A golden era for active managers is coming

By Russel Pillemer, Pengana Capital

“It is not a stretch to imagine the next 10 years will be a golden age for Australian active managers”.

The constant barrage of reports about the demise of the active fund manager is relentless. The average investor might conclude the age of active is over and it’s time to switch to low cost index-type solutions. However, more informed investors understand nothing could be further from the truth.

The coming years are likely to be a golden era for active managers. It is highly improbable the next decade will be a repeat of the last decade’s smooth sailing. Over the past 10 years, markets have experienced an incredible run with indices soaring. Momentum has been a key driver, and in times like these, fundamentals hardly matter, leading active managers to struggle to outperform.

There were many active managers who were, in reality, closet index managers. As the cost of index funds has decreased significantly, many of these managers have lost clients and been forced to close – and rightfully so.

Meanwhile, there has been a proliferation of active, with many raising too much money. It’s a well understood phenomena that if a fund manager manages too much money (relative to the size of their market) they will be unable to perform well.

Asset gatherers are insufficiently incentivised to outperform.

Many of the large Australian institutional investors withdrew from active managers and moved to index funds. Either they consider low fees to be their primary objective (with returns being a distant second), or alternatively they have defined risk as the divergence of returns from the index, rather than the risk of losing capital. This reasoning makes sense in a bull market, where index products have outperformed high-cost active strategies. However, it is patently obvious this is nonsensical in a sideways or downwards market.

It is not a stretch to imagine the next 10 years will be a golden age for Australian active managers.

Due to the large number of closures and losses of mandates, there is far less competition for fundamental trades. This is particularly significant for small and mid-cap companies, which includes almost all of the Australian market.

And passive index-style strategies are ideal counterparties for active managers who can identify mis-pricing opportunities that index strategies create by virtue of their “dumb” trading rules.

Survive and thrive

The index trade is overcrowded. We know this as so many investors have capitulated and moved to index-type solutions. But history teaches us that overcrowded trades will inevitably unwind. Finally, active managers tend to thrive in volatile markets – and while it would be foolish to attempt to predict the direction of the markets over the next decade, it is reasonable to assume that volatility will be higher.

Investors need to identify active managers that are well-positioned to survive and thrive.

Look for highly skilled teams or individuals with substantial experience and proven track records. Ensure they have stuck to their guns and not surrendered their investment style to pressures emanating from the extended bull market. A credible manager will construct their strategies with an interest in downside protection and limit the amount of money they are willing to accept. I would add that such a manager defines risk as in “the risk of losing money” not “the risk of divergence from the market return”.

Good fund managers should be backed by appropriately resourced businesses so they are not faced with existential risks or operational complexity. Critically, they should not be hostage to large institutional investors who pose undue concentration risks. While the investing masses are piling into low-cost index-type solutions, the smart money is seeking alternative managers with the above attributes.

These intelligent investors are predicting a very different decade ahead and focused on securing allocations in expert managers. Investors who are doing this are likely to be handsomely rewarded over the coming years. Investors who are opting for low-cost solutions will inevitably realise the cheap lunch is likely to cost them dearly.

Pinebridge Global Dynamic Asset Allocation Fund

What’s the fund?

This month we are taking a closer look at the Pinebridge Global Dynamic Asset Allocation Fund. The fund is a multi-asset strategy that was originally established to manage the assets of the AIG insurance statutory fund. Statutory funds are similar to a typical pension fund in that they are required to generate consistent returns to meet the regular drawdowns that result from insurance claims. The fund targets a return of CPI + 5.00% per annum regardless of market returns and achieves this by focusing on asset allocation rather than investment selection.

The strategy is quite straightforward in that the 20-strong multi-asset team of $50bn work constantly to determine the risk and return outlook for every asset class in the world. The multi-asset team understand that economic trends in the short (within 12 months) and long-term (over 5 years) are incredibly difficult to predict. In their experience, the greatest level of certainty and actionable trends falls in the medium term, 2-3 years; as a result, they focus their analysis on building a model of economic inputs and review this quarterly. These expectations form the basis of forecast returns for all major asset classes (in the form of a Capital Markets Line) and underlying sectors of the economy. The results are plotting against each other at which point the management team allocate capital to the most attractive sectors on a risk to reward basis.

Where does it fit in your portfolio?

