
0.5%
$45
MICROSOFT CORP
Information Technology
USA
0.5%
$45
SCHLUMBERGER
Energy
Netherlands
0.4%
$44
Performance
Historical Performance
Absolute Fund Returns as at 31 Dec 2012
Absolute return is the total or actual return over a certain period of time. Returns for periods greater than a year are
annualised per annum (p.a.) returns.
3 month
Fund Performance
6 month
1 Year
3 Years
5 Years
10 Years
Since Inception
5 Dec 2005
2.1%
6.5%
10.8%
5.5%
0.1%
N/A
2.7%
Growth
2.1%
6.5%
8.1%
0.1%
-5.7%
N/A
-3.3%
Distribution
0.0%
0.0%
2.7%
5.4%
5.8%
N/A
6.0%
Page 3 of 6
MLC MasterKey Investment Service
Fund Snapshot
MLC Long-Term Absolute Return Portfolio Class B
Commentaries
Fund Commentary
As at 30 November 2012
The MLC Long-Term Absolute Return Portfolio returned 2.9% (before fees and tax) in the quarter to 30 November.
Investment news flow over the quarter was dominated by US politics. President Obama was elected to a second term in
early November and the re-elected Democrats began their second term having to continue fiscal negotiations. At the
same time, the more orchestrated change in Chinas leadership was revealed.
Meanwhile, peripheral Europe continued to be weighed down by high debt and unemployment levels. US unemployment
data continued to improve, with the unemployment rate dropping below 8%.
Share market returns over the last quarter were mixed. US markets were distracted by political manoeuvring, while
European and most Asian markets moved ahead as investors took a favourable view of central bank support measures.
The Australian share market surged ahead of other developed markets after a series of cash rate reductions by the
Reserve Bank of Australia.
Over the quarter, strategy and asset class performance in the portfolio were positive. The Australian shares strategy
posted a gain of 4.8%, with positive returns in all sectors but Energy. We announced changes to MLC LTARs Australian
share strategy in December. We:
appointed three new mangers: Alphinity, Antares Equities and Vinva
retained current managers JCP, Northcape and Vanguard, and
removed the other current managers of the strategy.
The strategy should make a more consistent contribution to the overall reliability of returns in the portfolio.
The Australian dollar (AUD) strengthened against the US dollar and yen over the quarter by 1.0% and 6.3% respectively,
but depreciated against the euro by 2.2%. On the back of these movements, the hedged global shares strategy
outperformed its unhedged counterpart by 1.3% for the quarter. Hedged overseas investments perform better than
unhedged investments when the AUD strengthens, and worse when the AUD falls.
The portfolio has significant exposure to non-traditional investments and strategies. These strategies help diversify the
portfolio by providing a return stream that is expected to have low correlation with returns from core asset classes and a
focus on absolute returns. This quarter, the portfolios non-traditional strategies all delivered positive absolute returns.
During the quarter we evolved the way the portfolio invests in hedge funds. To bring greater diversification to our hedge
fund strategy, we introduced the Low Correlation Strategy. This strategy aims to generate returns that are mostly
independent of share market performance. It consists of two strategies weve used successfully in the portfolio for several
years, plus one new strategy managed by Balestra Capital. By increasing diversification in the portfolio, we expect it to
help produce more reliable returns. Over the quarter this strategy has returned 1.1%.
Our medium-term assessment
While the portfolio tolerates short-term return volatility, the portfolios objective is to reliably preserve capital and enhance
returns over the medium to longer term. This is the basis of our asset allocation approach.
We continue to consider a broad range of medium-term future paths. It seems to us that the most credible transitions to
eventual normalisation of the debt overhang are likely to involve elevated inflation, with high growth markets contributing
significantly. However, the way the environment evolves in the near term is much more uncertain. The prospect of
austerity-led deflation cant be ruled out, nor can stagflation, if newly-minted currency finds its way into financial assets
faster than into the real economy. We also take into account the possibility that reforms will restore growth potential faster
than is currently anticipated.
Note:
- Please refer to the Market commentary for an overview of what happened in domestic and global markets over the
quarter.
- Fund commentary for this fund will be updated two to three weeks after the end of the month
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MLC MasterKey Investment Service
Fund Snapshot
MLC Long-Term Absolute Return Portfolio Class B
Market Commentary
World share markets produced very solid gains for investors in the last three months, and over the year to November.
Hedged global shares outperformed unhedged global shares, as the Australian dollar has appreciated since the end of
August. Here in Australia, share prices rose sharply in recent months, but the local market has tended to underperform
world share markets over most of the longer time periods shown in the table.
Fixed income investors have enjoyed strong performance, as lower bond yields over the past few years have boosted
returns. Non-government securities have posted stronger returns than government bonds. Lower quality corporate
securities have enjoyed particularly strong returns lately, as investors continued to chase higher yields. Yields in the
worlds major government bond markets remain at or close to historic lows.
