Symposium 2013 - Resources Kit

Symposium facilitated debate on the three pillars of portfolio construction – markets, strategies and investing. The jam-packed program featured 20+ local and international investment professionals presenting on contemporary and emerging portfolio construction issues to challenge and refresh delegates' portfolio construction thinking, giving tangible and meaningful takeouts to apply in practice to build better quality investor portfolios.

The Resources Kit is now complete.

Tuesday 21 May 2013

Critical Issues Forum 1

The big picture
PortfolioConstruction Forum Publisher, Graham Rich, opened Symposium in his usual thought-provoking (and entertaining) way. Throughout Symposium, Graham presented Video Thought Pieces, in which leading global investment experts share their thoughts on investment challenges.

- The Legend of Benjamin Graham

- So far, King Kong is winning - Mohammed El-Erian, PIMCO

- Mind the gap - Nouriel Roubini, Roubini Global Economics

- Two forces driving markets - Nouriel Roubini

- The great degeneration - Niall Ferguson, Harvard University

- Identifying the right wave, Mohammed El-Erian, PIMCO

- Longevity is opportunity





 

Thought piece

Thought piece

Thought piece

Thought piece

Thought piece

Thought piece

Thought piece

Critical Issues Forum 2
 

Building portfolios in a brave new world - Huxley Redux
Market and economic environments continue to change, but in ways no investor has experienced. The training and understanding that define nearly all investors are no longer up to the task of dealing with today’s issues. We need to identify deficiencies of the pervasive methodologies and spotlight additional disciplines required to navigate the new world order. Specifically, we must avail ourselves of geopolitical and game theoretical analysis to remedy contemporary deficiencies. These disciplines lead us away from traditional asset allocation, new-fangled risk parity and downside protection strategies and toward prudent risk capital allocation.

Brian Singer, Partner, CFA, Head Dynamic Allocation Strategies Team, William Blair & Co (Chicago)

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Climbing the mother of all walls – stay positive
The market adage is that bull markets climb a wall of worry. And, despite having much to worry about - a Eurozone in recession, a listless US recovery, the unknown effects of Japan’s unprecedented QE, slowing China growth, Cyprus, North Korea, etc - both the Dow and the more important ‘mother of all indices’, S&P 500, reached new, all-time highs recently. Where to from here?

Jonathan Pain, Editor, The Pain Report (Sydney)

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Expert panel Q&A
Our two Inquisitors grilled Brian and Jonathan on their respective views.

Brian Singer, Partner, Head DAA Strategies, William Blair & Co (Chicago)
Jonathan Pain, The Pain Report (Sydney)
Michael Kitces, Partner/Head of Rsh, Pinnacle Advisory (Washington DC)
Tim Farrelly, Principal, farrelly’s Investment Strategy (Sydney)

Resources to come

Critical Issues Forum 3

This session sets the scene for the two Workshops later in the afternoon. Referencing back to the assigned pre-reading for their Workshops, Tim and Michael will each summarise the thesis/core premise to get everyone on the page in preparation for the Workshops.

Diversification – when it works, when it doesn’t
This presentation was preparation for the interactive workshop later in the day, looking at the fundamental principles behind diversification, the critical role of correlation in getting diversification benefits, and how practically to consider the benefits of diversification when designing portfolios.

Tim Farrelly, Principal, farrelly’s Investment Strategy (Sydney)

A risk parity approach to building portfolios
This presentation was preparation for the interactive workshop later in the day looking at what risk parity investing is, the opportunities and risks, the practical challenges of implementing such strategies in portfolios, and whether risk parity portfolios might actually represent a better way to protect clients through diversification.

Michael Kitces, Partner/Head of Rsh, Pinnacle Advisory (Washington DC)




 

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Resources

 

Due Diligence Forum 1

Winning by not losing – defensive equity strategies
Building a better global equity portfolio requires a new structure that incorporates both high-growth/higher expected-return elements (emerging markets and small cap, for example) and a complementary low volatility component. This paper and presentation explain why low-volatility equities make sense and provides an overview of the types of strategies available and what they are trying to achieve.

