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Hedge Clippings | Friday, 02 October 2020
Whilst at this stage it's too early to have firm details on fund performances for September, neither the ASX nor the S&P500 (or almost all other global indices) fared too well for the month, so we'd expect the usual wide range once we have the bulk of the numbers by this time next week.
Active equity managers will be under pressure to perform to justify their fee structure. They have certainly done that (and more in many cases) in the 12 months to the end of August, based on AFM's Index Report which revealed that against a fall of -5.08% for the ASX200 Accumulation Index, All Equity funds rose 5.36%, whilst on a geographic mandate basis funds investing in Australian/NZ equities rose 3.25%.
Not surprisingly, given the US market's better performance over 12 months, funds investing both in Australia and Globally fared better at +5.44%, whilst those investing specifically in the US have returned 9.08% - although this latter group are well below the S&P's 12 month performance.
Irrespective of the above facts and 10% average out performance over 12 months, the fee debate will no doubt continue: Is it worth paying higher fees for above market performance? One would have thought so, provided the outperformance came with lower risk, and consistency over time.
Turning to economic matters, next Tuesday will see the Treasurer Josh Frydenberg deliver a belated budget, with expectations of a deficit around $200bn, give or take a few billion. No doubt there'll be those (particularly amongst the opposition) who will try to make mileage out of that number when earlier this year expectations were for a small surplus.
From our perspective, the government has to do whatever it takes to manage the economy out of the COVID inspired train crash that has occurred. Provided sufficient quantities of the billions of deficit dollars are directed towards supporting those sectors of the economy or community that are in need of support, whilst stimulating those that will have the maximum effect on employment and economic activity, that would seem to be their obvious responsibility.
Will everyone and every sector be happy? Undoubtedly not, and we'll hear plenty from those that aren't, and very little from those that are. Will it put a burden on future generations? Of course, but not nearly as large a burden (or trauma) that would be caused by not creating the debt to fund the stimulus the country requires. If anything, we'd urge the Treasurer to spend more, not less.
Just don't waste it.
Australia has always been known as the "lucky country". Casting an eye around the world right now it may be easy to complain, but where else would you want to be? While there are stories of the thousands of Australian citizens desperate to return home but unable to do so due to a lack of quarantine hotels or facilities to handle them, we don't hear of too many US, UK or EU citizens desperate to leave our shores for their homelands where chaos reigns supreme.
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