Morningstar Core Equities Portfolio

Transcription

1 Morningstar Core Equities Portfolio Managed Portfolio Disclosure Document for members dated 29/02/2016. The Portfolio Manager is Morningstar Australasia Pty Limited (ABN , AFSL ). Issued by The Trust Company (Superannuation) Limited (ABN , AFSL ). Product website: hub24.com.au/super

2 Important information This Managed Portfolio Disclosure Document (document) is issued by the Trust Company (Superannuation) Limited (ABN , AFSL , RSE License No. L ) (Trustee). Effective from 1 July 2016 the Trustee will be renamed to Diversa Trustees. The information in this document forms part of the HUB24 Super Product Disclosure Statement (PDS) dated 29/02/2016. HUB24 Super is a product issued from the HUB24 Super Fund (ABN , RSE R ) (the Fund). The Fund is promoted by HUB24 Custodial Services Ltd (ABN , AFSL ) (HUB24, Promoter). The information contained in this document is general information only and doesn t take into account your personal objectives, financial situation, or needs. You can only invest in the Fund if you re advised by a financial adviser (adviser) so you can receive financial advice for each investment you are considering. The PDS, Member Guide and other incorporated materials are available from the product website shown on the front cover or by calling Members who receive this document in electronic form are entitled to request and obtain a paper copy free of charge by contacting us. Before you make any decision it is recommended you obtain professional financial advice. This document is intended only for the purposes of providing an overview of the key features of the managed portfolio available through the Fund. The information contained in this document is not intended to be a definitive statement on the subject matter nor an endorsement that this managed portfolio is appropriate for you and should not be relied upon in making a decision to invest. A managed portfolio is a pre-set investment portfolio that is designed by a portfolio manager to meet a certain investment objective. HUB24 as the investment manager of the Fund has appointed the Portfolio Manager to design and manage the composition of the managed portfolio. For more information on managed portfolios, see the PDS, Member Guide and other incorporated materials available from the product website shown on the front cover or by calling The Trustee and HUB24 (including their subsidiaries) do not guarantee the performance of HUB24 Super. Investments in HUB24 Super are investment-type products subject to investment risk including loss of income and capital invested. About HUB24 HUB24 has been appointed by the Trustee to provide various services in relation to the Fund, including administration, investment management and custody services. The Trustee pays HUB24 for providing these services and these costs are paid out of the fees paid to the Trustee, as set out in the PDS. HUB24 may sub-contract the performance of some or all of its functions to other professional service providers, where approved by the Trustee. In its capacity as a financial services provider, HUB24 or its representatives may provide financial services such as investment management to members or prospective members of HUB24 Super. Any such services are provided by HUB24 in its own right and not on behalf of the Trustee. The Trustee does not in any way endorse, warrant or accept responsibility for these services. For more information about the remuneration HUB24 receives and its relationships with other parties, refer to the relevant PDS and the HUB24 Financial Services Guide. Managed Portfolio Disclosure Document 2

3 Managed portfolio Managed portfolio Code Morningstar Core Equities Portfolio MOR003 Inception date 13/01/2011 Portfolio Manager Benchmark Designed for Investment objective Portfolio income Investment strategy Investment universe Turnover aim Morningstar Australasia Pty Limited (ABN , AFSL ) is the Portfolio Manager responsible for designing and managing the composition of the portfolio for HUB24, to meet the investment objective and investment strategy detailed below. S&P/ASX 200 (TR) The Morningstar Core Equities Portfolio is designed for investors who: Are seeking to achieve capital growth through investment in listed Australian securities and tax effective income returns via franked dividends; and Are seeking an actively managed concentrated portfolio constructed with an allocation to both growth and income securities. The principal objective of the Morningstar Core Equities Portfolio is to achieve capital growth through investment in listed Australian securities and tax effective income returns via franked dividends. The Morningstar Core Equities Portfolio is an actively managed concentrated portfolio constructed with an allocation to securities that exhibit income and growth style biases. All income derived from this portfolio will be retained in the portfolio. The Portfolio embodies the principles central to Morningstar s investment philosophy, namely a focus on long-term fundamental value with a strong bias toward businesses with sustainable competitive advantages (economic moats) and predictable cash flows (lower uncertainty). This approach helps ensure preservation of capital, low turnover, and reduced volatility while pursuing excess returns (lower uncertainty) Refer to Morningstar Australasia s Core Equities Portfolio investment strategy below. S&P/ASX 200-Listed Australian equity securities. The portfolio does not invest in derivatives. N/A Asset allocation ranges Australian shares: 90% - 100% Cash: 0% - 10% Risk Level High. The estimated likelihood of a negative annual return is 4-6 years in 20 years. Managed Portfolio Disclosure Document 3

