Investors’ Seminar November 2014 “How Risky Are Our Investments?” Disclaimer This is not Advice. Please see Mark before considering any changes. Mark will put any recommendations in writing The information contained in this presentation has been prepared for general use only and does not take into account your personal investment objectives, financial situation or particular needs. Before you make any decision about whether to invest in a financial product, you should obtain and consider the Product Disclosure Statement of the financial product. The information provided by HFS has been done so in good faith and has been derived from sources believed to be accurate at the time of compilation. Changes in circumstances, including unlawful interference and unauthorised tampering, after the date of publication may impact on the accuracy of the information. Neither HFS d nor any member of HFS accepts responsibility for any inaccuracy or for investment decisions or any other actions taken by any person on the basis of the information included. Past performance is not a reliable indicator of future performance. Neither HFS nor any member of HFS guarantees the performance of the Funds, the repayment of capital or any particular rate of return. The performance of any unit trust depends on the performance of its underlying investment which can fall as well as rise and can result in both capital losses and gains. Consequently, due to market influences, no assurance can be given that all stated objectives will be achieved. Investors’ Seminar November 2014 How Risky Are Our Investments? Past performance; Economic data Forecasts Ideal Cash & Term Deposit Levels Top 10 Holdings IOO – iShares S&P Global 100 XAO – S&P All Ords What could go Wrong? 1. Drawdown Levels may significantly increase 2. Dividends may not provide sufficient cash-flow to the RHS 3. The Security of the RHS may cease 4. The businesses part-owned in the LHS may not produce adequate Earnings 5. A loss of the long-term focus and the patience – cannot “stay the journey” What Are The Risks? Volatility – it’s not a risk; it’s a certainty Risk Capacity Risk Attitude Longevity Risk Inflation Risk Liquidity Risk Credit Risk; Diversification Risk; Market Risk Market Timing Risk Past Performance Lonsec Asset Classes - Historical Returns to 30 September 2014 Returns (%p.a.) Australian Equities Global Equities % pa Australian Listed Property % pa Australian Fixed Interest % pa % pa % pa 5 years 6.6 11.2 8.6 6.7 3.9 10 years 8.2 5.0 1.7 6.3 4.9 15 years 8.7 2.0 5.9 6.4 5.1 20 years 9.4 6.0 7.5 7.4 5.4 Cash Current market statistics and valuations Consensus expectations for EPS growth and P/Es 10 October 2014 PE FY 2015 (f) x PE FY EPS Growth 2016 (f) FY 2015 (f) x % MARKET 14.0 12.9 5.4 EPS Growth FY 2016 % 8.6 Financials 12.8 12.2 7.2 4.8 - REITS 14.5 13.8 6.8 4.6 Industrials 16.5 14.9 9.8 10.68 Resources 12.6 11.0 -3.6 14.5 Top 50 Mid Cap 50 13.8 15.2 12.8 13.3 3.7 10.5 7.2 14.4 Small Ords 15.3 12.9 21.8 17.9 Source: Ausbil calculation based on consensus broker earnings forecasts, 10 October 2014 8 Forecast Returns Lonsec 30 September 2014 Asset Class 10 Year Forecasts Yield % pa Growth % pa Total % pa Australian Equities 4.5 4.2 8.7 Global Equities 2.5 5.8 8.3 Australian Listed Property 6.0 2.0 8.0 Australian Fixed Interest 4.4 0.2 4.6 Cash 4.2 - 4.2 Australian long term returns Average annual total returns after inflation 1900-2013 % Real bond returns Real equity total returns Real equity capital gains less inflation Income compounding effect 19502013 % 1950s 1960s 1970s 1980s 1990s 2000s % % % % % % 20102013 % 1.5 1.0 -6.3 0.9 -5.1 2.1 9.9 3.7 5.0 7.4 6.1 9.0 10.6 -4.2 8.6 9.0 5.5 4.0 1.6 0.8 2.4 4.6 -10.6 4.0 4.6 1.4 -0.3 5.8 5.3 6.6 6.0 6.4 4.6 4.4 4.1 4.3 Source: Credit Suisse / London Business School : ‘Global Investment Returns Yearbook 2014’ 10 The Ideal Level Of Cash & Term Deposits Segmentation Bar Placement – the key issues are: A. Drawdown Goals – allocate considerable time to this B. Market Issues (a) Dividends from the LHS; (b) Worst Case long-term share prices in LHS LHS – Long-Term Investing 10 Year Investing vs 1 Year Investing “Rolling Smoothed” 10 Year Returns Hayden Investment Paradox Allowance for Inflation is crucial because we must retain our Purchasing Power Specialist Stock-picker AS IS P TD Cash XYZ Manager Specialist Stock-picker We want to: 1. Buy a designated portfolio of shares 2. Contract a high-quality specialist Investment Manager to manage the portfolio and instigate changes to ensure best forecast (prognostic) returns How do we ensure a high quality result A. Analyse the portfolio of shares B. Analyse the skill-set of the Investment Manager The Boxes to Tick Realistic Goals Structure/Strategy (Tax etc) Super Fund Admin Asset Mix 1 -Cash/TermDeposits Asset Mix 2–Growth Section (LHS) Stock-Picker Selection What can Investors expect from HaydenFS? A. Revision of the Segmentation Bar Placement – to ensure the ideal level of Cash & Term Deposits B. Revision of the Investment Managers and Specialist Stock-Pickers Peace-of-mind for Investors 1. Part-own a lot of great businesses. We have a portfolio of businesses that is well diversified across locations, industries and size. 2. Employing (contracting) some very wise people to monitor and change our portfolio of investee businesses when necessary.