Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Home / 310

Firstlinks Edition 310

Welcome to the Firstlinks Newsletter Edition 310
Graham Hand

Graham Hand


We are approaching the end of another financial year where the performance of fund managers will again be judged against an index. Investors should cut them some slack and consider whether they are being true to their style. Simply by not owning the five WAAAX stocks (Wisetech, Altium, Appen, Afterpay and Xero), a fund will underperform the market this year by about 3%.

Experienced fund managers at a recent Morningstar Investment Conferencesaid they could not hold these stocks because there was no way to value them. Two of the companies do not make a profit but the market values them at $15 billion. Goldman Sachs' research shows these high-growth stocks are more expensive in Australia than any other sharemarket in the world. Who can blame a manager for protecting capital and not owning them?

 

Source: Yahoo Finance


These companies need exceptional growth and near-perfect execution to justify such prices, and the market is forgiving mistakes at the moment. Robert Miller reveals the disconnect the high-flyers are causing versus small, less-fashionable companies, and the need for considerable patience. It's also a test for many fund managers to retain their fundamental beliefs.

As more investors turn to bonds for income instead of cash and more volatile shares, we continue our popular Interview Series with Adam Grotzinger who specialises in global corporate bonds, now accessible via the ASX. The White Paper ETF update below from BetaShares also shows the strong flows into fixed income funds.

Courtesy of the Morningstar Conference, we also have a 45-minute video with Hamish Douglass on how Magellan went from nothing in the GFC to $83 billion 12 years later.

Many financial advisers are doing it tough in the wake of the Royal Commission. A recent EYsurvey revealed 40% of clients intend to switch their advice provider in the next three years. Major life events are often a catalyst for change, but more people are turning to multiple providers for assistance. ASIC is asking advice licensees for lists of products where they receive grandfathered remuneration, and there is a trend towards "punitive measures rather than protective measures". A Money Management survey suggested 30% of planners intend to leave the industry as a result of the Financial Adviser Standards and Ethic Authority (FASEA) regime.

All financial advice businesses are reviewing their business models, and clients should ensure the new approach works for them. There are more planning tools and technology solutions available than ever, and as Jonathan Hoyle says, the traditional way an adviser reviews a portfolio and recommends changes is "old-fashioned, clunky and reactive". Claire Wivell Plater uses a recent court case to show the only way forward is with digital solutions. What does your adviser use?

Many of you consider the franking issue done and dealt, but we know from reader comments that Chris Bowen's example of a nurse earning $67,000 versus a retiree bothered many others. So to finally put this one to bed, actuary Geoff Walker does the numbers.

At the EOFY, people often look for tax deductions. Rachael Rofe shows new research from Swinburne University on PAFs, and how charitable giving and tax efficiency can combine well.

Finally, Louise Watson reports on how professional fund buyers are allocating their assets, and how they retain faith in active managers to deliver performance to justify their fees.

Howard Marks has just released his latest client memo, 'This Time It's Different'.

Graham Hand, Managing Editor

 

For a PDF version of this week’s newsletter articles, click here.

 


 

Leave a Comment:

banner

Most viewed in recent weeks

Australian house prices close in on world record

Sydney is set to become the world’s most expensive city for housing over the next 12 months, a new report shows. Our other major cities aren’t far behind unless there are major changes to improve housing affordability.

The case for the $3 million super tax

The Government's proposed tax has copped a lot of flack though I think it's a reasonable approach to improve the long-term sustainability of superannuation and the retirement income system. Here’s why.

Tariffs are a smokescreen to Trump's real endgame

Behind market volatility and tariff threats lies a deeper strategy. Trump’s real goal isn’t trade reform but managing America's massive debts, preserving bond market confidence, and preparing for potential QE.

The super tax and the defined benefits scandal

Australia's superannuation inequities date back to poor decisions made by Parliament two decades ago. If super for the wealthy needs resetting, so too does the defined benefits schemes for our public servants.

Meg on SMSFs: Withdrawing assets ahead of the $3m super tax

The super tax has caused an almighty scuffle, but for SMSFs impacted by the proposed tax, a big question remains: what should they do now? Here are ideas for those wanting to withdraw money from their SMSF.

Getting rich vs staying rich

Strategies to get rich versus stay rich are markedly different. Here is a look at the five main ways to get rich, including through work, business, investing and luck, as well as those that preserve wealth.

Latest Updates

SMSF strategies

Meg on SMSFs: Withdrawing assets ahead of the $3m super tax

The super tax has caused an almighty scuffle, but for SMSFs impacted by the proposed tax, a big question remains: what should they do now? Here are ideas for those wanting to withdraw money from their SMSF.

Superannuation

The huge cost of super tax concessions

The current net annual cost of superannuation tax subsidies is around $40 billion, growing to more than $110 billion by 2060. These subsidies have always been bad policy, representing a waste of taxpayers' money.

Planning

How to avoid inheritance fights

Inspired by the papal conclave, this explores how families can avoid post-death drama through honest conversations, better planning, and trial runs - so there are no surprises when it really matters.

Superannuation

Super contribution splitting

Super contribution splitting allows couples to divide before-tax contributions to super between spouses, maximizing savings. It’s not for everyone, but in the right circumstances, it can be a smart strategy worth exploring.

Economy

Trump vs Powell: Who will blink first?

The US economy faces an unprecedented clash in leadership styles, but the President and Fed Chair could both take a lesson from the other. Not least because the fiscal and monetary authorities need to work together.

Gold

Credit cuts, rising risks, and the case for gold

Shares trade at steep valuations despite higher risks of a recession. Amid doubts that a 60/40 portfolio can still provide enough protection through times of market stress, gold's record shines bright.

Investment strategies

Buffett acolyte warns passive investors of mediocre future returns

While Chris Bloomstan doesn't have the track record of his hero, it's impressive nonetheless. And he's recently warned that today has uncanny resemblances to the 1990s tech bubble and US returns are likely to be disappointing.

Sponsors

Alliances

© 2025 Morningstar, Inc. All rights reserved.

Disclaimer
The data, research and opinions provided here are for information purposes; are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. Morningstar, its affiliates, and third-party content providers are not responsible for any investment decisions, damages or losses resulting from, or related to, the data and analyses or their use. To the extent any content is general advice, it has been prepared for clients of Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892), without reference to your financial objectives, situation or needs. For more information refer to our Financial Services Guide. You should consider the advice in light of these matters and if applicable, the relevant Product Disclosure Statement before making any decision to invest. Past performance does not necessarily indicate a financial product’s future performance. To obtain advice tailored to your situation, contact a professional financial adviser. Articles are current as at date of publication.
This website contains information and opinions provided by third parties. Inclusion of this information does not necessarily represent Morningstar’s positions, strategies or opinions and should not be considered an endorsement by Morningstar.