The Pinebridge Global Dynamic Asset Allocation Fund (GDAAF) targets a return of CPI + 5.00% over rolling three-year periods. This meets the return requirement of the Targeted Return Bucket. Importantly, the funds mandate is to deliver this whilst exposing the portfolio to two thirds the volatility of equity markets and through a highly diversified selection of assets. The fund reduces risks by investing into a series of exchange traded funds (ETFs), external and internal managed funds in order to gain its exposure to the various sectors of global markets. The strategy has outperformed its benchmark over the very long-term and most importantly been able to restrict losses during all major market events. Given the fund has a target of 2/3rds the volatility of sharemarkets, this is one of the more growth oriented Targeted Return strategies, meaning it complements well with the lower risk Smarter Money and Invesco funds.

Why invest?

Extensive research has shown that asset allocation drives a large portion of long-term returns and importantly, that simply maintaining the same asset allocation over time is not sufficient to deliver on the typical CPI + 4.0% objective of most investors and pension funds. In fact, research by Dalbar Inc. found that in order to generate this return over extended period and in different conditions, an investor would need to hold 100% equities at some times and 100% bonds at others. Obviously, this is extremely difficult to implement.

We are more concerned that the 30 year compression in bond rates will come to an end soon and that the historic levels of Quantitative Easing may have brought forward sharemarket returns for the next decade. We have undertaken substantial research in order to identify the asset classes that are able to protect your portfolio in what we believe will be either sustained low bond rates or a rising bond rate environment; both scenarios are not great for equity investors. We came to the conclusion that applying a more dynamic approach to asset allocation; that seeks to benefit from medium term opportunities offers the best potential to achieve this.

What does it invest in?

As detailed above, the fund invests into a combination of ETF’s and managed funds both internally managed by different parts of the Pinebridge team or those offered by external managers; the key being the team has more time to focus on value adding asset allocation decisions. The largest holdings at the current time are as follows:

  • Productivity Basket: The Productivity Basket was established by Pinebridge to capture the huge increase in investment that was expected and continues to occur around the world. Their research highlighted substantial underinvestment by business and sought to build an active portfolio of exposures to this important growth sector of the global economy. The underlying allocations are as follows:


  • US Small Cap Equity: Pinebridge have a generally positive view for the US economy believing that fiscal and monetary conditions facilitate a further extension of the cycle and that the current slowdown in economic data will be short-lived. The result is that their Capital Markets Line suggests US smaller companies offer greater risk adjusted returns due to the higher exposure to the true US economy and substantially cheaper valuations than the mega cap S&P 500 constituents.


  • US Government Bonds: The fund has increased its exposure to US Government Bonds from 5.5% to 8.6% during the quarter as they grew more confident in the prospect of rate cuts to stimulate the economy and believe that the large amount of Government debt necessitates lower rates for longer. This has added protection for investors in periods of volatility.


  • Japan Equity: Management have a long-held view of two things in Japan; 1) Abenomics will continue for the foreseeable future and eventually be successful in stimulating growth; 2) Japanese companies would become more shareholder focused. The combination has performed well for investors, with many Japanese indices now focused on the Return on Equity and cash returned to shareholders rather than on reinvestment of profits.


  • Indian Equity: Pinebridge’s global network means they have in-country analysis teams in most important markets, with India a case in point. The team in India have delivered one of the best performing domestic equity funds in the world and were able to successfully foresee the implications of Modi’s run to Government and subsequent reform agenda to the benefit of investors. This offers a differentiating point and an exposure that is very difficult for investors to access.

How has it performed?

Pinebridge has successfully navigated the worst market events over the last 20 years via its conviction to its asset allocation approach. This affords management the ability to increase cash, bond and other fixed interest weightings when the Capital Markets Line suggests they offer better risk-adjusted returns. Importantly, their models suggested this was the case prior to both the Dot Com Bubble and the Global Financial Crisis, triggering a substantial move into low risk assets at just the right time.  

The fund has only been available to retail investors in Australia since 2015, but the wholesale class has returned 6.94% since inception with $1.43bn under management here. This is in line with the CPI + 5% benchmark but delivered with substantially lower volatility. Shorter term performance has been weaker, due to the higher growth allocation to the Productivity Basket with a 3.07% return for the 12 months to 30 June.

What income does it provide?

As with all managed funds, the Pinebridge Global Dynamic Asset Allocation Fund must distribute all income and realised capital gains each year. Therefore, distributions are dependent on both the performance of the underlying investments and whether any investments are actually sold. As an actively managed strategy the fund receives minimal dividends and the majority of returns come in the form of capital growth and realised gains. The distributions since inception in 2015 are as follows and have averaged around 5% per annum with the intention to be paid semi-annually:

  • 2014-15 – 4.93 cent per unit
  • 2015-16 – .03 cents per unit
  • 2016-17 – 5.84 cents per unit
  • 2017-18 – 5.04 cents per unit

Importantly for investors, the fund provides daily liquidity and charges a management expense ratio of 1.00%.

