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Colonial First State An Introduction to Managed Funds

Colonial First State An Introduction to Managed Funds. Disclaimer.

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Colonial First State An Introduction to Managed Funds

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  1. Colonial First StateAn Introduction to Managed Funds

  2. Disclaimer This presentation is given by a representative of Colonial First State Investments Limited AFS License 232468 (Colonial First State). The presenter does not receive specific payments or commissions for any advice given in this presentation. The presenter, other employees and directors of Colonial First State receive salaries, bonuses and other benefits from it. Colonial First State receives fees for investments in its products. For further detail please read our Financial Services Guide (FSG) available at colonialfirststate.com.au or by contacting our Investor Service Centre on 13 13 36. All products are issued by Colonial first State Investments Limited ABN 98 002 348 352. Prospectuses or Product Disclosure Statements (PDSs) describing the products are available from Colonial First State. The relevant prospectus or PDS should be considered before making a decision about any product. This presentation does not take into account your individual objectives, financial situation or needs. You should assess whether the information is appropriate for you and consider talking to a financial adviser before making an investment decision. The information is taken from sources which are believed to be accurate but Colonial First State accepts no liability of any kind to any person who relies on the information contained in the presentation.  

  3. Agenda • What is a Managed Fund? • Asset Classes • What is the right balance for me? • Why managed funds • Investing for the long term

  4. What is a Managed Fund? • Your money is pooled with other investors • You decide on the type of fund (e.g. Australian share fund, international share fund, balanced fund) • Your fund manager researches and selects the companies (or assets) in which to invest

  5. = Global shares = Australian shares = Global property = Listed property = Fixed Interest & Cash Risk / return trade off Return Risk

  6. Asset Classes

  7. Shares • Ownership in a company • Growth Asset • Capital growth (earnings) • Income (dividends) • Potential for high return • Higher risk

  8. Annualised return = 13.2% Annualised return = 12.7% Asset Class ComparisonValue of $10,000 invested Jun 1984 – Jun 2004 $ Source: IRESS - S&P/ASX 300 Accumulation Index, (ASX All Ordinaries Accumulation Index pre April 2000), MSCI World Price Index (A$), All dividends reinvested, excluding fees and charges

  9. Property • Investment in property securities • Growth asset • Income (rent) • Capital Growth (increase in value of property) • Hedge against inflation • 1980’s • Diversify • Hotels, office towers, shopping centres

  10. Asset Class ComparisonValue of $10,000 invested Jun 1984 – Jun 2004 $ Annualised return = 12.7% Source: IRESS - S&P/ASX 200 Property Accumulation Index (ASX Property Accumulation Index pre April 2000), S&P/ASX 300 Accumulation Index, (ASX All Ordinaries Accumulation Index pre April 2000), MSCI World Price Index (A$), All dividends reinvested, excluding fees and charges

  11. Bonds • Income producing asset • Purchase of bond = lending funds to issuer • Income payments (coupons) • Can be traded on secondary market • Can generate both a profit & a loss • Distinct relationship between • Bond prices • Interest rates

  12. Bond example • Fund Manager holds $1,000 worth of Govt. bonds with a interest rate of 8%pa ($80) • Interest rates fall to 6% ($60) • Investor prefers 8% (profits) • Interest rates rise to 10% ($100) • Investor prefers 10% (loss) • There is an inverse relationship between interest rates and bonds

  13. $ Asset Class ComparisonValue of $10,000 invested Jun 1984 – Jun 2004 Annualised return = 11.0% Source: IRESS - UBS Australian Composite Bond Index, S&P/ASX 200 Property Accumulation Index (ASX Property Accumulation Index pre April 2000), S&P/ASX 300 Accumulation Index, (ASX All Ordinaries Accumulation Index pre April 2000), MSCI World Price Index (A$), All dividends reinvested, excluding fees and charges

  14. Cash • Security • Capital • Short term, i.e. 12 months or less • Cash Management Trust • Generally provides better return than a bank account

  15. $ Asset Class ComparisonValue of $10,000 invested Jun 1984 – Jun 2004 Annualised return = 9.1% Source: UBS Australia Bank Bill Index (91 day Commonwealth Treasury Note Index pre Jan 1999), UBS Australian Composite Bond Index, S&P/ASX 200 Property Accumulation Index (ASX Property Accumulation Index pre April 2000), S&P/ASX 300 Accumulation Index, (ASX All Ordinaries Accumulation Index pre April 2000), MSCI World Price Index (A$), All dividends reinvested, excluding fees and charges

