2020: WHAT IS THE OUTLOOK FOR RETIREMENT INCOME? MAXIMISING RETIREMENT INCOME 1
Disclaimer Note: Past performance is not a reliable indicator of future www.plato.com.au/retail-funds/. You should consider the current PDS performance. in its entirety and consult your financial adviser before making an investment decision. The information contained in this presentation is for information purposes only and has been prepared for use in conjunction with a Pinnacle Fund Services Limited and Plato believe the information verbal presentation and should be read in that context. contained in this communication is reliable, however its accuracy, Plato Investment Management Limited ABN 77 120 730 136 (‘Plato’) reliability or completeness is not guaranteed and persons relying on AFSL 504616. this information do so at their own risk. Subject to any liability which cannot be excluded under the Competition and Consumer Act 2010 Any opinions or forecasts reflect the judgment and assumptions of and the Corporations Act, Plato and Pinnacle Fund Services Limited Plato and its representatives on the basis of information at the date of disclaim all liability to any person relying on the information contained publication and may later change without notice. Any projections in this communication in respect of any loss or damage (including contained in this presentation are estimates only and may not be consequential loss or damage), however caused, which may be suffered realised in the future. The information is not intended as a securities or arise directly or indirectly in respect of such information. recommendation or statement of opinion intended to influence a person or persons in making a decision in relation to investment. This Unauthorised use, copying, distribution, replication, posting, communication is for general information only. It has been prepared transmitting, publication, display, or reproduction in whole or in part of without taking account of any person’s objectives, financial situation or the information contained in this document is prohibited without needs. Any persons relying on this information should obtain obtaining prior written permission from Plato. Plato and their professional advice relevant to their particular circumstances, needs associates may have interests in financial products mentioned in the and investment objectives. presentation. Interests in the Plato Australian Shares Income Fund (ARSN 152 590 157) and Plato Global Shares Income Fund (ARSN 608 130 838) (‘Funds’) are issued by Pinnacle Fund Services Limited ABN 29 082 494 362 AFSL 238371. Pinnacle Fund Services Limited is not licensed to provide financial product advice. A copy of the most recent Product Disclosure Statement (‘PDS’) of the Funds can be located at 2
RBA cut rates by 25bp on 3 March, more to come? OFFICIAL RBA CASH RATE EXPECTATIONS Source: Macquarie Macro Strategy January 2020 “It is reasonable to expect that an extended period of low interest rates will be required in Australia ...” Philip Lowe, RBA Governor: Monetary Policy Decision 3 September 2019. 3
4 NEGATIVE REAL RATES OF RETURN Safe assets lose you money * Depending on your risk profile Source: Plato, RBA updated to 4/3/2020 $100,000 $120,000 $140,000 -$60,000 -$40,000 -$20,000 $20,000 $40,000 $60,000 $80,000 $- Dec-81 Sep-82 Jun-83 Mar-84 Dec-84 Sep-85 Jun-86 Mar-87 Dec-87 Sep-88 Jun-89 Mar-90 Dec-90 Safe options = going backwards!* Sep-91 Jun-92 Mar-93 Dec-93 Sep-94 Real Overnight Jun-95 Mar-96 Dec-96 Real Earnings on $1m Sep-97 Jun-98 Mar-99 Real 1 Yr TD Dec-99 Sep-00 Jun-01 Mar-02 Dec-02 Sep-03 Real 10 Yr Bond Jun-04 Mar-05 Dec-05 Sep-06 Jun-07 Mar-08 Dec-08 Sep-09 Jun-10 Mar-11 Dec-11 Sep-12 Jun-13 Mar-14 Dec-14 Sep-15 Jun-16 Mar-17 Dec-17 Sep-18 Jun-19
Will a million dollars see you through retirement? RETIREMENT BALANCES WITH AND WITHOUT AGED PENSION $1,200,000 $1,000,000 $800,000 $600,000 $400,000 $200,000 $- 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 100 Balance -0.5% real Balance 4% real Balance -0.5% real +pension Balance 4% real +pension Source: Plato. ASFA, Dept Human Services, aihw.gov.au/reports/life-expectancy-death Assumptions: Home-owning couple aged 65 ASFA Comfortable $61,522pa expenditure -0.5% and 4% real earnings rate on investments A million dollars may not be enough? 5