Internal rates of return

The measurement and reporting of investment returns is an important facet of receiving financial advice, yet it is one of the most misunderstood concepts in finance. Most people think about returns in simple terms, that their capital should be worth more at the beginning of the period than at the end. This is obviously important, but it does not accurately measure how your portfolio is performing because it excludes such important factors as pension payments, franking credit refunds, taxation and both additions and withdrawals from your portfolio.

In order to more accurately reflect the performance of portfolios Wattle Partners, and in fact all major super funds, report performance as an ‘internal rate of return’ more commonly known as an IRR. An IRR differs from the simple approach to measuring returns in that it measures only the performance of the investments you hold. What this means is that the contribution of funds to your portfolio is not seen as a positive return as it would be in a ‘simple’ calculation, whilst withdrawals from your portfolio do not negatively impact on performance. As most readers will appreciate, if you draw 5% of your capital from your portfolio in a year in which your capital has grown by 7%, your simple return would be reduced to just 2% when looking at the balances alone.

The IRR is a more accurate and comparable approach to measuring returns over the long-term. For those with engineering or investment experience, the IRR reflects the discount rate that makes the initial value of your portfolio equal to the final value, including the impact and timing of any income that is received. That means it is time and money weighted. Your withdrawals will not directly impact on returns, only the performance of the investments sold to fund them.

The IRR is used throughout the investment world, including for the calculation of benchmark returns, like industry super fund and other benchmarks. This is due to the fact that it removes the impact of all non-investment related matters from performance. As a global industry standard, it is the primary measure available to us to report performance and is calculating automatically via our XPLAN system.

There are a number of reasons that an IRR is more accurate and useful for investors, but particularly those who are drawing an income from their portfolios.

Franking Credits – One of the biggest reasons is due to Australia’s imputation system. If your portfolio holds ASX shares each dividend will be received with franking credits attached, yet you do not actually receive these in cash at the time of payment. For those in a zero-tax environment, you only receive these franking credit refunds when you lodge your tax return, which can be as late as the following financial year. Therefore, relying on the simple rate of return of reviewing the start and end balance of your portfolio excludes the impact and value of these franking credits which can be 2-3% on an annual basis.

Taxation – Similarly to the treatment of franking credits, the simple rate of return gives no consideration to taxation rates or benefits. The alternative to the franking credit exclusion, is the tax reduction that these and other deductions provide to you. For instance, if franking credits from your personal share portfolio are used to reduce your tax, you are receiving substantially more benefit than a simple rate of return is able to measure. The use of an IRR includes the impact of franking credits when they are received, ensuring their value is not excluded from your performance.

Spending – One often overlooked matter when it comes to measuring performance is the inclusion and exclusion of personal bank accounts. If your personal bank account is included at one time and excluded at another, the result would be a substantially lower simple rate of return. By using an IRR, the inclusion or exclusion of these accounts has substantially less impact on your return.

One final important fact to consider is the different manner in which index, industry fund and benchmark returns are measured. Each of the major benchmarks and industry super funds report accumulation returns, assuming every dollar of return generated by your portfolio is reinvested immediately upon receipt. This means the returns benefit from daily compounding. This makes direct comparison with accumulation indices more difficult, as they most investors withdraw or spend the income they receive, rather than reinvested it into their portfolio.

Fallen Angels iSentia

We may be wired differently to the rest, but when we see companies fall by 20% or more in a day out interest is automatically piqued. Whether it is the need to search for a discount, or something contrarian in our blood, we tend to see value in these ‘fallen angels’. And with interest rates at an all-time low, markets and most importantly individual companies trading at stretched valuations, there seem to be more and more of these every month. This month we take a look at media monitoring battler, iSentia, whose share price has fallen 70% in the last 12 months and closer to 90% over the last few years.

Who is iSentia?

iSentia operates in an extremely competitive sector, being media-monitoring, advertising and brand management. The sector is that cut throat that iSentia instigating legal proceedings against one of their main competitors in 2018 after learning they were piggy packing off their own site without paying for the service.

iSentia was established in 1982 and is the original ‘newspaper clipping’ business in Australia. In its beginnings the company would physically collate important information about various companies from a variety of sources and deliver this to them on a regular basis to guide marketing, advertising and business decisions. To this day, the business is essentially the same, with the main difference being that the content must be delivered in real-time.