Periods to end November 2012
3 mths
1yr
2yr
3yr
5yr
10yr
Cash
0.9
4.1
4.6
4.6
5.0
5.4
Australian bonds
1.0
8.3
9.4
8.1
8.2
6.6
Global investment grade bonds (hedged)
2.0
11.4
9.9
9.5
9.3
8.2
A-REITs
5.2
25.9
13.5
9.5
-10.1
2.4
Global REITs (hedged)
4.3
28.5
15.0
18.0
1.2
na
Australian shares
5.7
14.8
3.9
3.1
-2.8
8.6
Global shares (hedged)
4.5
17.7
9.1
10.2
0.2
8.5
Global shares (unhedged)
2.9
12.2
2.4
2.5
-4.5
1.4
Emerging markets equities (unhedged)
5.8
10.0
-4.5
0.2
-4.7
9.0
Sources: Datastream, MLC Investment Management
Benchmark data include UBS Bank Bill Index (Cash), UBS Composite Index (Aust bonds) Barclays Global Aggregate hedged to A$ (Global bonds),
S&P/ASX200 A-REIT Accumulation Index (A-REITs), MLC Global property strategy benchmark hedged to A$ (Global REITs), S&P/ASX200
Accumulation index (Aust shares), MLC global equity strategy benchmark (MSCI All Country Indices hedged and unhedged in A$) and MSCI
Emerging Markets Indexin A$ (Emerging Markets).
After a disastrous performance during the worst of the global financial crisis, listed real estate assets have enjoyed
amazing gains over the past year. The higher yields that were offered on these securities proved extremely attractive to
investors.
Economic data in the US and elsewhere that were generally better than expected have provided good support to share
prices. Improved US data also contributed to President Obamas re-election in early November, as well as some modest
gains for the Democrats in both houses of the US Congress. However, the political status quo remains broadly
unchanged President Obama in the White House, a Republican-dominated Congress, and a Democrat-dominated
Senate.
After the US election, market attention quickly turned to the need to address the US fiscal cliff the massive automatic
tightening in fiscal policy due to take effect in 2013. Hopes that common sense will prevail, and that the tightening will be
largely averted, have eased market concerns, but there remains a real risk that a compromise will not be reached.
Political developments were also the focus of attention in China, where the next generation of rulers was announced by
the Communist Party. While the leadership transition produced few surprises, it removed one source of uncertainty for
investors and has raised hopes for faster reform of the Chinese economy.
Here in Australia, the Reserve Bank of Australia (RBA) surprised many in financial markets by not reducing official interest
rates at its Melbourne Cup Day board meeting. Recent economic data have tended to suggest that economic conditions
were softening, and that the massive pipeline of capital spending particularly related to the mining boom would come to
an end sooner than previously thought. However, in early December, after the release of weaker than expected capital
spending intentions data, the RBA reduced the official cash rate to 3% - equal to the lows reached during the worst of the
global financial crisis.
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MLC MasterKey Investment Service
Fund Snapshot
MLC Long-Term Absolute Return Portfolio Class B
Information in this report does not take into account your objectives, financial situation or needs. Before acting on the information you should consider
whether it is appropriate to your situation. You should consider the relevant Product Disclosure Statement before making a decision about the product.
Past performance is not a reliable indicator of future performance. Please also see Advice Warning and Important Information.
MLC Limited (ABN 90 000 000 402 AFSL 230694) is the issuer of:
MLC MasterKey Investment Bond
MLC Nominees Pty Ltd (ABN 93 002 814 959 AFSL 230702 Trustee of The Universal Super Scheme ABN 44 928 361 101) is the issuer of:
MLC MasterKey Business Super (including MLC MasterKey Personal Super), MLC MasterKey Superannuation, MLC MasterKey Super, MLC MasterKey
Super Fundamentals, MLC MasterKey Allocated Pension, MLC MasterKey Pension, MLC MasterKey Pension Fundamentals, MLC MasterKey Term
Allocated Pension
MLC Investments Limited (ABN 30 002 641 661, AFSL number 230705) is the issuer or operator of:
MLC Investment Trust, MLC MasterKey Investment Service, MLC MasterKey Investment Service Fundamentals, MLC MasterKey Unit Trust, MLC
Investments Limited also trades as MLC Private Investment Consulting.
NULIS Nominees (Australia) Limited (ABN 80 008 515 633 AFSL 236465):
trustee of the MLCS Superannuation Trust ABN 31 919 182 354 is the issuer of Navigator Eligible Rollover Fund ABN 32 649 704 922;
trustee of the MLC Superannuation Fund ABN 40 022 701 955 is the issuer of MLC Wrap Super and MLC Navigator Retirement Plan.
Navigator Australia Limited (ABN 45 006 302 987 AFSL 236466) is the Operator and issuer of:
MLC Wrap Investments, MLC Wrap Self Managed Super and MLC Navigator Investment Plan.
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