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Monday, 20 September 2021
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The outlook for emerging market debt in 2021 revolves around liquidity, uneven recoveries and debt sustainability. Damage has been done to many countries’ finances and watch for central banks withdrawing support.
At some point, policymakers will turn to the task of deleveraging, to work off massive debt burdens built up during the pandemic. Australia is already ticking the boxes on many policies used in the past.
Markets always come back to fundamentals, valuations and liquidity, even when faced with a global pandemic. The key question is whether liquidity can hold up the market as the economic storm hits.
Large super funds hold unlisted assets such as infrastructure, property and private equity. It's likely many of these assets have not been revalued recently, inflating the price paid to members who exit.
An investment with any fund manager should be part of an asset allocation decision, but what happens when your equity manager decides to do a major switch to cash? It messes up your plan.
Equity market vigilanties, particularly resisting poor Initial Public Offerings (IPOs), are showing the benefits of active managers not simply buying everything put in front of them.
APRA’s letter to super funds highlights concerns about 'cash' investments. A lack of understanding might haunt investors when the next downturn comes as too many people forsake protection for yield.
One benefit of ETFs for investors is their tradability - being able to buy or sell at any time through the ASX just like an ordinary share. But this leads many investors to mistakenly evaluate their liquidity in the same way.
There's no straightforward answer to the question of whether a bond is liquid. Unfortunately, at the time when you most want to sell, everyone is likely to be running for the exit.
When deciding between listed and unlisted infrastructure securities, the focus should be on the cashflows, the risks associated with those cashflows and the entry price to buy the assets.
Despite similar objectives, the proportion of Australian superannuation assets in alternative and less liquid assets is much lower than for other long-term investors such as family offices and global pension funds.
Australia's defined contribution superannuation market seems to be obsessed with ‘liquid’ investments. For the long-term investment that super inherently is, it doesn't make sense to limit our options.
Who knew? With some surprise results, the Government is on unexpected firm ground in asking people to draw on all their assets in retirement, although the comments show what feisty and informed readers we have.
The RBA Governor says rising house prices are due to "the design of our taxation and social security systems". The OECD says "the prolonged boom in house prices has inflated the wealth of many pensioners without impacting their pension eligibility." What's your view?
It's a remarkable statistic. In any year since 1875, if you had invested in the Australian stock index, turned away and come back eight years later, your average return would be 120% with no negative periods.
Never stand between Australian households and an uncapped government programme with $3 billion in ‘free money’ to build or renovate their homes. But excess supply is coming with an absence of net migration.
Picking macro trends is difficult. What may seem logical and compelling one minute may completely change a few months later. There are better rewards from focussing on identifying the best companies at good prices.
Some high-quality companies have emerged even stronger since the onset of COVID and are well placed for outperformance. We call these the ‘COVID Opportunists’ as they are now dominating their specific sectors.