What does Certitude offer the Australian market?
We're a provider of global asset managers to the Australian market. We represent a range of global providers, the first of which was Lighthouse Partners, which is our absolute returns manager. They've been a big part of our make-up.
In 2010 we brought on Asia specialist Marshall Wace Gavekal. We also have subsequently bought on Threadneedle, which is our global equities partner. And very recently we've brought on Columbia Management Investment Advisers, which is our global debt partner. We're just about to launch a Columbia credit fund.
So that gives us a suite across the entire global spectrum and allows people to access the best managers across all global asset classes. It allows us to address a range of different needs.
What are you seeing in the global environment?
Emerging markets are now a driving force - it's at the forefront of our minds in terms of growth. Emerging markets are seen in variety of ways: equities, debt, and then you look at geographies within that.
What is interesting is when people are talking about emerging markets, they are now somehow dropping Brazil out of the BRIC (Brazil, Russia, India, and China). There is less interest around Brazil and the South Americas, although they seem to be offering some very good emerging market debt opportunities. There is also less interest around eastern Europe. But Asia seems to be standing out as an emerging markets oasis.
But the way we see things at the moment, you don't want to isolate anything on the globe, and you want active managers. Active managers should be able to play the entire globe, where they can go overweight emerging markets and underweight developed markets as they need to, and vice versa, based on the themes they're seeing.
The partners we've picked are playing the entire globe, and are able to over-emphasise Asia versus other emerging markets, and they can play developed markets as they present more opportunity to them. That flexibility gives people far better growth opportunities going forward, in rising or non-rising markets.
The fact we have a strong DNA to our hedge fund piece allows clients to make money in down markets.
That leaves you with active managers playing the globe where you can make money on the up and downside. They're all first quartile and risk-adjusted return basis, so they're outperforming the index while taking less risk than the index themselves.
What are you hearing from investors?
The baby boomers are getting older, the super dependence is getting higher, and based on that, risk profiles are going to change quite dramatically. We've seen portfolios drop quite considerably. For those in their late fifties and early sixties, the chance of making that back is becoming harder, and they would need to be quite aggressive to do so.
What will play out is that cash will no longer be the highest asset class. Cash has to do more, or they won't be able to bridge the gap between now and retirement. They need to take risk but they can't afford to be extremist, so risk adjusted returns will be a big focus going forward. Having managers with that at the forefront of their investment processes will be critical.
The opportunity for growth is there without taking huge risks in doing it.
So income will be more of a focus?
The growing demand for income from every asset class is going to be immense. People aren't going to move out of cash where income is all they get and move to asset classes where no income is possible at all. So what we're seeing is a growing trend to global equity income, deriving an income stream from offshore equities. Australians should be used to that because of fully franked dividends.
They're looking at stronger income streams out of their global fixed income - there is a real caution to global sovereign bonds, which makes sense, especially in developed markets.
Credit and high yield are drawing a stronger focus. For corporations that are in very good shape, credit is a very good way of driving income out of fixed income pools. Demand for income will only get stronger. So you're developing funds for markets changing in risk profile, where growth and income are both required.
Growth will elongate capital to draw upon for retirement and prolong the income stream throughout retirement as well.
