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Model Portfolio Enhancements & Department Update

Model Portfolio Enhancements & Department Update. Contents. 1. Model Portfolios 2. Current Research Analysis 3. ‘BOB Highlights’. 1. Model Portfolios. 1.1 Background - Committed to supply for all approved platforms - Portfolios available for: * IOOF Pursuit Select (IPS) & Core

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Model Portfolio Enhancements & Department Update

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  1. Model Portfolio Enhancements & Department Update

  2. Contents • 1. Model Portfolios • 2. Current Research Analysis • 3. ‘BOB Highlights’

  3. 1. Model Portfolios • 1.1 Background • - Committed to supply for all approved platforms • - Portfolios available for: • * IOOF Pursuit Select (IPS) & Core • * Navigator Investment & Retirement Services • * ING OneAnswer Super/ Pension/ Investments • * CFS FirstChoice Super/ Pension/ Investments • * Lonsec Model Portfolios • * plus MLC MasterKey & Custom • - Available for the six standard client risk profiles • - Can use without platforms. Eg DIY Super

  4. 1. Model Portfolios • 1.2 Recap • - Suitable to use when providing an ‘investment service’ as part of value proposition – A & B grade clients • - Multi manager better when not servicing clients - A & B grade clients • - Portfolios use sector specific funds • - Modelled on each platforms investment menu • - Investment policy are ‘rules & boundaries’ • - Asset allocation used is van Eyk (subject to change) • - Quarterly reporting provided • - Portfolios & quarterly reporting available through Xplan • - Adviser role is portfolio administration – annual reviews re-weighting

  5. 1. Model Portfolios • 1.3 Investment Objectives • - Capital Safe: Aim is capital protection & hence 100% defensive assets • Objective is to outperform cash by 1% over 3 years • Suggested minimum investment timeframe is 3 years • - Conservative & Moderately Conservative: Aim is capital stability with some limited exposure to growth assets • Objective is to outperform cash by 2% & 3% over 5 years • Suggested minimum investment timeframe is 5 years • - Moderate Growth, Growth & High Growth: Aim is capital growth through a high exposure to growth assets • Objective is to outperform cash by 4%, 5% & 6% over 7 years • Suggested minimum investment timeframe is 7 years

  6. 1. Model Portfolios • 1.4 Investment Policy • - Portfolio investment management style - neutrality • - Active & passive asset managers • - Regional asset allocation • - Strategic versus tactical asset allocation • - Optimal number of managers • - Market segmentation • - Currency management • - Alternate asset classes: • * Direct Property * Short selling * Derivatives • * Boutiques * Currency management

  7. 1. Model Portfolios • 1.5 Asset Allocation • - Use van Eyk strategic asset allocation • - Capital safe risk profile previously 100% cash & fixed interest • New recommended asset allocation 40% cash/ 30% Aust FI/ 10% High Yield/ 20% International FI • - High yield is generally listed income securities/ sub investment grade corporate debt • - Regard aggressive mortgage trusts as ‘high yield’ –mezzanine debt/ construction financing etc • - Tailoring asset allocation – document in SOA’s

  8. 1. Model Portfolios • 1.6 Selected Fund Managers • - Ultimately controlled by asset allocation & investment policy • - Eg four Australian equities funds required – style neutral • - Review investment universe/ quant & qual screen on: • * Track record * Review research reports • * Research ratings * Meet portfolio managers & team • * Vet tracking errors/ information ratios/ review manager ‘style’ • * Blend potential portfolios & recommend • - Cash & fixed interest, understand risks/ constraints/ asset allocation • - Vet ongoing performance/ all information & changes

  9. 1. Model Portfolios • 1.7 Platform Portfolios • IOOF Pursuit Core (old IPS models) • - CASH: IOOF Cash Enhanced Trust • - AUSTRALIAN FIXED INTEREST: IOOF W FI Interest Trust/ Challenger W High Yield • - INTERNATIONAL FIXED INTEREST: Macquarie Diversified Fixed Inter. Fund • - PROPERTY: Legg Mason Property Trust • - AUSTRALIAN EQUITIES: Ausbil Dexia Aust. Active Equity Fund/ Orion Australian Share Fund/ IOOF Perennial Value Aust Shares Trust/ Perpetual W Industrial Fund • - INTERNATIONAL EQUITIES: Axa Bernstein Global Value Equity Fund/ Credit Suisse International Shares Trust/ GSJB Were International Fund/ Platinum International Fund • IOOF Pursuit Select • - AUST. FIXED INT.: AMP Enhanced Yield Class A in place of Challenger High Yield • - PROPERTY: GSJB Were Property Securities in place of Legg Mason Prop. Securities • - AUSTRALIAN EQUITIES: Challenger Aust. Share in place of Ausbil Active Equity/ Schroder Australian Share in place of Orion Australian Share • - INTER. EQUITIES: Zurich International Share in place of GSJB Were International

