Budget week finally confirmed what most already knew: Australia was not going to be in, or return to, surplus any time soon, irrespective of any change in government in September. Treasury's earlier revenue estimates were far too optimistic, and some (in particular from the mining and carbon tax) have simply not materialised as anticipated by the government.
Coincidentally or not with the confirmation of the federal deficit, the A$ came under pressure as the combined effects of lower rates (down 25 bps to 2.75%), a reduced outlook for resources, and the reality of a mid to long term budget deficit added to the effects of a strengthening US currency.
The current government delivered a strategic budget which promised large social programs such as the disability pension scheme and education reform, cleverly boxing in the opposition and making it difficult for them to abandon them if, or when they assume power.
As previously telegraphed the budget included the gradual increase of the superannuation guarantee levy from the current 9 to 12%, which the opposition promptly announced would be delayed or deferred on their watch. One interesting twist in the ongoing progress or otherwise of reform of the superannuation system was the opposition's successful amendment this week requiring at least one third of industry superannuation fund trustees to be independent.
The current equal representation model requires industry super funds to appoint half their trustees from union representatives and the other half from employer representatives. Although the Cooper Review recommended that a lack of independent trustees was no longer appropriate, the government chose not to include the changes in the legislation.
The twist came not so much that the amendment was proposed, and passed 72 to 68, but in the fact that the independent MP's voted against a proposal favoring independence, and that it appears four government MP's, including two ministers and a government whip, either abstained, or were absent.
Given the importance and value of the superannuation system it seems incongruous that industry super funds are not subject to the same or similar governance and transparency regime as corporate Australia.
While on the subject of governance and transparency, Bloomberg the global leader in financial information with over 300,000 terminals installed, was (or should be) severely embarrassed. It was revealed this week that Bloomberg has been engaging in a case of "big brother" by enabling their journalists to be able to track who, what and where the terminals were being used, and what was being viewed.
While we haven't yet read of actual cases where the information gleaned has been misused, the potential for misuse (given that each terminal is usually registered to an individual user) is massive, and Bloomberg will no doubt be scrambling to protect their reputation in dealing rooms around the globe, just as users will be demanding changes to the terms of their agreements.
Performance and News Updates on www.fundmonitors.com this week:
The Monash Absolute Investment Fund returned 1.13% during April, a month of extreme moves on the ASX with Small Cap Resources falling 19% and the top industrials rising 4.7%. At month-end Fund net exposure was 67%.
Insync Global Titans Fund returned 1.63% for April with the biggest positive contributors coming from a range of stocks including Sanofi, Coach, Roche and Walt Disney. Average mkt cap of stocks in the portfolio is $A 99.1bn with a weighted average forecast dividend yield of 2.90%. The fund is currently un-hedged. We also released the latest Fund Insync Review for April 2013, which you may read here.
The Pengana Australian Equities Fund had a strong April returning 3.51% bringing its 12 month return to 25.91%. Cash exposure at end April was 29%.
Morphic Global Opportunities Fund had a sound April returning 2.80% with top stock contributors coming mostly from Japan. Performance since inception in August 2012 is now 20.53%. The Fund is fully un-hedged, you can read the most recent Morphic Fund Review here.
The Auscap Long Short Australian Equities Fund had a very strong month, recording 9.83% during April. A major contributor to performance was shorting gold stocks which provided the Fund with a 2.8% return.
And finally, for something completely different, a funny clip on how frustrating it could be to teach a child how to tell the time, almost as frustrating as teaching my wife how to fix her computer.
On that note, I hope you have a happy and healthy weekend!
Regards,
Chris
CEO, AUSTRALIAN FUND MONITORS