4 Typical number of stocks Investment management fee Performance fee Estimated indirect cost ratio (ICR) Minimum suggested timeframe 15 to 30 stocks 0.44% p.a. 1 of the balance in the managed portfolio. This fee is calculated as a percentage of the managed portfolio calculated daily and deducted from your cash account monthly in arrears % (inclusive of GST) of gross outperformance above the S&P/ASX 200 (TR). The total estimated ICR for the Portfolio is 0.00% p.a. 1 This is indicative only, as the actual ICR may vary depending on the investment fees and weightings of the underlying investments selected for this portfolio. HUB24 will update the estimated ICR at least annually. For an up to date ICR estimate please contact your adviser or HUB24. 5 years Brokerage for securities For information about brokerage for trading securities within a managed portfolio which ordinarily applies, refer to the 'Fees and other costs' section in the Member Guide. 1 You must read the PDS in relation to the amounts that may be payable in respect of your interest in the Fund. All fees quoted in this document include GST and reflect the actual amounts charged to you. If eligible, the Trustee will claim the benefit of GST income tax credits on behalf of the Fund. Other fees and costs apply as described in the Fund s Member Guide in Section 5. You must speak to your adviser and obtain your own independent financial, legal or tax advice before considering an investment in this managed portfolio and this Fund. Managed Portfolio Disclosure Document 4

5 Background on the Portfolio Manager Morningstar Australasia Pty Ltd (ABN , AFSL ) ( Morningstar ) is the Investment Manager in relation to the establishment and implementation of the Morningstar Income Equities Portfolio (Income Portfolio). Morningstar is a wholly owned subsidiary of Morningstar Inc. Morningstar Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. Morningstar Inc. offers an extensive line of Internet, software, and print-based products and services for individuals, financial advisers, and institutions. Morningstar Inc. provides data on approximately 380,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 5 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar Inc. has operations in 26 countries. Morningstar has operated in Australia and New Zealand since Morningstar offers comprehensive data and objective information about more than 12,000 managed funds and 2,000 stocks available to individual investors in Australia and New Zealand, including proprietary Morningstar model portfolios. Using fundamental analysis, Morningstar specialises in constructing high conviction portfolios for use by stockbrokers, financial planners and retail investors. Employing a bottom up approach and taking a long term view to stock selection, Morningstar has been constructing model portfolios since September Investment strategy The Core Portfolio embodies the principles central to Morningstar s investment philosophy, namely a focus on long-term fundamental value with a strong bias toward businesses with sustainable competitive advantages (economic moats) and predictable cash flows (lower uncertainty). This approach helps ensure preservation of capital, low turnover, and reduced volatility while pursuing excess returns (lower uncertainty). Investors in the Core Portfolio simplify their investment decision process by outsourcing the style tilt to Morningstar. Relative value is largely determined by comparing prevailing stock prices to the Morningstar research team s price/fair value estimates. Morningstar s structured and rigorous investment decision making process boosts the quality and transparency of Morningstar s portfolio strategies, limiting the risk of behavioural errors, such as emotion-driven decisions. Morningstar believes market sentiment, which drives much of the shortterm movement in share prices, is fleeting and often a great source of mispriced securities. Discrepancies between market prices and Morningstar s fair value estimates create investment opportunities for Morningstar s portfolio strategies (and clients) to outperform. Portfolio weights are based on conviction more so than relative benchmark weights. Greater weights are given to companies with a lower ratio of price to fair value, economic moats and lower uncertainty. Industry weights are monitored to ensure reasonable diversification but Morningstar prefers to stick to highconviction ideas rather than track the index, as this provides optimal outcomes for investors. Prior to execution, each proposed transaction is reviewed by Morningstar s investment strategy committee in light of alternative opportunities and the portfolio s mandate. Critical examination that leverages the committee s depth and diversity of experience increases the odds of success. The overall portfolio is assessed for various risks, including cyclical versus defensive exposures, GICS industry group weights relative to the benchmark, market capitalisation, liquidity, cash holdings and other factors. Morningstar s equity portfolios are reasonably concentrated, with 15 to 30 stocks in each, so tracking error may be higher than alternative pooled investments. Underperformance by any stock can impact portfolio returns although Morningstar s unrelenting emphasis on undervalued and higherquality businesses and Morningstar s disciplined investment process tend to minimise this risk. Risks Before you consider investing in this portfolio, it s important you understand the risks that can affect your investments. Investment risks may vary significantly from those set out below and will depend on the actual investments used by the portfolio. This summary is a guide only and is not an exhaustive list of all the risks. For more general information about Managed Portfolio Disclosure Document 5

