Authors
Schroders has undertaken its second survey of Australian brokers to gain insight into their asset allocation views. Key findings include:
- Diversification replaces growth as primary driver.
- ASX listed stocks dominant; while direct equity and hybrids are the most popular ASX vehicles there was a clear move towards LICs at the expense of direct shares and active ETFs.
- Asset allocation decisions have picked up at the margin, with 22% changing asset allocation in the preceding six months, up from 14 per cent.
- Twice as many respondents think increased returns are more likely than decreased returns over the next three years.
Following the 2017 annual reporting season Schroders has again surveyed Australian brokers to gain insight into their asset allocation views. The inaugural survey six months ago highlighted the top three objectives for participating brokers were to generate income, maximise returns including franking credits, and protect capital. Two of these have fallen down the list of priorities since March.
The March survey showed that ASX listings remain the dominant implementation vehicle of choice and that on average brokers were allocating 80% to growth assets (Australian equity, global equity and A-REITs). This has remained essentially unchanged. Sentiment was positive with limited concern for an equity market correction.
In the following six months, the growth-oriented exposure and lack of concern about a market correction have both proven well founded. Equity markets have delivered positive total returns (+1% in Australia, +10% in global equities (A$ hedged) and -1% in A-REITs). Although not overly represented in broker portfolios, returns from Australian fixed income have also been positive over that time delivering +2.5% returns.
In this second survey we received more than 50 responses, which is of sufficient size to be useful but still a small enough sample that there may be some inherent biases. We describe some of the key findings from the survey as well as the interesting changes from the inaugural survey in March 2017.
Figure 1: Investment Objectives in order of preference (with change from previous survey in parentheses)

Figure 2: Vehicles used to implement objectives

Figure 3: Which vehicles on the ASX are preferred?

Figure 4: Current asset allocation being advised to your clients

Figure 5: How often do you change a client’s asset allocation?


Figure 7: What are your market return expectations over the next 3 years?

How is Schroders positioned in the Real Return Active ETF (ASX: GROW)?
Figure 8: Real Return (ASX: GROW) Portfolio

Two of the main questions we have received since the launch of GROW have been related to the performance of the ETF relative to the unlisted managed fund strategy on which it is based, and the real world costs of buying and selling the fund. Based on daily data, the net of fee performance and volatility of the unlisted fund versus the active ETF since its launch are almost identical:

The dollar weighted realised offer spread (applicable to buys) has averaged 32bp on all trades since inception of the active ETF on 9 August 2016. The dollar weighted bid spread (applicable to sells) has averaged 34bp. Blue lines are trades purchasing the fund while red lines are trades selling the fund.

Important information
Important Information:
This document is issued by Schroder Investment Management Australia Limited (ABN 22 000 443 274, AFSL 226473) (Schroders). It is intended solely for wholesale clients (as defined under the Corporations Act 2001 (Cth)) and is not suitable for distribution to retail clients. This document does not contain and should not be taken as containing any financial product advice or financial product recommendations. This document does not take into consideration any recipient’s objectives, financial situation or needs. Before making any decision relating to a Schroders fund, you should obtain and read a copy of the product disclosure statement available at www.schroders.com.au or other relevant disclosure document for that fund and consider the appropriateness of the fund to your objectives, financial situation and needs. You should also refer to the target market determination for the fund at www.schroders.com.au. All investments carry risk, and the repayment of capital and performance in any of the funds named in this document are not guaranteed by Schroders or any company in the Schroders Group. The material contained in this document is not intended to provide, and should not be relied on for accounting, legal or tax advice. Schroders does not give any warranty as to the accuracy, reliability or completeness of information which is contained in this document. To the maximum extent permitted by law, Schroders, every company in the Schroders plc group, and their respective directors, officers, employees, consultants and agents exclude all liability (however arising) for any direct or indirect loss or damage that may be suffered by the recipient or any other person in connection with this document. Opinions, estimates and projections contained in this document reflect the opinions of the authors as at the date of this document and are subject to change without notice. “Forward-looking” information, such as forecasts or projections, are not guarantees of any future performance and there is no assurance that any forecast or projection will be realised. Past performance is not a reliable indicator of future performance. All references to securities, sectors, regions and/or countries are made for illustrative purposes only and are not to be construed as recommendations to buy, sell or hold. Telephone calls and other electronic communications with Schroders representatives may be recorded.