Philip Houghton-Brown, Head of Investments, Mercer NZ (Auckland)

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Boomers, herding, denial and zeitgeist
The current financial advice model serving retirees is suboptimal for their needs. An approach that is fundamentally focused on retiree objectives is imperative, as these objectives will generally differ from those in the accumulation phase, often compete with each other, and require well thought out prioritisation. Many of the conventional approaches to post-retirement portfolio construction have not been scrutinised adequately in terms of possible outcomes for retirees adopting these approaches. This paper and presentation assess the possible outcomes of using these approaches in meeting income objectives and the impact on asset values, as well as the likelihood of these outcomes occurring. Finally, we examine how the advice process can evolve to better address specific objectives by adopting a more holistic approach to portfolio construction

Lukasz de Pourbaix, Head of Investment Consulting, Lonsec (Sydney)

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ETFs – the top 5 portfolio strategy considerations
ETFs have grown substantially in size, range, complexity and popularity in recent years. This presentation and paper provide the key issues and portfolio strategy considerations relating to ETFs that can form part of the client conversation. These considerations are not often discussed but should influence whether and how ETFs may be used by clients relative to alternative structures.

Gavin Shepherd, Director, Strategy Steps (Sydney)

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Due Diligence Forum 2

Blurring lines - rethinking bond investment in an uncertain world
With the dynamics of global growth and risk changing rapidly, it is time for investors to reorient their thinking about bond allocations and the investment strategies that drive them. Anemic global growth and financial repression have driven interest rates to historic lows and markedly reduced future expected returns on all financial assets. Meanwhile demographic, financial and political lines - as well as those traditionally separating developed and emerging markets- are increasingly blurred. In this environment, bond investors will need to adapt if they hope to prosper.

David Fisher, Executive VP & Product Manager, PIMCO (Newport Beach)

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Perspectives on blending active and index products
The low yield world has focused investors on the costs of investing, while changing regulation is leading to greater alignment between clients’ investment portfolio choices and their risk-return profiles. Together these factors are transforming the use of active management, indexing and the blending of investment styles. This paper and presentation highlight the results of a survey of wealth and private bank advisory firms, discretionary and multi-asset institutional portfolio managers, and research and ratings houses, describing their various approaches to blending active and index funds in portfolios.

Oliver Berry, iShares Australia Head of Institutional, BlackRock (Sydney)

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An all-encompassing approach to emerging markets
The economic growth and newfound fiscal strength of many emerging countries have created a dilemma for investors. Expectations of future growth are alluring, but the financial markets remain highly volatile. Is it possible to reduce emerging markets’ volatility without sacrificing return potential? This paper and presentation show that a portfolio with emerging stocks, bonds and currencies managed in an active, unconstrained and integrated strategy can capture a greater set of opportunities to seek the high returns associated with EM growth, with better risk management potential.

Ross Kent, CEO, AllianceBernstein Australia/NZ (Sydney)

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Workshops 1&2

Diversification – when it works, when it doesn’t
This interactive, active-learning workshop revisited the fundamental principles behind diversification. We review Markovitz’s primary findings (without resorting to equations!) and look at the critical role of correlation in getting diversification benefits, before examining how to practically consider the benefits of diversification when designing portfolios. You will go away with a deeper understanding of how to think about diversification in practice and some simple rules of thumb to help build better quality portfolios for clients.

Tim Farrelly, Principal, farrelly’s Investment Strategy (Sydney)

Because of the interactive nature of the Workshops, they were not recorded. Refer to CIF 3 above to view the introductory presentations for these two workshops.

 

A risk parity approach to building portfolios
Notwithstanding its long conceptual roots dating back to Markowitz and favourable performance since the 1990s, risk parity investing has only really begun to gain momentum in the past few years. This workshop looked at what risk parity investing is (and what it’s not), the opportunities and risks, the practical challenges of implementing such strategies in portfolios, and whether risk parity portfolios might actually represent a better way to protect clients through diversification.

Michael Kitces, Partner/Head of Rsh, Pinnacle Advisory (Washington DC)


Wednesday 23 May 2013

Critical Issues Forum 4

Risks and rewards - global economic risk
Five pillars of risk neatly encapsulate the main areas of risk and contagion that all investors should be watching - the US fiscal cliff (it has only been kicked down the road), the global economic slowdown, the EU sovereign debt and banking crisis, Middle East and oil prices, and contagion risk. In the changing risk environment, the key is to determine which parts of the world are actually paying you to take risk, and which areas are definitely not.

Nicholas Bullman, Founder & Managing Director, CheckRisk (London)

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Expert panel Q&A
Our three Inquisitors grilled Nick on his views.

