BTIM now competing in savings pool
A structural change in investor attitudes means fund managers are now competing in a "savings pool" rather than an "investment pool", according to BT Investment Management (BTIM) chief executive Emilio Gonzalez.
"Twelve months ago the Aussie equity market was trading at around about 3,900 in September, and it had just declined from 5,000 six months prior to that. It felt like the final blow - the knock-out blow to investors who were fatigued," Gonzalez said.
After a series of face-to-face conversations with financial planners in Sydney, Melbourne and Brisbane, Gonzalez recognised BTIM was competing in a different market when he saw the "fear in planners' eyes".
"[There is a] group of investors who were investors in the market. They had investment portfolios, and they've switched their portfolios to a savings pool. [They want] preservation of capital, but also high income," he said.
Huge amounts of money are in cash, but with interest rates heading down, term deposit rates are coming down to 4.5-4.6 per cent, he said.
To get decent levels of income, clients have two choices: they can increase their risk by moving into PERLS, hybrids, corporate bonds and credit; or they can scale back their standard of living - which is not ideal, Gonzalez said.
To compete in this space, BTIM announced yesterday the launch of its BT Equity Income Series with two new products: the BT Defensive Equity Income Fund and the BT Balanced Equity Income Fund.
Both funds offer a stable monthly income that is disclosed to investors six months in advance, comprised of yield and franking credits (8.5 per cent for the defensive fund, and 10 per cent for the balanced fund).
The defensive fund maintains a 30 per cent exposure to the stock market, while the balanced fund has a 40 per cent exposure.
According to Gonzalez, the funds can be used by clients who are looking to boost their income in an environment where interest rates have been declining.
The funds can either complement an equities portfolio, or boost the income of a term deposit portfolio while slightly increasing risk, he said.
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