6 risk, see the Risks of super section of the PDS. The risks relevant to this portfolio depend on the portfolios underlying investments. For information about risks having regard to your personal situation, speak to your Adviser. Country risk Country risk is a general term that refers to the collection of risks associated with investing in a foreign country. It includes specific types of risks such as, but not limited to: Political the risk of political instability in a country Foreign exchange refer to Foreign exchange risk below for more information Sovereign the risk of a foreign government intervention resulting in losses, and Transfer the risk of a foreign government or regulator restricting transfer of assets Credit risk Your capital and/or interest earned on that capital may not be paid due to the underlying bank or deposit-taking institution defaulting. Derivatives and sophisticated investment products risk The use of sophisticated financial products such as derivatives has the potential to cause losses that are large in relation to the amount invested. Some managed funds use derivatives and this may imply some embedded leverage that could, under some circumstances, magnify the losses. The cost of using this type of financial product may also reduce returns. Diversification risk Lack of diversification across asset classes over your entire portfolio of investments may cause your portfolio s return to fluctuate more than expected. For example, if you invest entirely in shares rather than spreading your super across other asset classes (such as property, cash and fixed interest), share market movements could significantly affect your investment. Foreign exchange risk If parts of your investment are priced in a foreign currency, international factors such as exchange rate fluctuations and movements in international stock markets may affect the value of your investment. These investments may also not be hedged (protected) effectively, or at all, against exchange rate fluctuations. Inflation risk Your investments may not keep pace with inflation so that over time, your money has less purchasing power. Interest rate risk Changes in interest rates may affect the value of interest bearing securities and shares in some companies. Investment option risk The investment options you select may change or cease to be offered through the Fund which may affect the investment composition in your account and your investment strategy. Liquidity risk In difficult market conditions, some normally liquid assets may become illiquid. This could restrict the ability to sell them and to make withdrawal payments or process investment switches in a timely manner. For example, we might not be able to sell listed securities that are rarely traded or that are restricted or suspended from trading. Another example might be a property trust where the underlying property (e.g. a shopping centre) takes a long time to be sold. Term deposits are generally an illiquid investment as they may not be redeemable before their maturity date, as early redemption usually results in reduced returns or a penalty. Manager risk Underlying investment managers for managed funds, or the managers of managed portfolios, may not anticipate market movements or execute investment strategies effectively. Changes in staff may also have an impact on the performance of a managed fund and/or a managed portfolio. Market risk Movements in a market sector, due to, for example, interest rate movements, economic factors, political, military or social events may have a negative impact on your investment and/or on the returns your Managed Portfolio Disclosure Document 6

7 investment generates. Market values can change rapidly and it s possible to lose some or all of your investment. Sector risk There are risks associated with a particular industry s specific products or services due to, for example, changes in consumer demand or commodity prices. For instance, if a portfolio invests heavily in a sector such as energy, the value of your investment might change with the price of oil. Specific asset risk There are risks associated with specific assets, for example certain investments may use leverage (borrowing to invest), undertake short selling (selling listed securities they don t actually own) or invest in sophisticated financial products such as derivatives, futures, foreign exchange contracts and options. Use of these methods could cause large losses in proportion to the money invested in them. Before selecting these types of assets as part of your investment strategy, you must read the relevant PDS or disclosure document. How the portfolio manager manages risk The portfolio manager is unable to eliminate all investment risks, but does analyse, research, manage and aim to reduce the impact of risks on investments by actively monitoring investment markets and the portfolio and use carefully considered investment and risk management guidelines. Labour standards and environmental, social and ethical considerations The Trustee does not take into account labour standards, environmental, social or ethical considerations when making the investments available. This investment strategy does not directly measure or incorporate labour, environmental, social or ethical standards as part of the investment decision making process. The Portfolio Manager is aware that these issues can influence social, business and investor outcomes, in certain circumstances they may consider these issues when making an investment decision. The Portfolio Manager s consideration of labour, environmental, social or ethical considerations is in its own right and not on behalf of the Trustee. Performance fees Investment Performance Fee The Portfolio Manager may charge a performance fee in addition to the investment management fee, as an additional incentive for the Portfolio Manager to outperform the managed portfolio s Benchmark. Performance fees relate to the outperformance of the managed portfolio in relation to the relevant Benchmark and will generally be paid to the Portfolio Manager. Please refer to page 3 of this document for more information including the performance fee % which is used to calculate the $ amount of performance fee to be deducted from your Account. Benchmark The Portfolio Manager sets an appropriate Benchmark for the managed portfolio so that performance can be measured in relation to this Benchmark. For example, the S&P/ASX 200 may be a Benchmark for an Australian shares fund. HUB24 obtains data on these indices from Standard and Poor s including performance data, and uses this to determine the managed portfolio Benchmark return % each day. HUB24 calculate the managed portfolio performance by measuring the daily returns on a notional amount ($10,000,000) invested in accordance to the Portfolio Managed Portfolio Disclosure Document 7

