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January 2016
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This webinar contains information specifically intended for institutional clients, asset consultants, advisers, platforms and researchers, who are professional investors and wholesale clients (as defined in the Corporations Act 2001).
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But rather than trying to get fund managers to stick cash into the Australian stockmarket — which his father would undoubtedly love, to boost sagging trading volumes — Bell has been out spruiking to retail investors the benefits of investing globally in companies such as Apple, Nike and Costco.
His efforts are driven by demand as investors increasingly seek exposure to global equities, but also the opportunity to tap into the 160,000 clients at broker Bell Potter, founded by his dad.
Bell, the chief investment officer at Bell Asset Management (BAM), a private group separate from the broking house’s listed parent Bell Financial, says wealthy individuals are interested in its global equities fund to offset the slow domestic economy and get access to sectors not available on the Australian Securities Exchange.
Much of the “gentle” marketing has been focused on education, getting investors comfortable with the most common issues — the currency and lack of fully franked dividends offshore.
He says there’s a partly built-in currency hedge as major companies generate revenue globally, and global stocks help diversify a local portfolio’s heavy weighting to yield stocks.
“There’s a lot of other really good reasons to invest overseas,” Bell tells The Australian.
“It’s the only way you can really get exposure to the best companies in the world. We don’t have the likes of Apple and Google and those types of companies in Australia.
“Also, the growth potential, the actual capital appreciation, is I think far greater.
“The one point I’ve been making in a lot of investor meetings is that the way to think about global is, you stay at home for you dividends, ie the banks, but then capital appreciation potential domestically is not that fantastic so … that’s why people should probably think about going global.”
Some global investors share the dim view on Australian stocks. Fresh from a trip visiting British and European institutions, Citi strategist Tony Brennan said there was “limited attraction” to the Australian market due to weaker than average economic growth and lofty valuations in sectors like the banks.
It’s a dynamic more fund managers are trying to capitalise on in the footsteps of the likes of star listed global equity manager Magellan Financial, which has grown funds under management to $30 billion, from just $2.8bn three years ago. FUM is the lifeblood of fund managers, with several domestic-focused players being squeezed in recent years as more superannuation funds manage money in house.
With its $535 million in FUM remaining “relatively flat” in recent years, Bell concedes it has taken a “lot longer” than expected to build momentum and attract cash from the institutional market, such as super funds, in BAM’s 12-year history.
But with “legitimate demand” for global equities from Bell Potter’s sophisticated clients, Bell believes the group’s FUM growth will “kick into gear” in 2015.
The bulk of BAM’s $535m is allocated offshore, with $200m invested domestically. It also acts as the responsible entity for local trusts owned by US manger Bridgewater Associates, adding $4.9bn in assets.
Rather than more super funds managing their global exposures in-house, Bell says the struggles to grow institutional flows have been driven by scepticism about the skillset to invest globally from Australia.
While institutions are likely to “dial up” there allocation to global equity managers due to the “increasing concentration risk among the top 10” domestic stocks, Bell is eyeing the high net worth market, or those with more than $2m in assets.
“So far it’s been very positive. We have been getting steady flows, much more so than we have previously. The pipeline looks quite healthy from that channel,” he says.
“We expect more meaningful flows in the first quarter of next year.”
BAM, a bottom-up stock picking house that is typically fully invested in the market, has delivered investors 25.1 per cent per annum in the past three years, before factoring in fees. In contrast, the MSCI World ex-Australia index has returned 23.8 per cent.
It’s been a happy hunting ground, with Wall Street’s S&P 500 index rising 65 per cent in the period, more than double the 30 per cent gain by the local S&P/ASX 200.
But the US market’s outperformance — helped by the Federal Reserve’s quantitative easing stimulus program — has led to concern gains offshore may be more muted. According to a recent Bank of America-Merrill Lynch survey of fund managers, the mood towards US and Japanese stocks has soured due to the stretched valuations.
But Bell remains bullish and has 71 per cent of his portfolio invested in North America, compared with almost zero in emerging markets and 22.5 per cent in Europe. He says much of the US market’s performance has been driven by companies actually producing earnings growth — a rare achievement since the crisis — and the massive pullback in oil prices will have a “huge stimulatory impact” on US consumers.
“That in reality has not shown up in investments for next year yet. It has for oil companies, but not consumer-related stocks,” he says.
“The recovery in the US has been quite shallow and prolonged but I get the distinct sense that growth trajectory is about to accelerate.
“You can still make a pretty strong argument there is 15-20 per cent upside in the next 12 months.”
While Bell’s forecast factors in US companies exceeding the expected 10 per cent earnings growth, there’s also more upside for local investors if the Australian dollar continues to dive.
He’s also not overly worried about the Fed hiking interest rates, saying companies can withstand it after reducing financial leverage in recent years.
“You’ll get this mean reversion between quality and junk,” he says, noting he typically avoids cyclical sectors and banks.
“The junkier type stocks, the more cyclical things with more financial leverage, which has driven the markets the last few years, will probably have pullbacks and there’ll be flows into the more higher quality, dependable type stocks.”
BAM’s portfolio, which houses around 100 stocks, is positioned for the switch back to “quality” companies generating return on equity of at least 15 per cent for at least three years. But Bell won’t be upping BAM’s exposure to emerging markets or to Europe anytime soon, saying there are fewer good companies and buying stocks just because they were cheap was a risky strategy.