In 2019, iSentia offers a software-as-a-service (SaaS) platform that is easily scaleable and able to collate content from 5,500 mainstream media outlets, 55,500 online news sources and 3.4m user generated sources from around the world. The business is capital-lite in that new clients can easily be added to the platform without additional expenditure, adding quickly to cash flow and boosting profits. The company has a strong competitive position, with the most extensive database of sources and years preparing value added services that it hopes to upsell to clients.

What happened?

After listing in 2014 valued at some $700m, iSentia is today worth just $50m; hence the recent talk of the business being taken private once again. It has been a swift fall from grace that boils down to a few things, but primarily the disastrous acquisition of King Content for $48m and an inability of management to change the direction of their business as the needs of their customers and the markets changed.

iSentia was a willing acquirer of many business before and after its eventual listing with the purchase of King Content, a content marketing agency, meant to be the one that took it to another level. The company was focused on producing content of questionable quality for businesses in Australia and helping them market this in order to attract new customers. By all reports the company was a leader in its industry but relied upon a heavy sales culture to build revenue and find new customers.

It seems the greater issue with iSentia was its inability to adjust to the entrance of a key competitor in Meltwater and change the way it did business. The industry was quickly moving to a more templated subscription approach to media monitoring and not one of custom, tailored reports that had for so long driven iSentia’s dominant market position. It appears to have simply taken too long for management to adjust to the new normal and combined with King Content resulted in four successive profit downgrades in 2018. The company was recently removed from the All Ordinaries such has been the level of poor performance.


The companies financials aren’t in bad shape given the share price movement. Most importantly the group only carries $41.1m in debt, which it has extended and continues to repay with positive cash flow. The covenants remain well out of sight, at 3x leverage and interest cover, with the company well ahead at 1.5x and 12.3x respectively. Recent guidance for revenue of $120m in FY 19 appears on track after the company delivered $62.2m in revenue for the first half, a fall of 7.2% on the previous year. The issue, however, was the NPAT loss of $22.1m resulting from the $22.3m writedown of goodwill on the King Content and other acquisitions. The company remains heavily reliant on the Australian market ($44.7m revenue) with the Asian market the new focus of management ($17.5m).

Our View

What if we told you there was a company with 90% market share in its core domestic market, had the most extensive data base of news sources, serviced 5,000 clients and operated in a sector that is now considered by most business as non-discretionary spending. Sounds good right?

We think it may have some value but is not for the faint hearted. Media monitoring is incredibly important for businesses both small and large, as it is one of the only ways to collate an extensive amount of data and news without employing a dedicated staff member to do so. iSentia allows companies to manager their brand, understand what people are thinking about them and to deploy specifically targeted advertising campaigns that increase the return on their marketing investment. Yet the business has moved from bad to worse.

After announcing a new CEO in August 2018 the company appears to be on the improve, however, the full year results will tell us the real story. According to recent reports, the group is more sales and quality focused than before and better prepared for the continued cost cutting within the industry. At 90% market share of a $100m market in Australia, the company is obviously good at what they do, however, there real opportunity is in Asia, where they are still struggling to break in to the $400m revenue market. The new CEO has doubled down on their Asian expansion as well as refocusing and simplifying their business and re-engineering legacy systems that had been costing clients and staff time and money.

They continue to move into the modern age with the graphic below showing where iSentia have been stuck and where they need to be. Advertising and brand management now needs to be proactive, not reactive, and social media is as if not more important than traditional media sources.

The opportunities for iSentia appear to be in two areas, the aforementioned expansion and investment in Asia, as well as the cost cutting and innovation within their platform. They have been focused on automating key parts of their service delivery including daily updates and other templated reports but need to justify the spend in comparison to lower cost tools like Google.

At this point, just 25% of their clients utilise Value Added Services, something that needs to be improved. Management are focused on tripling the number of products they offer and servicing clients better to ensure their 79% recurring revenue continues. The company is a high risk one, but an interesting deep value opportunity in the small cap space. They are five times larger than their main competitor, have an excellent system and 28% of revenue in their growing Asian market. One for the watchlist.

Around the markets

Facebook shrugged off its record setting privacy fine to deliver revenue growth of 28% to $16.9bn for the quarter and a profit of $2.6bn

In this section we look to provide an update on newsworthy events that have occurred with investments that don’t necessarily meet our requirements today, but which we believe should be of interest to investors and readers.

