2020: WHAT IS THE OUTLOOK FOR RETIREMENT INCOME? MAXIMISING - - PowerPoint PPT Presentation

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MAXIMISING RETIREMENT INCOME 2020: WHAT IS THE OUTLOOK FOR RETIREMENT INCOME?

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Disclaimer

Note: Past performance is not a reliable indicator of future performance. The information contained in this presentation is for information purposes only and has been prepared for use in conjunction with a verbal presentation and should be read in that context. Plato Investment Management Limited ABN 77 120 730 136 (‘Plato’) AFSL 504616. Any opinions or forecasts reflect the judgment and assumptions of Plato and its representatives on the basis of information at the date of publication and may later change without notice. Any projections contained in this presentation are estimates only and may not be realised in the future. The information is not intended as a securities recommendation or statement of opinion intended to influence a person or persons in making a decision in relation to investment. This communication is for general information only. It has been prepared without taking account of any person’s objectives, financial situation or

• needs. Any persons relying on this information should obtain

professional advice relevant to their particular circumstances, needs and investment objectives. 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 www.plato.com.au/retail-funds/. You should consider the current PDS in its entirety and consult your financial adviser before making an investment decision. Pinnacle Fund Services Limited and Plato believe the information contained in this communication is reliable, however its accuracy, reliability or completeness is not guaranteed and persons relying on this information do so at their own risk. Subject to any liability which cannot be excluded under the Competition and Consumer Act 2010 and the Corporations Act, Plato and Pinnacle Fund Services Limited disclaim all liability to any person relying on the information contained in this communication in respect of any loss or damage (including consequential loss or damage), however caused, which may be suffered

• r arise directly or indirectly in respect of such information.

Unauthorised use, copying, distribution, replication, posting, transmitting, publication, display, or reproduction in whole or in part of the information contained in this document is prohibited without

• btaining prior written permission from Plato. Plato and their

associates may have interests in financial products mentioned in the presentation.

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RBA cut rates by 25bp on 3 March, more to come?

OFFICIAL RBA CASH RATE EXPECTATIONS

“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.

Source: Macquarie Macro Strategy January 2020

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Safe assets lose you money

NEGATIVE REAL RATES OF RETURN

Safe options = going backwards!*

Source: Plato, RBA updated to 4/3/2020

• $60,000
• $40,000
• $20,000

$- $20,000 $40,000 $60,000 $80,000 $100,000 $120,000 $140,000 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 Sep-91 Jun-92 Mar-93 Dec-93 Sep-94 Jun-95 Mar-96 Dec-96 Sep-97 Jun-98 Mar-99 Dec-99 Sep-00 Jun-01 Mar-02 Dec-02 Sep-03 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

Real Earnings on $1m

Real Overnight Real 1 Yr TD Real 10 Yr Bond

*Depending on your risk profile

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$- $200,000 $400,000 $600,000 $800,000 $1,000,000 $1,200,000

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

Will a million dollars see you through retirement?

RETIREMENT BALANCES WITH AND WITHOUT AGED PENSION

A million dollars may not be enough?

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

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Australian dividends have been remarkably stable

GROSS DIVIDENDS V CASH/BONDS

Source: Plato, RBA, S&P, invest $100k at the start of the year

0% 2% 4% 6% 8% 10% 12% 14% 16% 18% 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

Past performance is not illustrative of future performance.

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Don’t forget the franking!

S&P/ASX 300 1 JULY 2005 TO 31 DECEMBER 2019

2.9% p.a. price, 7.5% p.a. accumulation, 9.1% p.a. including franking

Illustrative only and no guarantee of future performance

Source: S&P, Plato

$- $50,000 $100,000 $150,000 $200,000 $250,000 $300,000 $350,000 $400,000

Jul/2005 Jul/2007 Jul/2009 Jul/2011 Jul/2013 Jul/2015 Jul/2017 Jul/2019

ASX300 Price ASX300 Accum ASX300 Accum + Franking

+251% +185% +52%

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Update on results season February 2020

• Strong results from JB Hi Fi in retail, Resmed and CSL,

iron ore miners

• Solid CBA result, dividend maintained, only bank not

to cut so far in this cycle

• AMP, Blackmore omit dividends, Whitehaven -90%
• 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.

