Earning It, October 2012

Smart Investor, October 2012

ROADTEST

SPDR S&P/ASX 200 fund

Who runs the fund? It’s run by State Street Global Advisors, one of the world’s largest developers of ETFs, and the institution behind the SPDR (usually pronounced spider) series of funds.

The basics: Australia’s original ETFs. These days there are dozens of them covering every asset class and region imaginable, but this one – tracking the top 200 stocks in Australia – was launched back in 2001.

The process: Like most ETFs, this is designed to track the performance of an index. You buy and sell it like any other share, but it offers you exposure to a diversified benchmark, in this case the S&P/ASX 200.

The bottom line: It has done what it’s meant to do – closely tracked index performance – but how has the index itself done? Because of our volatile times, the answer depends very much on what timeframe you’re looking at. For example, in the year to June 30 it was down 7% net of fees; over three years, up 5.26%; over five years, down 4.26%; and since inception, up 6.2% per year.

Fees: 0.286%. This is the great appeal of ETFs: diversified exposure, low fees.

Verdict: The original ETF represents a great building block for a broader portfolio. But as to what the index is going to do next – that’s anybody’s guess.

NEW FUND

90 West Global Natural Resources Fund

What is it?

A fund investing in global resource, commodity and food stocks.

Who’s behind it?

90 West was founded in July 2008 by Clive Landale, who was joined in July 2011 by David Whitten, formerly head of global resources at Colonial First State.

And what’s their process?

They use a bottom-up approach – meaning you start with a close look at individual companies, rather than macro trends – and invest in natural resource stocks whether they are upstream (exploration) or downstream (such as refining), both in Australia and internationally. They aim for a global portfolio of mining, agriculture and energy companies, at various stages of evolution.

Is this a good time to be launching such a fund? I thought the resource boom was dead.

Whitten addressed this point a couple of months ago. “Many people might be questioning why we are launching this fund in a depressed market. Quite simply, the China and emerging markets story, combined with constrained supply in vital areas, cannot be overstated in terms of its importance on the demand supply balance for resources,” he said. China might be slowing down but it is still growing fast, as are India and Brazil; that means heavy demand for natural resources. And a period of low valuations is the best time to buy in, they argue.

And why go global? Australia’s full of resources stocks I already recognise.

It’s true that there are about 1,000 Australian natural resource companies, but Whitten says those companies account for about 5% of the global listed natural resource stocks by market capitalization. There’s plenty more out there.  You may question, though, how hard it is for a boutique fund manager to cover the globe.

GIZMO

SKROSS world travel adapter

This is, when all is said and done, just a power adapter. But as is so often with Swiss stuff, it’s just so elegant and practical it seems so much more.

This gizmo will accept a plug from anywhere in the world and put it into a socket anywhere in the world, but will also charge two USB devices at the same time. Australian device into Swiss socket? No problem. American input into European socket – even those weird three-pole ones you find in Italy? Easy. The only one I couldn’t find was those odd triangular three-pole things from Israel. So pretty much anywhere you can be giving up to 2500W of power to one thing, and charging two others on the USB. And it looks cool. Bit heavy though. Sells on the Skross web site for Eu49.90.

FUND WATCH

Aberdeen Australian Equities

These have been moribund years for Australian equities; the S&P/ASX 200 Accumulation Index remains in the red over the last five years, and is only modestly positive over one and three. Aberdeen’s fund is pretty much in line, a bit better than the herd over one and five years, and a bit worse over three. That suggests it does relatively better in tough times.

A closer look shows that it doesn’t appear much different to the benchmark anyway: more than a third in financial services stocks, and a further quarter in basic materials. There are some clear convictions – Woolworths as the second biggest holding and QBE as the third is unusual, while NAB doesn’t make it into the top 10 – but you wouldn’t expect this fund to go too far away from benchmark returns, whether positive or negative.