Reporting season predictions: The reporting season begins in August with the majority of companies reporting full year earnings. As usual, the predictions are coming in thick and fast, so we have summarised some of the initial views:

  • Marcus Padley expects any businesses associated with the iron ore, oil and gold sectors will be standouts. Followed by businesses with substantial offshore operations, particularly those exposed to the USD. Whilst highly leveraged infrastructure plays will have benefitted from every lower interest rates. On the negative side he suggests investors avoid anything exposed to the struggling Australian consumer, but particularly discretionary spending, housing, car sales and coal.


  • Macquarie’s research team share similar views with positive outlooks for Fortescue, on the back of Vale continued troubles in Brazil, and Charter Hall property group. They see value in mining services business Worley Parson and dairy producer A2M but believe the CBA, South 32 and Cochlear are set to disappoint.


  • Morgan’s broking shares the view that A2M will continue its stellar run, with Medibank Private, mortgage broker Australian Financial Group, AP Eagers and Megaport all to outperform. There is a decidedly smaller company focus. They believe Bellamy’s, Next DC, Flight Centre, Coca Cola, Realestate.com.au, AGL Energy and Woodside are poised to disappoint.


Speedcast International (SDA): The company that specialises in offering satellite communications to various industries around the world delivered another shock downgrade, with earnings likely to fall between $140-150m from previous expectations of $160-$170m. The reaction was substantial, as can be expected from a high growth, smaller company play trading on an inflated multiple.

Facebook: Facebook shrugged off its record setting privacy fine to deliver revenue growth of 28% to $16.9bn for the quarter and a profit of $2.6bn. This included a $2bn impairment for the $5bn fine but importantly the company is growing at twice the rate of the internet advertising market. The company reported that 1.59bn accounts used Facebook daily, up 8% on last quarter, suggesting the platform isn’t dead yet.

Hub 24 (HUB): Hub 24 suffered after a research report released by a Macquarie Bank analyst suggesting the company was paying negative returns on it’s cash accounts. Further, they believe that falling interest rates and competition are cutting the margin that these platforms make on their bank accounts. The company responded with a public announcement to the contrary, noting that applying platform fees solely to a cash balance is not intuitive nor an appropriate assessment and confirming that most investors keep the balance of their cash accounts low preferring to use one of the many term deposits or fixed income funds available on their platform.

Netflix (NFLX): The disruption darling delivered one of the weaker announcements of the US reporting season with global user growth of 2.7m well below the 5.0m previously forecast. The last time Netflix added this few subscribers in a quarter was back in 2016. The company lost some 130k subscribers in the US and as has always been the case there is no cost to change, so this worrying trend resulted in a double figure drop in the share price. Revenue was still up 26% year over year to $4.92bn but the company remains cash flow negative as it seeks to monetise its huge subscriber base and invests in expensive content.

Microsoft (MSFT): Microsoft was the highlight of what has been an otherwise downbeat earnings season announcing better than forecast revenue and profit results for the quarter. The highlight was the Azure cloud business, sales for which rose 39% from a year earlier to $11bn at the same time the profit margin increased to 65%. The online version of Office, titled Office 365, saw sales increase 31%. All this was enough to see the stock move past it’s all-time high.

The month that was..

  • Geopolitical tensions continued around the world, with Iran commandeering British oil tankers in the Strait of Hormuz and the Hong Kong protests over a planned Chinese extradition bill sending the city into lockdown. The UK Prime Ministerial race has concluded, with Pro-Brexit candidate and former Mayor of London, Boris Johnson the winner. He has arrived as a ‘circuit breaker’ after the Brexit debacle saw the departure of the last two leaders. His mandate is to force through Brexit by 31 October with or without a deal. Throughout all this, markets marched ahead, the S&P 500 was up 1.3% for the month, the ASX 200 2.9% and the FTSE 2.1%.


  • The ASX reached its highest point since just prior to the GFC, hitting 6,845 points in July. The ASX 200 eventually returned 2.93% for the month, with consumer staples (9.8%), consumer discretionary (4.9%) and healthcare (5.92%) leading the way. It was positive across the board with all sectors delivering a positive return for the month. The market continues to be driven by falling interest rates at the same time that geopolitical risks escalate, and the domestic economy shows signs of slowing. With the RBA now indicating lower rates will remain for longer, investors continue to seek out the more traditional, profitable businesses for their secure income and earnings.