8 Manager s instructions (i.e. in the Securities that make up the managed portfolio using the weights as advised by the Portfolio Manager). This identifies the Value Added (defined below) by the Portfolio Manager compared to its Benchmark, without being distorted by the timing of contributions and withdrawals, and the timing and settlement of trades, all of which can vary for each investor. In this manner the same value added % is charged to each investor in a particular managed portfolio. The % return each day is termed the managed portfolio return %. Note that dividends are assumed to be reinvested in the managed portfolio in the form of cash. The Portfolio Manager must regularly rebalance the managed portfolio to redistribute any cash weight among Securities as it sees fit. The managed portfolio weights will have in the meantime moved from the original set of weights due to price movements and (possibly) other corporate actions this is referred to as a floating managed portfolio. Calculation method The Performance Fee is calculated as a set percentage applied to the Value Added by the Portfolio Manager, so the higher the Value Added the higher the Performance Fee as the Portfolio Manager shares the outperformance with the investor. The fee is removed from the Account cash reserves at the end of each month (or prior to full withdrawal from the managed portfolio). Value Added is a dollar amount and is defined as Value Added % x your managed portfolio value, where Value Added % = (managed portfolio return % less the managed portfolio Benchmark return %) for that day. month and must be made up before any outperformance fee can be charged. Example If at the end of the previous month the cumulative outperformance was negative or -$1,000 (i.e. a cumulative underperformance) and this month s outperformance is $1,500 then the cumulative outperformance is $500. If the Portfolio Manager charged a performance fee % of 25% then 25% x $500 = $125 would be the performance fee for that month. Say at the end of the previous month the cumulative outperformance was positive $1,000 and a performance fee was charged of 25% x $1,000 = $250, then the cumulative outperformance is reset to $0. If this month s outperformance is $1,500 then the cumulative outperformance is $0 + $1,500 and another performance fee is due of 25% x $1,500 = $375. The performance of the Portfolio Manager s managed portfolio will usually differ to your portfolio for many reasons including: cashflows the timing of capital contributions into and out of your managed portfolio the Portfolio Manager s managed portfolio makes no allowance for capital contributions or withdrawals your managed portfolio will not be identical to the Portfolio Manager s managed portfolio, and (minor) rounding adjustments and minimum trade sizes the notional amount invested in the Portfolio Manager s managed portfolio is assumed to start at $10,000,000 which may be different to your actual Account size. Performance is calculated for the managed portfolio and the Benchmark in exactly the same way to identify the Value Added %. The Value Added dollar amount is accumulated daily so that at the end of a given month, if the cumulative Value Added is greater than $0 then a Performance Fee is payable on the Cumulative Value Added $ x the Portfolio Manager s performance Fee %, at which time the Cumulative Value Added is set to $0. If the Cumulative Value Added is less than $0 then a Performance Fee is not payable and the cumulative underperformance amount carries forward to the next Managed Portfolio Disclosure Document 8

9 Universe of investments A managed portfolio can only be made up of asset classes and underlying assets and securities from the approved list of investments in the Fund. The Portfolio Manager will select from the approved list to construct this managed portfolio. The actual list of assets and securities acquired in all of the above asset categories will be set out in your Statement of Advice. Read disclosure documents You should read all the disclosure documents provided to you in relation to all the securities acquired under this managed portfolio. Consents The Portfolio Manager has given and has not withdrawn their consent to the statements in relation to themselves (including their name) and being included in this document. The Portfolio Manager has not authorised or caused the issue of this document. Managed Portfolio Disclosure Document 9

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