  10. 1. Model Portfolios • Navigator Retirement & Investment Service • - CASH: UBS Cash Fund • - AUSTRALIAN FIXED INTEREST: BT Wholesale Fixed Interest Trust/ Challenger W High Yield • - INTERNATIONAL FIXED INTEREST: Macquarie Diversified Fixed Inter. Fund • - PROPERTY: BT Property Securities Fund • - AUSTRALIAN EQUITIES: Ausbil Dexia Aust. Active Equity Fund/ Orion Australian Share Fund/ IOOF Perennial Value Aust Shares Trust/ Perpetual W Industrial Fund • - INTERNATIONAL EQUITIES: Axa Bernstein Global Value Equity Fund/ Credit Suisse International Shares Trust/ GSJB Were International Fund/ Platinum International Fund • Note, no portfolios for Navigator Access due to menu limitations. Recommend diversified use with sector blend.

  11. 1. Model Portfolios • ING OneAnswer Super/ Retirement/ Investment • - CASH: ING Cash • - AUSTRALIAN FIXED INTEREST: Optimix Australian Fixed Interest Fund/ AMP Capital Enhanced Yield Fund • - INTERNATIONAL FIXED INTEREST: Merrill Lynch Monthly Income Fund • - PROPERTY: Credit Suisse Property Trust • - AUSTRALIAN EQUITIES: BGI Australian Shares Fund/ IOOF Perennial Value Aust Shares Trust/ Perpetual Australian Shares Fund/ Schroder Australian Equities Fund • - INTERNATIONAL EQUITIES: Axa Bernstein Global Value Equity Fund/ Credit Suisse International Shares Trust/ Zurich International Fund/ Platinum International Fund

  12. 1. Model Portfolios • CFS FirstChoice Super/ Pension/ Investments • - CASH: CFS Cash Fund • - AUSTRALIAN FIXED INTEREST: Axa Alliance Australian Fixed Int. Fund/ Challenger W High Yield • - INTERNATIONAL FIXED INTEREST: CFS Diversified Fixed Interest Trust • - PROPERTY: BT Property Securities Fund • - AUSTRALIAN EQUITIES: Ausbil Australian Active Equity Fund/ BGI Australian Share Fund/ IOOF Perennial Value Aust Shares Trust/ Schroder Australian Equities Fund • - INTERNATIONAL EQUITIES: Axa Bernstein Global Value Equity Fund/ BT Core Global Share Fund/ Credit Suisse International Shares Trust/ Platinum International Fund

  13. 1. Model Portfolios • Ex Lonsec Model Portfolios • - CASH: IOOF Cash Enhanced Trust • - AUSTRALIAN FIXED INTEREST: IOOF Wholesale FI Interest Trust/ Challenger W High Yield • - INTERNATIONAL FIXED INTEREST: BT Global Fixed Interest Fund • - PROPERTY: MLIM Combined Property Income Fund • - AUSTRALIAN EQUITIES: Ausbil Australian Active Equity Fund/ Orion Australian Share Fund/ IOOF Perennial Value Aust Shares Trust/ Portfolio Partners High Growth Shares Trust • - INTERNATIONAL EQUITIES: Axa Bernstein Global Value Equity Fund/ Barclays International Share Fund/ Zurich International Fund/ Platinum International Fund

  14. 1. Model Portfolios • MLC MasterKey Custom • - CASH: UBS Cash Enhanced Trust • - AUST. FIXED INT: Credit Suisse Aust FI Interest Fund/ Challenger W High Yield • - INTERNATIONAL FIXED INTEREST: Macquarie Diversified Fixed Interest Fund • - PROPERTY: Legg Mason Property Trust • - AUSTRALIAN EQUITIES: Ausbil Dexia Aust. Active Equity Fund/ Barclays Australian Share Fund/ IOOF Perennial Value Aust Shares Trust/ Perpetual W Industrial Fund • - INTERNATIONAL EQUITIES: Axa Bernstein Global Value Equity Fund/ Credit Suisse International Shares Trust/ GSJB Were International Fund/ Platinum International Fund • Note, no portfolios for MasterKey due to menu limitations. Recommend diversified use with sector blend.