  • The US economy delivered once again, reporting a 2.1% annualized GDP growth rate in the second quarter. It came after a better than expected quarterly reporting season during which 170 of the 221 companies delivered better than expected results. It is the companies generating most of their revenue in the US, rather than through exports, that performed strongest (including small caps). The result has been a 3.2% increase in earnings rather than the 2.6% contraction initially predicted. Interestingly, the Federal Reserve decided to cut their benchmark rate by 0.25% on the last day of July but indicated no further cuts are planned at this stage, which sent the market down quickly.


  • Closer to home inflation surprised to the upside, with a 10% increase in fuel prices resulting in Australian inflation hitting 1.6% for the 12 months to June. As expected, the Reserve Bank of Australia cut interest rates to an all-time low of 1.0% in July with the Governor suggesting the rate cuts was aimed at boosting the flagging unemployment rate of 5.2% and helping achieve the inflation target, which remains well below the 2-3% range at just 1.6%. Given the last round of rate cuts simply lead to a residential housing bubble, it’s difficult to see what real benefit this will have outside of forcing investors into riskier assets to generate income. Take for instance the latest term deposit offers, with the best 3-year rate just 2.0% per annum. The US Federal Reserve is also hinting at more accommodative monetary policy via an out-of-the-blue rate cut. They are concerned about the slowing economy and weak inflation.


  • The Australian economy remains in a difficult position, seemingly teetering on the edge of a slowdown, but receiving stimulus from both Government spending and lower interest rates.


  • New car sales were off 9.6% in June, the 15th straight monthly fall, whilst the housing cycle seems to be turning with Steller Developments and Ralan entering administration; worryingly the latter had requested buyers release their deposits as a loan to the company, which may never be returned. Anecdotal evidence is suggesting to us that the banks are simply unwilling to lend as much or as easily as before, which is seeing both pre-sales and apartment settlements reduce and along with them the value of newer apartments. This comes at the same time that the depth of the flammable cladding problem is being investigated by Governments. It’s becoming evident that those who built and approved the impacted towers will escape penalties with the cost passed onto taxpayers, with owners likely to bear the majority of the burden for cheap construction materials and profit maximizing developers.


  • The industry fund sector returns for the financial year were delivered during the month with the median growth option delivering a return of 7%. This represents higher risk options, with the more ‘Balanced’ strategy delivering closer to 6.2% for the same period. It’s more useful to compare against the median or average return for each option, as this reduces the skew that occurs from the higher risk-taking strategies. It remains as difficult as ever to understand the amount of risk each of these options is taking, or the appropriateness of the discount rates being used to price all those unlisted assets. Research house, Chant West, suggests more challenging times are ahead for the sector years of strong returns.


  • In what looks to be a positive move for suffering consumers in Victoria and NSW, the Australian Energy Market Commission released a draft rule allowing large energy consumers, like manufacturers and smelters, to sell back unneeded demand into the wholesale energy market. This means that major users can go around their retailers to reduce capacity when it is not required, whereas in the past retailers had no reasons to sell into the wholesale market as they simply passed the cost onto consumers. Given it is industry that are the greatest power users this makes some sense.


  • Chinese GDP growth fell to the lowest level in 27 years in the June quarter, at ‘just’ 6.2%. The result was weaker than expected as the trade ‘negotiations’ with the US continued to impact on exports but at that level remains one of the fastest growing economies in the world. Importantly, retail sales were up 8.4% year on year in the first 6 months, whilst industrial production also improved by 6%, meaning the quarter was quite strong.


  • The financial services industry purge continued during July as APRA’s disqualification case against prior directors of IOOF came to a head. APRA is suggesting the use of reserves within their super plan to compensate impacted investors was inappropriate. AMP’s maligned life insurance business sale was effectively rejected by the NZ Reserve Bank who noted that the buyer had not submitted the appropriate paperwork and it was not comfortable with many aspects of the change of control. NAB continues making strides to reform their business, with ‘crisis banker’ Ross McEwan appointed the new CEO.


  • BHP has made a huge decision to begin setting goals for its customers to cut their greenhouse emissions. Under what’s being called their ‘Scope 3’ de-carbonisation strategy the company will invest $500m to reduce the emissions from its coal and gas fired global operations and to pressure its customers into doing the same. It’s an important step for the mining sector given the companies dominance in coal mining and the fact it’s exports result in the emission of some 40 times their own.


  • The Australian reporting season will begin in earnest in August, highlights for the first two weeks that will give an insight into the outlook for the economy include:


  • Commonwealth Bank – 7 August
  • AGL Energy – 8 August
  • AMP Ltd – 8 August
  • JB HiFi – 12 August