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Firstlinks newsletter - 28 November

Graham Hand  |  28 Nov 2019Text size  Decrease  Increase  |  
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Morningstar acquired Cuffelinks (Firstlinks) in October 2019. Join 60,000 unique users and receive the Firstlinks weekly editorials and free investment ebooks.

Two reports this week confirm that superannuation will remain at the forefront of social, business and political debate forever. Deloittes issued an estimate that super assets will grow from the current $3 trillion to $10 trillion over the next 20 years, and super funds will become so large that they will own most of the listed assets in Australia. Such massive power and influence will create policy conflict, and Westpac's Brian Hartzer and Lindsay Maxsted learned this week that the super funds are already the integrity gatekeepers. Maxsted intended to tough it out until told otherwise by the big investors and their agents.

Then the Retirement Income Review released its Consultation Paper. The Review is supposed to deliver only a 'fact base' as if somehow a neutral document will settle the arguments. However, one chart confirms the 'facts' will lead to policy changes, if not in this parliamentary term, then the next. The Review paper says:

"The overall level of public support provided by the retirement income system should be targeted to those who need it most."

The chart shows the opposite: the most government support in retirement goes to the wealthiest.

Lifetime government support provided through the retirement income system

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But the Review must not focus only on superannuation. There is an equally-revealing chart showing that in every age group except the youngest, the largest asset is owner occupied dwellings. Note, these are homes lived in by the owner, not investment properties.

Average net Australian household wealth by age group, 2017-2018

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With over 10 million residential buildings in Australia representing half the wealth of households, Rafal Chomik and Sophie Yan of CEPAR examine housing and ageing, and how renting can compromise a comfortable retirement for some people.

Still on housing, economist Diana Mousina shows how much prices have risen in recent months and why it has happened, and she checks the possibility of reintroduction of prudential controls. Then Stephen Hayes reports on an overseas trend Australia has been slow to adopt, of institutions building excellent rental accommodation to meet changing lifestyles and affordability.

Max Cappetta explains quant investing and how it sits in portfolios alongside fundamental styles, while Conrad Saldanha shows why passive or index investing does not work in all markets, with a focus on emerging markets equities. Index ETFs are good structures in the right market but it's worth checking the horses for courses.

Back on the influence of investors in company decisions, Fiona Balzer says retail investors can have a strong impact when combined together in the right type of proxy voting.

And it's that time of month when Jonathan Rochford provides his quirky but revealing look at the news you might have missed. Always something fascinating in here worth knowing.

This week's White Paper is Vanguard's economic and market outlook for 2020, with subdued expectations on the back of heightened levels of uncertainty and fully-valued markets. And as usual, our Education Centre has the latest reports on ETFs, LICs and listed investments.

is the editorial director of Morningstar Australia.

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