SIMILAR THEMES TO AUGUST 2019

Source: Plato, Iress, S&P200

1.1% 9.8% 0.0% 0.0%

INCLUDING SPECIALS EXCLUDING SPECIALS

CHANGE IN DIVIDENDS PCP

Average Median*

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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)

$0 $10 $20 $30 $40 $50 $60 $70 $80 $90 $100 $0 $500 $1,000 $1,500 $2,000 $2,500 2018 2019 Dividends Paid (AUD bn) Dividends Paid (AUD bn)

Total Dividend Income (AUD)

Developed Market (LHS Axis) Australian Market (RHS Axis)

SOURCE: PLATO INVESTMENT MANAGEMENT

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Coronavirus

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Percentage change in total Coronavirus cases

CHINA UNDER CONTROL, REST OF WORLD NOT

Source: Plato, John Hopkins, Worldometers

0.0% 20.0% 40.0% 60.0% 80.0% 100.0% 120.0% 140.0%

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 8-Feb 9-Feb 10-Feb 11-Feb 12-Feb 13-Feb 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

chg china chg rest world

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Supply and demand shock

• 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

MARKETS RESPOND TO GLOBAL SPREAD

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Significant policy response

• 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

MONETARY AND FISCAL STIMULUS

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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

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Questions?

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PLATO AUSTRALIAN SHARES INCOME FUND – A CLASS

ABOUT THE FUND

1 July 2017 the minimum for direct (non-platform) investors is $100,000. ABOUT THE FUND – AU60WHT00394

The Plato Australian Shares Income Fund is a long-only equity income fund managed specifically for zero tax investors who can utilise franking credits. These investors include, but are not limited to pension phase investors, SMSFs and charities.

BENCHMARK

S&P/ASX 200 Franking Credit Adjusted Daily Total Return Index (Tax- Exempt).

BENEFITS

§ Investments seek to achieve after-tax income maximization, which may be attractive to pension-phase investors/SMSFs and charities § Franking credits are priced into unit price § Active dividend rotation is an integral part of the investment process to alleviate permanent sector biases § Highly rated and regarded by leading fund research houses, including being rated ‘Recommended’ from Zenith Investment Partners (June 2019) § One of Australia’s most highly qualified investment teams with 5 PhDs and over 135 years combined investment experience.

