Mclowd Community Newsletter January 2020

Welcome to the Mclowd Community Newsletter

I think this will be an abnormally low-return decade,” warned Andrew Sheets, chief cross-asset strategist at Morgan Stanley. Mr Sheets pointed out that expected returns have looked low before, only to be ‘bailed out’ by central banks’ easing policy, which pushed prices up ever higher. But that practice just pulls future returns into the present.
Investors grit their teeth for a low return decade, ft.com, Dec 13th

Introduction

In the last thirty years the US 10-year Treasury yield has fallen from 12% to just 2%.

When you apply that sort of decline in the reference / discount rate to long-dated assets (whether bonds, property or equities), you get some pretty remarkable increases in valuation.

Economists call it ‘duration’, but as Morgan Stanley has pointed out, the returns that are recorded on the basis of this ‘balance sheet effect’ can only be generated once.

From this point forward the returns on superannuation assets will need to come from the P&L, which will be a much more difficult task.

Because that is where all the deflation has been happening.

Accounting Software Update

Development activities that are in progress or have recently been delivered include:

  • Support for capital calls as they relate to alternative assets
  • An upgrade to the Fund set up process, providing greater validation and making the user interface more intuitive
  • Making the MWA Report directly accessible
  • Simplifying the Practitioner upgrade path for broker data feeds

As we deploy new features we are also making a point of adding more tooltips into the interface (with plans to extend the current help content to include a self-paced learning environment as well).

Conclusion

Generating investment returns over periods that can be measured in decades is ultimately about sustainability.

If some economic driver of those returns is not sustainable, neither are the returns themselves.

But as the recent bushfire crisis around Australia illustrates, that narrative is not just about economics.

Those returns must be founded on the effective protection of the ecological systems that underpin our economy and civil society.

For generations to come.

Regards

Ashley Porter
Managing Director
Mclowd Pty Ltd

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