  15. 1. Model Portfolios • 1.8 Current Issues • - Aim to align over time - Ausbil Active Equity inclusion first step (see new Model Portfolios report for specific recommendations) • - New format for presenting portfolios – one table! • - Quarterly reporting to continue • - Ongoing work: Xplan integration/ strategic asset allocation (global property)/ Pursuit product development (automatic re-weighting) etc • - Reporting changes: Can no longer portfolio performance reporting for all portfolios due to: • * Theoretical returns • * No reporting tool – manually calculated • * Convergence of many portfolios – WCFP/ FP/ Lonsec • - Will provide ongoing core portfolio reporting and individual manager & benchmark returns – ideally provide clients actual net return! • - Income biased portfolio – early 2007

  16. 2. Current Research Analysis • 2.1 Agribusiness Review • - Currently reviewing • - Analysis of sub asset classes: timber chipping/ timber other/ horticulture/ viticulture etc • - Different risk profiles of sub asset classes – some more ‘commodity like’ in nature – other more speculative • - Need to examine providers – important to diversify exposure to promoters/ products • - Adviser policy being changed from marginal tax rate focus to strategy focus (eg CGT issues/ non deductible debt strategies/ family tax benefit etc) • - Will focus on the cheaper & better rated products – price certainly an issue for ‘commodity like’ offers

  17. 2. Department Update • 2.2 Super Choice • - Mercer Super comparator tool • - Product database being built – forward suggested funds not covered • - Adviser policy to change – will remove need to forward completed analysis forms to Research Department • - Policy focus is to use super comparator table to form ‘basis for recommendation’ – your choice whether to include analysis in SOA • 2.3 Non Core Approval Process • - Use Product Request form for new product recommendations except if 4 or 5 star S&P rated, forward email • - If HOLD rec for existing investor, forward email • - Ensure full manager/ product/ investment option is detailed on all requests

  18. 3. ‘BOB’ Highlights • Recent ‘Best of Breed’ (BOB) Research tour – Reviewed 12 managers & estimated 30 products. • Investment Trends: • - Increasing use of quantitative (quant) management • * Improvements in technology & data quality • * Screening based on mix of fundamental (bottom up P/E; P/B; DCF’s etc) & technical analysis (charting; valuation focus) • * Allows large universe to be screened – traditional mgrs use MSCI • * Traditional fundamental managers use • * More & more dedicated quant funds – optimiser use

  19. 3. ‘BOB’ Highlights • - Emerging markets focus – not just China! • * Largest growth potential due to GDP growth • * All countries are unique. Eg China manufacturing/ Russian & Brazil resources/ Indian IT etc • * Volatility reducing as risk premiums reduce – developing monetary policies/ banking systems/ infrastructure etc • * Inter. Equities funds increasing exposure to generate ‘alpha’ • * Diversified funds increasing trend to use • - Thematic investing – dedicated style + ‘traditionals’ increasing use • - Global property commitment • - Increasing development/ use of structured product • - Sophistication of diversified fixed interest/ increasing focus of equities managers (due to complex debt structures)

  20. The End • QUESTIONS

  21. Disclaimer • Consultum Financial Advisers Pty Ltd, ABN 65 006 373 995, Australian Financial Services Licence No. 230323 and Life • Insurance Broker. • This document has been prepared for general information purposes only and not as specific advice to any particular • person. Before making any investment decision based on this advice, you should consider, with or without the • assistance of an adviser, whether it is appropriate to your particular investment needs, objectives and financial • circumstances. A Product Disclosure Statement on any financial product mentioned in this document should also be • obtained and read prior to proceeding with an investment decision. • Although every effort has been made to verify the accuracy of the information contained in this document, Consultum • Financial Advisers Pty Ltd, its officers, employees and agents disclaim all liability (except for any liability which by law • cannot be excluded), for any error, inaccuracy in, or omission from the information contained in this document or any • loss or damage suffered by any person directly or indirectly through relying on this information. • This information has been provided for the exclusive use of the party to whom it is addressed and must not be provided • to any other party or disseminated in any way without the express approval of Consultum Financial Advisers Pty Ltd. It • is intended for your sole use and must not be passed onto a retail client or be made available to any retail client and any • provision of advice based on this information should not be attributed to Consultum Financial Advisers Pty Ltd.

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