Diversification paramount - Schroders asset allocation survey

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 6: What are the key barriers to making more frequent rebalancing decisions on behalf of your clients?

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.


 To find out more about the Schroders Active ETF click here 




Important Information:
Important Information: This material has been issued by Schroder Investment Management Australia Limited (ABN 22 000 443 274, AFSL 226473) (Schroders) for information purposes only. The views and opinions contained in this material are those of the authors as at the date of publication and are subject to change due to market and other conditions. Such views and opinions may not necessarily represent those expressed or reflected in other Schroders communications, strategies or funds. The information contained is general information only and does not take into account your objectives, financial situation or needs. Schroders does not give any warranty as to the accuracy, reliability or completeness of information which is contained in this material. Except insofar as liability under any statute cannot be excluded, Schroders and its directors, employees, consultants or any company in the Schroders Group do not accept any liability (whether arising in contract, in tort or negligence or otherwise) for any error or omission in this material or for any resulting loss or damage (whether direct, indirect, consequential or otherwise) suffered by the recipient of this material or any other person. This material is not intended to provide, and should not be relied on for, accounting, legal or tax advice. Any references to securities, sectors, regions and/or countries are for illustrative purposes only. You should note that past performance is not a reliable indicator of future performance. Schroders may record and monitor telephone calls for security, training and compliance purposes.