Are stocks going cheap? And what about the property market – should we be selling out before it’s too late, or buying on the dip? Everyone has an opinion on current market conditions, making it difficult to discern what’s fact and what’s fiction. So let’s get to the heart of the matter: where are Australia’s finance experts personally investing their cash?
Dr Shane Oliver, AMP Capital Investors
Dr Shane Oliver, of AMP Capital Investors, is preparing to borrow against his Sydney home to buy shares. He says buying shares when the ASX 200 is trading at 4000-point levels offers potentially bigger returns than when the benchmark climbs back above 6000.
But Oliver is not going to choose the stocks himself, rather he’s leaving that to his fund managers. “I don’t see myself as a stock picker,” Oliver, who is a chief economist and head of investment strategy, says. “I don’t have the time to examine individual stocks, but I am across the performance of all asset classes.”
Oliver personally owns AMP and Qantas shares, but his nine managed funds combined in a wrap account expose him to a diversified portfolio of Australian and overseas equities. His AMP Capital China fund exposes Oliver to Chinese equities, while his AMP Capital Equity, Colonial and Perpetual funds consist of Australian shares.
Oliver’s Credit Suisse fund holds international equities, while his Schroders fund reaches beyond Chinese equities and into Asian shares. The breakdown of Oliver’s managed share portfolio is 55 per cent Australian equities and 45 per cent international.
While the total value of his managed funds is below last November’s highs, Oliver says they are performing better than related indices and expects them to recover and prosper over time. “On the international front, I have a bias towards Asian equities because their economies offer long-term growth potential,” Oliver says.
Oliver, 48, believes the price of his Avalon home on Sydney’s northern beaches has almost quadrupled since buying it for his wife and two children in 1995. But he is not tempted to buy a rental property, believing Australian residential prices are way over-valued and likely to fall in a slowing economy.
He says the Australian sharemarket has been over-sold and offers far better long-term value. “You don’t very often see the sharemarket’s price/earnings ratio below 10 times,” Oliver says. “A lot of bad news has already been factored into market. Sharermarkets rise an average 32 per cent in the first 12 months of a recovery, so I want to be on the ground floor. I will be investing more in my managed funds while topping up my super.”
Seventy-five per cent of his super is weighted towards Australian shares, property and international equities, with the remainder in cash and bonds. He says the AMP Capital Balanced Growth Fund he invests in and overlooks posted about a 7 per cent loss in the 12 months to June 30. But the fund’s returns remain more than 60 per cent higher compared to five years ago. Super should be seen as a long-term investment, he says.
Simon Bond, ABN AMRO Morgans
Stockbroker Simon Bond, of ABN AMRO Morgans, is a strong believer in boosting super and reducing debt. Bond, personally, doesn’t own a single share, but his self-managed super fund consists only of equities, including BHP Billiton, National Australia Bank, Woodside Petroleum, Telstra, Suncorp Metway, Australian Agricultural Company, Maryborough Sugar and Pipe Networks. Bond and wife Karen invest as much as they can in super, saying it’s tax-effective and forces them to save.
Bond, who has been working in the sharemarket since 1986, is eager to draw a distinction between investing and speculating. He says he is a conservative investor who buys shares for his super fund based on fundamentals painting a bright performance outlook over the longer term. Numerous margin account speculators have gone broke trying to make a quick buck in equities and derivatives.
Bond says companies able to withstand the financial and economic downturn are on his buying radar, including the major banks, Incitec Pivot, AWB, Orica and more of BHP Billiton and Rio Tinto.
Profitable companies with low debt and solid management are buying material.
Bond, 47, and a father of three, says he refuses to unlock the equity in his Sydney home and investment property to invest in shares or other assets no matter how attractive they may appear. He strongly advises people to stgise a long-term savings and investment strategy and, importantly, stop using equity in their homes as an ATM.
Jeff Bresnahan, SuperRatings
Jeff Bresnahan is the founder of SuperRatings, a company that rates the performance of the nation’s super funds.
Bresnahan contributes to an industry fund consisting of a 50-50 split between Australian and international equities, a retail fund, primarily for “top value” life insurance cover, and his own self-managed super fund consisting of what he considers more speculative equities, including Silex Systems, MYOB, Amalgamated Holdings, Mosaic Oil and Sydney Gas. There is also cash.
Bresnahan also takes delight in sniffing out a bargain for his own personal share portfolio. He feels vindicated after buying National Australian Bank when it was oversold to $18 levels in September and he’s been buying IT services company Oakton on weakness. “Oakton offers a solid business and, in my mind, it’s been a great buy,” he says. “It pays solid dividends and people tend to forget the importance of dividend streams.”
Other stocks in his personal portfolio include Oil Search, Crown, Cabcharge and Sonic Healthcare. He says his wrap account consisting of nine managed funds holding Australian and international is down since last November, but he’s confident it will recover in line with the market.
Bresnahan owns a home in Sydney’s Lane Cove, but prefers super and the liquidity of shares to build long-term wealth. The 46-year-old father of two, who has worked in the super industry all his life, credits Paul Keating as having the biggest positive influence by introducing compulsory employer contributions on July 1, 1992.
But he has some sobering news for apathetic members who fail to take control of their retirement nest eggs.
He says while most super funds have averaged a 7 per cent return in the past five years, he estimates that today’s balanced option fund averages a mere $50,000. Most super members need to seriously top up their super, or struggle in retirement.
Bresnahan says he subscribes to switching funds if the existing one has a poor performance record. “There are huge levels of apathy towards super brought about by an implicit trust of their fund,” he says. “The difference between a well managed and poor performing fund can be hundreds of thousands of dollars at retirement.” Bresnahan says his super funds are equity driven because they provide superior returns over time. He notes his fees and charges and compares it with the competition, and advises others to do the same.
Bresnahan is the first to acknowledge that bumper returns in the past are not necessarily an indicator of future performance. But these are worth a look. According to Bresnahan, the leading returns among balanced option funds in the past five years include MTAA Super (12.9 per cent), Buss (Q) (11.6 per cent), Cbus (10.7 per cent), AustralianSuper (10.6 per cent) and HOSTPLUS (10.6 per cent).