Nicholas Bullman, Founder & Managing Director, CheckRisk (London)
Tim Farrelly, Principal, farrelly’s Investment Strategy (Sydney)
Stewart Brentnall, CIO, ANZ Global Wealth & Private Banking (Sydney)
Andrew Bascand, MD & PM, Harbour Asset Management (Auckland)

Resources to come

Critical Issues Forum 5

Australasia in the Pacific Century
As the centre of the world economy is shifting towards the Pacific, New Zealand and Australia are facing great opportunities. But are we ready to embrace them? Or are we not even aware of them? Both New Zealand and Australia should embrace economic reforms to make the most of their favourable geopolitical situation.

Dr Oliver Marc Hartwich, Exec Dir, The New Zealand Initiative (Wellington)

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Expert panel Q&A
Our three Inquisitors grilled Nick on his views.

Nicholas Bullman, Founder & Managing Director, CheckRisk (London)
Tim Farrelly, Principal, farrelly’s Investment Strategy (Sydney)
Stewart Brentnall, CIO, ANZ Global Wealth & Private Banking (Sydney)
Andrew Bascand, MD & PM, Harbour Asset Management (Auckland)

Resources to come

Due Diligence Forum 3

Capital preservation in a rising interest rate environment
For nearly 30 years bond yields globally have fallen, generating significantly positive returns to investors - but with yields near record lows and global growth improving, this is unlikely to continue. In addition, while fixed income investments are considered to be lower risk than shares, there are still important risks that need to be understood and evaluated. This presentation and paper explore the development of the New Zealand fixed income market and consider ways for investors to better protect themselves against the growing risks.

Grant Hassell, Head of New Zealand Fixed Income, AMP Capital (Wellington)

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What does an elevated Equity Risk Premium mean for investing?
A changing Equity Risk Premium has implications beyond considering allocations to equities and bonds. The presentation and paper consider the factors that might drive a change in the Equity Risk Premium and ask - If elevated Equity Risk Premium fall, which sectors and stocks might benefit the most? What implications might that have for investing in Australasian equities in the months and years ahead? How should investors think about the mix of yield and growth? Are we really in a different cycle now, what can we learn from recent market behaviour and what should we watch for a retracement in the recent pattern of returns?

Andrew Bascand, MD & PM, Harbour Asset Management (Wellington)

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Onwards and upwards – the way forward for NZ listed property
Property’s attractive characteristic as an asset class is that it is able to deliver relatively stable revenue streams, with a growth profile in line with inflation. This presentation and paper discuss listed property in the context of the New Zealand market and give some perspective on the sector’s track record over the last cycle. It also deals with what investors need to think about when investing in the sector and what property vehicles need to do better in order to improve returns for shareholders.

Craig Tyson, Equity Investment Manager, OnePath (Auckland)

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Critical Issues Forum 6

Meeting the longevity challenge
Time frame is a key factor in designing a quality portfolio. Averages such as the Life Tables do not reflect wide individual variations in longevity and fail to take account of ongoing improvements in mortality. Underestimating life expectancy means a client may outlive their retirement income and fail to consider timely and realistic lifestyle and financial responses. This session quantifies the extent of the problem and identifies five key areas that help to determine personal longevity, before discussing the three very different three stages in longevity and their financial implications. A strategic approach to better manage longevity implications for portfolios is proposed.

David Williams, CEO, My Longevity (Sydney)

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Understanding retirement sequencing risk
What really does, and does not, cause a retirement plan to run out of money? While many retirees are fixated on the risk of a precipitous market decline, it turns out that the potential for retirement failure is dictated not simply by the magnitude of the market decline, but the speed at which it recovers as well. As a result, the true danger for many is not actually a market crash or a “black swan” event, but an extended period of “merely mediocre” results that are uncommon but not rare.

Michael Kitces, Partner/Head of Rsh, Pinnacle Advisory (Washington DC)

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Delegate Q&A
Delegates asked David and Michael questions on their views

David Williams, CEO, My Longevity (Sydney)
Michael Kitces, Partner/Head of Rsh, Pinnacle Advisory (Washington DC)

Resources to come

Portfolio Construction Implications

Portfolio construction key takeouts panel
All of the Critical Issues Forum sessions are building blocks for this final session which ensures delegates determine their key takeouts and actions to take when building investor portfolios. This session is very interactive! Our Expert Panel members will discuss and debate the delegates views collected throughout the program using the Gizmos and answer more of the delegates’ questions that we’ve collected throughout the program.

Michael Kitces, Partner/Head of Rsh, Pinnacle Advisory (Washington DC)
Tim Farrelly, Principal, farrelly’s Investment Strategy (Sydney)
Stewart Brentnall, CIO, ANZ Global Wealth & Private Banking (Sydney)
Andrew Couch, Investment Mgr, Advanced Investment Solutions (Auckland)

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