But rather than trying to get fund managers to stick cash into the Australian stockmarket — which his father would undoubtedly love, to boost sagging trading volumes — Bell has been out spruiking to retail investors the benefits of investing globally in companies such as Apple, Nike and Costco.
His efforts are driven by demand as investors increasingly seek exposure to global equities, but also the opportunity to tap into the 160,000 clients at broker Bell Potter, founded by his dad.
Bell, the chief investment officer at Bell Asset Management (BAM), a private group separate from the broking house’s listed parent Bell Financial, says wealthy individuals are interested in its global equities fund to offset the slow domestic economy and get access to sectors not available on the Australian Securities Exchange.
Much of the “gentle” marketing has been focused on education, getting investors comfortable with the most common issues — the currency and lack of fully franked dividends offshore.
He says there’s a partly built-in currency hedge as major companies generate revenue globally, and global stocks help diversify a local portfolio’s heavy weighting to yield stocks.
“There’s a lot of other really good reasons to invest overseas,” Bell tells The Australian.
“It’s the only way you can really get exposure to the best companies in the world. We don’t have the likes of Apple and Google and those types of companies in Australia.
“Also, the growth potential, the actual capital appreciation, is I think far greater.
“The one point I’ve been making in a lot of investor meetings is that the way to think about global is, you stay at home for you dividends, ie the banks, but then capital appreciation potential domestically is not that fantastic so … that’s why people should probably think about going global.”
Some global investors share the dim view on Australian stocks. Fresh from a trip visiting British and European institutions, Citi strategist Tony Brennan said there was “limited attraction” to the Australian market due to weaker than average economic growth and lofty valuations in sectors like the banks.
It’s a dynamic more fund managers are trying to capitalise on in the footsteps of the likes of star listed global equity manager Magellan Financial, which has grown funds under management to $30 billion, from just $2.8bn three years ago. FUM is the lifeblood of fund managers, with several domestic-focused players being squeezed in recent years as more superannuation funds manage money in house.
With its $535 million in FUM remaining “relatively flat” in recent years, Bell concedes it has taken a “lot longer” than expected to build momentum and attract cash from the institutional market, such as super funds, in BAM’s 12-year history.
But with “legitimate demand” for global equities from Bell Potter’s sophisticated clients, Bell believes the group’s FUM growth will “kick into gear” in 2015.
The bulk of BAM’s $535m is allocated offshore, with $200m invested domestically. It also acts as the responsible entity for local trusts owned by US manger Bridgewater Associates, adding $4.9bn in assets.
Rather than more super funds managing their global exposures in-house, Bell says the struggles to grow institutional flows have been driven by scepticism about the skillset to invest globally from Australia.
While institutions are likely to “dial up” there allocation to global equity managers due to the “increasing concentration risk among the top 10” domestic stocks, Bell is eyeing the high net worth market, or those with more than $2m in assets.
“So far it’s been very positive. We have been getting steady flows, much more so than we have previously. The pipeline looks quite healthy from that channel,” he says.
“We expect more meaningful flows in the first quarter of next year.”
BAM, a bottom-up stock picking house that is typically fully invested in the market, has delivered investors 25.1 per cent per annum in the past three years, before factoring in fees. In contrast, the MSCI World ex-Australia index has returned 23.8 per cent.
It’s been a happy hunting ground, with Wall Street’s S&P 500 index rising 65 per cent in the period, more than double the 30 per cent gain by the local S&P/ASX 200.
But the US market’s outperformance — helped by the Federal Reserve’s quantitative easing stimulus program — has led to concern gains offshore may be more muted. According to a recent Bank of America-Merrill Lynch survey of fund managers, the mood towards US and Japanese stocks has soured due to the stretched valuations.
But Bell remains bullish and has 71 per cent of his portfolio invested in North America, compared with almost zero in emerging markets and 22.5 per cent in Europe. He says much of the US market’s performance has been driven by companies actually producing earnings growth — a rare achievement since the crisis — and the massive pullback in oil prices will have a “huge stimulatory impact” on US consumers.
“That in reality has not shown up in investments for next year yet. It has for oil companies, but not consumer-related stocks,” he says.
“The recovery in the US has been quite shallow and prolonged but I get the distinct sense that growth trajectory is about to accelerate.
“You can still make a pretty strong argument there is 15-20 per cent upside in the next 12 months.”
While Bell’s forecast factors in US companies exceeding the expected 10 per cent earnings growth, there’s also more upside for local investors if the Australian dollar continues to dive.
He’s also not overly worried about the Fed hiking interest rates, saying companies can withstand it after reducing financial leverage in recent years.
“You’ll get this mean reversion between quality and junk,” he says, noting he typically avoids cyclical sectors and banks.
“The junkier type stocks, the more cyclical things with more financial leverage, which has driven the markets the last few years, will probably have pullbacks and there’ll be flows into the more higher quality, dependable type stocks.”
BAM’s portfolio, which houses around 100 stocks, is positioned for the switch back to “quality” companies generating return on equity of at least 15 per cent for at least three years. But Bell won’t be upping BAM’s exposure to emerging markets or to Europe anytime soon, saying there are fewer good companies and buying stocks just because they were cheap was a risky strategy.