Australian dividends have been remarkably stable GROSS DIVIDENDS V CASH/BONDS 18% 16% 14% 12% 10% 8% 6% 4% 2% 0% Dec-81 Dec-82 Dec-83 Dec-84 Dec-85 Dec-86 Dec-87 Dec-88 Dec-89 Dec-90 Dec-91 Dec-92 Dec-93 Dec-94 Dec-95 Dec-96 Dec-97 Dec-98 Dec-99 Dec-00 Dec-01 Dec-02 Dec-03 Dec-04 Dec-05 Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 Dec-13 Dec-14 Dec-15 Dec-16 Dec-17 Dec-18 Dec-19 Term Deposits 10 year Bonds Aust Shares Gr Yield Hist Source: Plato, RBA, S&P, invest $100k at the start of the year Past performance is not illustrative of future performance. 6
Don’t forget the franking! S&P/ASX 300 1 JULY 2005 TO 31 DECEMBER 2019 $400,000 +251% $350,000 $300,000 +185% $250,000 $200,000 +52% $150,000 $100,000 $50,000 $- Jul/2005 Jul/2007 Jul/2009 Jul/2011 Jul/2013 Jul/2015 Jul/2017 Jul/2019 ASX300 Price ASX300 Accum ASX300 Accum + Franking Source: S&P, Plato 2.9% p.a. price, 7.5% p.a. accumulation, 9.1% p.a. including franking Illustrative only and no guarantee of future performance 7
Update on results season February 2020 SIMILAR THEMES TO AUGUST 2019 • Strong results from JB Hi Fi in retail, Resmed and CSL, iron ore miners CHANGE IN DIVIDENDS PCP • Solid CBA result, dividend maintained, only bank not Average Median* to cut so far in this cycle • AMP, Blackmore omit dividends, Whitehaven -90% 9.8% • Dividends were flat including specials, whilst normal dividends rose nearly 10%. Note ALP franking policy conducive to specials in 2019. Median growth 0% either way. 1.1% 0.0% 0.0% INCLUDING SPECIALS EXCLUDING SPECIALS Source: Plato, Iress, S&P200 8
Global dividends are strong (Q4 report www.plato.com.au) 2019 GLOBAL DIVIDENDS OVER $A2tn • $A2Tr+ paid out in developed markets • +11.4% increase (5.6% currency/5.8% local dividends) Total Dividend Income (AUD) $2,500 $100 $90 Dividends Paid (AUD bn) Dividends Paid (AUD bn) $2,000 $80 $70 $1,500 $60 $50 $1,000 $40 $30 $500 $20 $10 $0 $0 2018 2019 Developed Market (LHS Axis) Australian Market (RHS Axis) SOURCE: PLATO INVESTMENT MANAGEMENT 9
Coronavirus 10
11 CHINA UNDER CONTROL, REST OF WORLD NOT Percentage change in total Coronavirus cases Source: Plato, John Hopkins, Worldometers 100.0% 120.0% 140.0% 20.0% 40.0% 60.0% 80.0% 0.0% 20-Jan 21-Jan 22-Jan 23-Jan 24-Jan 25-Jan 26-Jan 27-Jan 28-Jan 29-Jan 30-Jan 31-Jan 1-Feb 2-Feb 3-Feb 4-Feb 5-Feb 6-Feb 7-Feb chg china 8-Feb 9-Feb 10-Feb 11-Feb 12-Feb 13-Feb chg rest world 14-Feb 15-Feb 16-Feb 17-Feb 18-Feb 19-Feb 20-Feb 21-Feb 22-Feb 23-Feb 24-Feb 25-Feb 26-Feb 27-Feb 28-Feb 29-Feb 1-Mar 2-Mar 3-Mar 4-Mar 5-Mar 6-Mar 7-Mar 8-Mar 9-Mar 10-Mar 11-Mar
Supply and demand shock MARKETS RESPOND TO GLOBAL SPREAD • Initially considered a China issue but impacting global supply chain • As virus spread globally, becoming both a supply and demand shock • Impacts are broad: – Tourism related – airlines and hotels – Oil demand hits oil price/stocks – Discretionary spending – Banks – 3-5% earnings impact due to full pass on of March rate cut, possible bad debts – Some less obvious impacts: Blackmores, Cochlear – Notably iron ore prices have held up very well 12
Significant policy response MONETARY AND FISCAL STIMULUS • Australian RBA reduces cash rate by 0.25% with expectation of further 0.25% cut • US Fed, Bank of Canada and Bank of England cut by 0.5%, more cuts expected by the Fed • Australian $17.6B stimulus package – $750 to pensioners, unemployed and family tax benefit recipients paid by March 31 – Immediate investment write-offs up to $150,000 for investments made to June 30 – Deeming rates to fall by 0.5% • Significant stimulus China, UK 13
Outlook • We expect the virus impact to be temporary but sharp – Flu type viruses peak in winter – Volatility to continue until global trends improve – Earnings impact to also be temporary, but avoiding weak “dividend traps”important • For most, the panic seems worse than the pandemic – Mortality rates for healthy people under 50 are well under 1% – The very old are most at risk – mortality rate over 80 is 15-20% – 2 vaccines have already been developed but need to be tested 14
Questions? 15
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