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Australia's investment and wealth management community gathers today to hear the experts speak on finding the holy grail of returns at the Portfolio Construction Forum's annual Markets Summit.
The scene here at Australian Technology Park, where BlueChip Communication is finding facts, seeking insights and supporting clients with social media presence, is intense.
The heavy 10-hour program (if you count drinks at the end, and who doesn't?) involves some of the world's leading names in investment management gathering to share their views on key drivers of markets for the next three years before an audience of investment and wealth management professionals.
The day's early sessions deal with the macro: business outlook, risk, geopolitical drivers and where Australia sits, economically and from a market perspective, in the world scheme of things.
Speaker one is Principal Global Investors head, Jim McCaughan.
Know your client - and diversify
Perhaps one of the most compelling messages from his presentation is his contention that it's not just the markets that have changed (which they have, and radically, in his view). The clients, too, are very different. According to Jim, a key challenge is understanding who the clients are.
That's because there's been a radical shift in the nature of the client from, among other things, the defined benefit pension schemes to defined contribution schemes, voluntary and mandatory. There's been a shift in focus from the developed world to Asia ... and so on. And investment managers ignore who their client is at their peril.
In Jim's sights on the Aussie investment front is the forthcoming end of the commodities super cycle, leading to a decline of the terms of trade that have helped keep us buoyant and a consequent negative effect on investment - IF investors fail to address the risk by diversifying into international investment waters.
QE: the downside of the money printing
Next to take the stage was Nick Bullman from CheckRisk. One of his key messages: beware the long term effects of quantitative easing, which are yet to be fully felt. They have not only sheltered investors perhaps artificially from near term pain, they may well have extended the current 'risk period' to extend further than it might otherwise have. In short: there's no reason for investors to rest one ash, even if some of the worst is behind us. And if we were to put a toe in the investment water? O a risk adjusted basis, says Nick Bullman, Asia remains far more attractive than Europe.
How does Australia rank?
To give an Australian perspective, Mark Rider from UBS took the stage in a presentation that incorporated the Peter L Bernstein Memorial Lecture. The former RBA stalwart remained true to his fact-driven heritage and took the audience through a compelling presentation in which he used IMF and OECD data to give a clear and objective picture of where Australia REALLY stands economically in the world.
The question he asked: Are we on the podium? The answer? On a number of levels - yes, Australian performance is world class. However, we also take the gold in some of the less desirable areas, including cost of living, competitiveness and labour costs. Against the backdrop of a concern he shares with Jim McCaughan, the upcoming shift away from commodities toward consumer goods and services, this means Australia should be alert, if not alarmed. He too pointed to the need to diversify - to broaden the economic base and prepare for an economy which can no longer rely on resources to keep it afloat.
In summary, the commentators on the macro outlook gave us cause for comfort - at least in the near term. But it's hard to ignore the fact that all agree that longer term pain, in one form or another, is more than likely down the track unless we look it in the face in the here and now.
