Financial Tools
  Client Portfolio Access
  New Client Kit
  Enquiry / Seminar Registration
Hot Issues
Aussie economy shifts gears as structural changes take hold
The catch 22 of retirement savings
Are there reasons to help the tax man do his job?
Some financial terms explained
Small business paradox
Good financial planning finally has a value: 23% more income in retirement
Market Update - January 2015
‘Incredibly high’ number of trustees hold no life insurance
SMSFs in 2015 Budget’s firing line
Rebalancing resolutions
Hammering away at asset allocation is only part of the retirement income solution
Market Update – December 2014
We wish all our clients a Merry Christmas,a Happy New Year and a restful holiday
A great overview of investing and good Holiday reading.
The final nail in the coffin for LRBAs?
Market Update – November 2014
Online financial tools your family and friends can use.
Overcoming our behavioural barriers to saving
Articles archive
Quarter 4 October - December 2014
Quarter 3 July - September 2014
Quarter 2 April - June 2014
Quarter 1 January - March 2014
Quarter 4 October - December 2013
Quarter 3 July - September 2013
Quarter 2 April - June 2013
Quarter 1 January - March 2013
Quarter 4 October - December 2012
Quarter 3 July - September 2012
Quarter 2 April - June 2012
Quarter 1 January - March 2012
Quarter 4 October - December 2011
Quarter 3 July - September 2011
Quarter 2 April - June 2011
Quarter 1 January - March 2011
Quarter 4 October - December 2010
Quarter 3 July - September 2010
Quarter 2 April - June 2010
Quarter 1 January - March 2010
Quarter 4 October - December 2009
Quarter 3 July - September 2009
Quarter 2 April - June 2009
Quarter 1 January - March 2009
Quarter 4 October - December 2008
Quarter 3 July - September 2008
Quarter 2 April - June 2008
Quarter 1 January - March 2008
Quarter 4 October - December 2007
Quarter 3 July - September 2007
Quarter 2 April - June 2007
Quarter 1 January - March 2007
Quarter 4 October - December 2006
Quarter 3 July - September 2006
Quarter 2 April - June 2006
Create opportunity from market volatility
Against a backdrop of market volatility and deep investor disquiet, this year's research from Create and Principal Global Investors, ....

.... Market volatility: friend or foe?, seeks to distil the lessons learned from and strategies for navigating this challenging environment successfully.
Methodology involved participants first answering questions relating to four
key areas. Consequently, emerging investment themes were then identified and
explored via further in-depth questioning of 100 research participants.

Capital markets

The first key area involved capital markets, which most respondents agreed are in an era of
frequent volatility and price dislocation, with the overwhelming majority
anticipating prolonged periods of turbulence until the sovereign debt crisis in
the West is resolved. Many also thought that the unintended consequences of
financial regulation were exacerbating the problem. In short, the majority view
was that where capital markets are concerned, political, market and investor
horizons will remain out of sync for the foreseeable future.

Risk approach

The second area was investors' approach to risk should the current market volatility continue
as expected. The prevailing view was that after enduring rollercoaster
volatility since 2007, most investors are growing weary of letting risk
aversion rule their every move. Now, instead of guarding the purse strings,
many are seeking cannier ways to blend caution with opportunism, chasing
bargains and looking for an imminent silver lining as corporate fundamentals

Asset focus

The third key area is the type of assets bargain-hunting activities are focusing on.
Currently priced at their lowest level compared with bonds in 50 years,
equities were seen as a good medium-term allocation. Credit was also a major
focus, with opportunistic buying focusing on distressed debt and high-yield

Making volatility work

The final question centred on how asset managers can help their clients benefit from
volatility: in short, converting volatility to opportunity. Not surprisingly,
this was seen as a significant challenge for most asset managers, with many
identifying a lack of big-picture investment nous in the industry.  A
frequent response was that "asset managers need to reboot their business

Volatility is central

Themes emerging from responses to the four question areas also centred on volatility.

First were the barriers to effective modelling and forecasting that the current environment
creates. With current levels of volatility unlikely to change in the
foreseeable future, the fact that financial decisions are also being made in a
climate of extreme political instability is a further complication. In short,
investors know that volatility creates fear and, like fear, it feeds on itself,
potentially obscuring the fundamental issues on which investment managers should be focusing.

As one investment manager put it, "the biggest risk is political, and you can't model
that in a spreadsheet".

Another theme was that, despite the volatility, there might be a silver lining. This belief
arises from the fact that the current crisis is one of confidence, not
liquidity. Despite perceptions to the contrary, corporate balance sheets are
generally strong. Many US
companies have been aggressively deleveraging since the start of the European
sovereign debt crisis.

For active managers, such solid corporate fundamentals and continuing volatility present
great opportunities. Accordingly, many predict that the first signs of real
progress on the sovereign debt issue will see equities bouncing back with a

In summary, the report indicates that recent market volatility has shown that the three
conventional investment assumptions (risk generates return; hedged portfolios
give better returns than unhedged ones; and diversification is a free lunch) no
longer hold true.

The new wisdom is that nothing is an opportunity until we know its risks, their likelihood and
impact.  Most importantly, volatility and asset correlations might not
follow historic norms and investment managers need to act accordingly.


By:  Grant Forster is CEO of Principal Global Investors (Australia), sponsor of the report.
17th July 2012
Source:  I & T News


  Financial Advisor | Financial Planner | Financial Adviser | Financial Planning | Financial Planner Sydney