  16. What is the Right Balance?

  17. What is the right balance? • List income & growth needs • Consider time horizon & degree of risk • Consider investment alternatives (which meet your needs) • Reassess your balance of investments as your needs and the economic environment change

  18. What is the right balance?Diversification across asset classes Fixed Interest Property $ $ $ Cash Shares Spreading your savings helps your chances of achieving your retirement goals

  19. What is the right balance?Risk / return trade off = Australian shares = Fixed Interest & Cash CFS High Growth Fund = Global shares = Listed property CFS Diversified Fund Return = Global property CFS Balanced Fund CFS Conservative Fund Risk

  20. Why managed funds?

  21. Why managed funds? • Spread investment risk • Potential for higher returns • Liquidity of asset holding • Fund manager expertise • Ability to invest in overseas markets that are otherwise difficult to access

  22. Asset class returns (%pa)Annual Returns to 30th June 2004 AUSTRALIAN INTERNATIONAL Percentage return over 1 year to 31st March 2004. Source: UBS Australia Bank Bill Index (91 day Commonwealth Treasury Note Index pre Jan 1999), UBS Australian Composite Bond Index, S&P/ASX 200 Property Accumulation Index (ASX Property Accumulation Index pre April 2000), S&P/ASX 300 Accumulation Index, (ASX All Ordinaries Accumulation Index pre April 2000), MSCI World Price Index (A$), and the SSB World Government Bond Index *ex Australia Hedged to A. All dividens reinvested excluding fees and charges

  23. $ Why managed funds?Taking the best of each asset class Source: UBS Australia Bank Bill Index (91 day Commonwealth Treasury Note Index pre Jan 1999), UBS Australian Composite Bond Index, S&P/ASX 200 Property Accumulation Index (ASX Property Accumulation Index pre April 2000), S&P/ASX 300 Accumulation Index, (ASX All Ordinaries Accumulation Index pre April 2000), MSCI World Price Index (A$), All dividends reinvested, excluding fees and charges

  24. Why managed funds?Gain access to global markets World equity markets by market capitalisation as at 30th November 2003 Source: Rimes Data to 30th November 2003

  25. Why managed funds?Putting it into perspective Australia A$bill USA A$bill 48% of ASX 300 A$649 bill 23% of S&P 500 US$10,408 bill Source: IRESS, ITG. Data as at 30th June 2004. Global stock data as at 12th July 2004

  26. Understanding the current market

  27. Understanding the current marketInternational shares… we’ve seen better! The 21st C Global shares in AUD MSCI – World Net Index ($A) Source: IRESS. Data to 30th June 2004

  28. Understanding the current market US sharemarket and company earnings US Sharemarket US company earnings Source: Bloomberg. Sharemarket data and earnings data to October 2003

  29. Share prices & company profits grow together Australian share price index $bill Corporate profits Corporate profits -Source: RBA Bulletin table G12. Data to 31st March 2004 Australian Share price index – Source: IRESS. Data to June 2004

  30. Recessions – USA, Europe, Japan Wars – Afghanistan, Iraq Pestilence – SARS Terror – September 11 Scandals – Enron Recessions in 1970s, 1980s, 1990s Korea, Cold War, Gulf War AIDS IRA, Red Brigade, Black September Barings, S&L crisis Understanding the current marketA ‘new’ era?

  31. Investing for the Long Term

  32. Investing for the long termPatience has been rewarded Source: Rimes. Returns from the MSCI World Net Index $A, calendar years to 30th November 2003

  33. Patience has been rewarded Source: Rimes. Returns from the MSCI World Net Index $A, calendar years to 30th November 2003

  34. Patience has been rewarded Source: Rimes. Returns from the MSCI World Net Index $A, calendar years to 30th November 2003

  35. Time in the market, not timingAustralian shares to 30th June 2004 Source: IRESS, Colonial First State *All Ordinaries Accum Index used prior to April 2000

  36. Conclusion • Understand how sensitive you are to changes in the market & know your investment time frame • Managed funds making accessing a range of asset classes easy • Invest for the long term • Diversification is the key

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