The author has been described by News Ltd as an "iconoclast", "Svengali", a pollie's "economist muse", and "pungently accurate". Fairfax says he is a "Renaissance man" and "one of Australia’s most respected analysts." Stephen Koukoulas concludes that he is "85% right", and "would make a great Opposition leader." Terry McCrann claims the author thinks "‘nuance’ is a trendy village in the south of France", but can be "scintillating" when he thinks "clearly". The ACTU reckons he’s "an enigma wrapped in a Bloomberg terminal, wrapped in some apparently well-honed abs."

Monday, September 19, 2011

Fear fuels fixed-income boom as investors seek safe harbours

The Oz reports on something that I have been advocating for years (see also Andrew Main in The Oz today here rehashing what I have described as some of the obstacles to retail investment in this space)...

"Fear fuels fixed-income boom as investors seek safe harbours Tim Boreham
From: The Australian

September 19, 2011 12:00AM

AUSTRALIANS are increasingly looking to previously shunned investment products like corporate and government bonds - so-called fixed-income securities - as they try to find a safe harbour from extreme stockmarket swings.

The trend is reflected in record deposit flows to the banks and surging inquiries to financial houses on how investors can protect their capital. And retirees are also asking about hitherto unloved annuity products that guarantee income over a set period.

One player, fixed-interest broker FIIG Securities, is signing up 250 clients a month without any advertising. "Pre-GFC we would be lucky to sign up 50 a month," FIIG executive director of markets John Lechte said.

Australians have one of the highest rates of direct share ownership and are also indirectly heavily exposed to equities thanks to the compulsory superannuation scheme.

But that appears to be changing as fixed-interest products, which are a common investment class in Europe and the US, are becoming popular.

One key reason for our high dependence on shares is that the $1.4 trillion superannuation sector is biased towards the "accumulation" phase, which emphasises growth through a high equities exposure.

Mr Lechte said: "Most people are getting sick of the volatility, which is causing them sleepless nights. There are definitely people aged 70 to 80 who are seeing a 10 per cent fall and are saying, 'I'm out' (of the sharemarket)"...

Challenger Group , the leading supplier of annuities, reported a 56 per cent rise in annuity sales in 2010-11 (to $1.46bn) and has targeted a 25 per cent rise this year.

Richard Howes, the head of Challenger's life arm, said annuities accounted for only 4 per cent of the $50bn post-retirement market, with allocated pensions accounting for the "overwhelming majority".

Allocated pensions allow retirees to nominate the amount of income received, but the period is not set and the pensions cease once the account is exhausted.

"We think the guaranteed retirement income market can command a share of the retirement income pie closer to 30 per cent," Mr Howes said.

"In 2011, we sold three times the amount of annuities we did in 2008. That growth doesn't show any signs of slowing up."