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Ratings Disclaimer

THE LONSEC RATING (ASSIGNED AS FOLLOWS: PLATO AUSTRALIAN SHARES INCOME FUND — OCTOBER 2018; PLATO GLOBAL SHARES INCOME FUND — FEBRUARY 2019) PRESENTED IN THIS DOCUMENT IS PUBLISHED BY LONSEC RESEARCH PTY LTD ABN 11 151 658 561 AFSL 421 445. THE RATING IS LIMITED TO “GENERAL ADVICE” (AS DEFINED IN THE CORPORATIONS ACT 2001 (CTH)) AND BASED SOLELY ON CONSIDERATION OF THE INVESTMENT MERITS OF THE FINANCIAL PRODUCT(S). PAST PERFORMANCE INFORMATION IS FOR ILLUSTRATIVE PURPOSES ONLY AND IS NOT INDICATIVE OF FUTURE PERFORMANCE. IT IS NOT A RECOMMENDATION TO PURCHASE, SELL OR HOLD PLATO INVESTMENT MANAGEMENT LIMITED PRODUCT(S), AND YOU SHOULD SEEK INDEPENDENT FINANCIAL ADVICE BEFORE INVESTING IN THIS PRODUCT(S). THE RATING IS SUBJECT TO CHANGE WITHOUT NOTICE AND LONSEC ASSUMES NO OBLIGATION TO UPDATE THE RELEVANT DOCUMENT(S) FOLLOWING PUBLICATION. LONSEC RECEIVES A FEE FROM THE FUND MANAGER FOR RESEARCHING THE PRODUCT(S) USING COMPREHENSIVE AND OBJECTIVE CRITERIA. FOR FURTHER INFORMATION REGARDING LONSEC’S RATINGS METHODOLOGY, PLEASE REFER TO OUR WEBSITE AT: HTTP://WWW.LONSECRESEARCH.COM.AU/RESEARCH-SOLUTIONS/OUR- RATINGS THE ZENITH INVESTMENT PARTNERS (“ZENITH”) AUSTRALIAN FINANCIAL SERVICES LICENSE NO. 226872 RATING PLATO AUSTRALIAN SHARES INCOME FUND ASSIGNED JUNE 2018 AND PLATO GLOBAL SHARES INCOME FUND ASSIGNED NOVEMBER 2018,) REFERRED TO IN THIS DOCUMENT IS LIMITED TO “GENERAL ADVICE” (AS DEFINED BY THE CORPORATIONS ACT 2001) FOR WHOLESALE CLIENTS ONLY. THIS ADVICE HAS BEEN PREPARED WITHOUT TAKING INTO ACCOUNT THE OBJECTIVES, FINANCIAL SITUATION OR NEEDS OF ANY INDIVIDUAL. IT IS NOT A SPECIFIC RECOMMENDATION TO PURCHASE, SELL OR HOLD THE RELEVANT PRODUCT(S). INVESTORS SHOULD SEEK INDEPENDENT FINANCIAL ADVICE BEFORE MAKING AN INVESTMENT DECISION AND SHOULD CONSIDER THE APPROPRIATENESS OF THIS ADVICE IN LIGHT OF THEIR OWN OBJECTIVES, FINANCIAL SITUATION AND NEEDS. INVESTORS SHOULD OBTAIN A COPY OF, AND CONSIDER THE PDS OR OFFER DOCUMENT BEFORE MAKING ANY DECISION AND REFER TO THE FULL ZENITH PRODUCT ASSESSMENT AVAILABLE ON THE ZENITH WEBSITE. ZENITH USUALLY CHARGES THE PRODUCT ISSUER, FUND MANAGER OR A RELATED PARTY TO CONDUCT PRODUCT ASSESSMENTS. FULL DETAILS REGARDING ZENITH’S METHODOLOGY, RATINGS DEFINITIONS AND REGULATORY COMPLIANCE ARE AVAILABLE ON OUR PRODUCT ASSESSMENT’S AND AT HTTP://WWW.ZENITHPARTNERS.COM.AU/REGULATORYGUIDELINES THE RATING CONTAINED IN THIS DOCUMENT IS ISSUED BY SQM RESEARCH PTY LTD ABN 93 122 592 036. SQM RESEARCH IS AN INVESTMENT RESEARCH FIRM THAT UNDERTAKES RESEARCH ON INVESTMENT PRODUCTS EXCLUSIVELY FOR ITS WHOLESALE CLIENTS, UTILISING A PROPRIETARY REVIEW AND STAR RATING SYSTEM. THE SQM RESEARCH STAR RATING SYSTEM IS OF A GENERAL NATURE AND DOES NOT TAKE INTO ACCOUNT THE PARTICULAR CIRCUMSTANCES OR NEEDS OF ANY SPECIFIC PERSON. THE RATING MAY BE SUBJECT TO CHANGE AT ANY TIME. ONLY LICENSED FINANCIAL ADVISERS MAY USE THE SQM RESEARCH STAR RATING SYSTEM IN DETERMINING WHETHER AN INVESTMENT IS APPROPRIATE TO A PERSON’S PARTICULAR CIRCUMSTANCES OR

• NEEDS. YOU SHOULD READ THE PRODUCT DISCLOSURE STATEMENT AND CONSULT A LICENSED FINANCIAL ADVISER BEFORE MAKING AN INVESTMENT DECISION IN RELATION TO THIS

INVESTMENT PRODUCT. SQM RESEARCH RECEIVES A FEE FROM THE FUND MANAGER FOR THE RESEARCH AND RATING OF THE MANAGED INVESTMENT SCHEME.

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