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NICK BRUINING
CERTIFIED FINANCIAL PLANNER
NC BRUINING & ASSOCIATES
sub-standard returns has seen a significant portion of investors
now making active choices to leave any investment involving risk.
$1.3 trillion in superannuation funds is impressive, but more than
80% of superannuation funds now offer members the ability to
switch underlying investments. That is, shift the asset allocation
by switching investment options.
And they are.
The usual catch cry of “don’t worry, we’re there for the long-
term” starts to lose credibility when we see that the All Ordinaries
index has been solidly in the 2006 trading range through most
of 2011. Investors comparing a return that shows a net 2.49%
compound return over five years in a balanced fund to term
deposits currently paying
around 6% are asking what’s
the point? The risk/return
trade-off has, in their minds,
been blown out of the water.
Superannuation funds
have picked up on the trend
and have started offering
bank term deposits within
the suite of offerings held via
superannuation platforms
in order to retain funds.
Data obtained from
APRA shows that of those
members making an active
selection, 50% have elected
to remove funds from
the “risky” investment
offerings, including the
default investment option
where most of the money
flows. Traditionally, around
40% of total funds in a
“Balanced”
investment
offering would find its
way into Australian equity
markets. In simple terms,
that is 40% being removed
from the market.
Of course, the counter
argument is that when the
inevitable improvement occurs, the money will be switched back,
but there is good anecdotal evidence also to show that switching
decisions are somewhat sticky. That is, switching is not done
frequently, and when executed, is not often looked at again for
some time. The damage done by the poor returns over the past four
years could take years for confidence to be restored.
It is a tricky issue and not easily fixed. While naturally, we are
focused on the business of mining, we should never forget that
each and every Australian, thanks to their superannuation and
their ability to switch, has a part to play. Their confidence in your
project and this industry is just as important as the analyst who
appears on site with the latest IPad.
FEEDING THE HUNGRY BEAST
Is capital, the lifeblood of commodity development, becoming
an increasingly shy and endangered species, corralled into
ever-more cautious corners by the foot-stomping, nostril-flaring
volatility of the Australian sharemarket? Expert Financial Planner
Nick Bruining takes us on an energetic safari through the game
park of investment choice, where traditional risk/reward ratios
seem to have bolted, and the timidity of the speculative dollar is
ever more tricky to overcome.
To say it has been an “interesting year” in markets would surely
go down as one of the great understatements of the century. Now
resembling the bouncing patterns of some form of cosmically
energised super-ball, commodity and capital markets have taken
on a life of their own. Swings of plus or minus 6% within a single
trading session have almost become part of the accepted volatility.
Driven in part by the possibility of world-wide economic
downturn but accentuated by hedge funds and computerised
trading systems actively trading the volatility, capital markets
run the real risk of spooking investors away from providing much
needed development capital in the years ahead.
Mining, more than any other sector, needs to attract the
speculative dollar. That some of our blue chip shares now exhibit
capital volatility on par with some of the best penny dreadful
stocks has many heads shaking, but could also be doing some
serious long-term damage.
While most of us just assume the institutional investors
will be there to feed the hungry beast, increasing awareness of
investment fundamentals coupled with an extended period of
LES WALKLING, PORT HEDLAND, 2010
MINESITE 2011
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