Investment Professionals

Managing volatility for your clients

Apr 02, 2020

The current COVID-19 concerns have rattled markets, with advisers fielding calls from concerned clients. In some cases, advisers may choose to add tilts or hedges for their clients’ investments, while for others, it will be better to stay the course. There are a range of ways to manage market volatility in a portfolio, some universally valuable, others dependent on the individual clients. In this paper, we’ve highlighted some of the most common. Download now In your discussions with clients, these principles can be a helpful starting point in reinforcing your approach and providing comfort in uncertain times. 1. Diversification Reinforcing the value of diversification with your clients can be as simple as the analogy of not having all your eggs in one basket. The current environment has reinforced the importance of diversification within asset classes and sectors, with some companies able to benefit (ie supermarkets) and others needing to close down (i.e. travel and tourism companies). 2. Incorporating more stable, less cyclical investments Holding companies which are able to consistently operate regardless of market conditions, such as essential services infrastructure, can assist in buffering portfolios against falling markets. 3. Alternative investments Investments which are designed to perform differently to equity and bond markets can range in complexity. Gold is a simple asset with a low or even negative correlation with other asset classes which has acted as a safe-haven investment across a number of market events over time. 4. Strategic tilts For some investors, incorporating short-term tilts alongside the long-term core strategy can assist in managing market volatility. Depending on the strategy, this could mean adding a tilt to high growth (and therefore ‘riskier’ assets) or adding more defensive position. ETFs can be an effective tool for managing volatility for your clients. Beyond characteristics including liquidity and cost-efficiency, the wide range available, broad exposures and instant diversification mean they can be suitable across investor types. For more information on our range of ETFs and using them in your clients’ portfolios, please contact us on: Sales Trading Phone +61 2 8311 3488 Email: sales@etfsecurities.com.au Phone +61 2 8311 3483 Email: primarymarkets@etfsecurities.com.au

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India: A Long-Term Opportunity Amidst the Current Panic

Apr 01, 2020

Key highlights India, like all other markets, has been deeply affected by COVID-19 However, this has now reset company valuations to highly attractive levels When the markets begin to recover there are strong reasons to believe India can flour-ish anew One of the easiest, most cost-efficient ways to get exposure to India for Australians is via the ETFS Reliance India Nifty 50 ETF (ASX code: NDIA) India: Current State of Play In the past month, the Indian stock market has undergone one of the sharpest corrections in history. Growth forecasts have seen sharp downgrades and India is no exception, with expected weakness for the remainder of the year. While these concerns are real, global policymakers have responded to this crisis with unprecedented levels of monetary and fiscal stimulus. Still, the panic in the market is visible in record levels of volatility which has led to deep cuts across most sectors. Market Valuations Return to GFC Levels After this sharp correction, market valuations have returned to near record lows not seen since the GFC. (Source: Blomberg & IMF Estimates) Policy support is expected to continue for a prolonged period and it is hoped that the COVID-19 epidemic will begin to subside in the second half of the year. With this in mind and given valuations are at near record lows, it seems the fallout of this epidemic is already priced in. While nobody can predict the extent to which the markets will continue to fall, or how long it will take for the current situation to return to normal, most market experts agree that current market valuations are attractive. Therefore, this could represent an attractive buying opportunity for long-term investors. Why India can recover Fiscal Response: If the COVID-19 epidemic results in prolonged lockdown a fiscal stimulus of at least 2% of GDP is likely. As an example of past stimulus, during the GFC additional expenditure amounting to 3% of GDP was provided [1] Strong Monetary Response: The RBI is expected to cut rates by at least 100bps, with the first rate cut of 75bps announced on the 30th of March [2] Rapid sequential growth for H2: Given India is a domestic consumption country, assuming COVID-19 can be contained and the lock down laws lifted, consumption can pick back up rapidly, without the reliance on international inflows [3] Access To India: ETFS Reliance India Nifty 50 ETF (ASX code: NDIA) One of the simplest ways to access the Indian stock market is through the ETFS Reliance India Nifty 50 ETF (ASX code: NDIA). NDIA tracks the Nifty50 Index, providing exposure to the top 50 large cap Indian companies (covering approx. 60% of the Indian market), most of which are currently available at their multi-year lows. Advantages of investing in the Nifty 50 index: Low cost Eliminates non-systematic risks like stock picking/portfolio manager selection Provides building blocks for portfolio construction Provides exposure to the top 50 blue chip companies who are, potentially, less likely to feel the long-term effects of the COVID-19 shut down For more information on ETFS Reliance India Nifty 50 ETF, please contact us on: Sales Trading Phone +61 2 8311 3488 Email: sales@etfsecurities.com.au Phone +61 2 8311 3483 Email: primarymarkets@etfsecurities.com.au

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Investing in megatrends

Mar 09, 2020

To access the white paper, please click the download now button above. Investors seeking growth in their portfolios need to look outside the box for opportunities in today’s market. The so-called blue-chips of the past are not necessarily the growth drivers of today or the future. Investing in megatrends may offer an effective and sustainable approach to growth in investor portfolios. Megatrends are universal socioeconomic, environmental or technological forces that change the way we do things . These trends tend to be sustained over longer periods, in some cases, 20 years or more and based on known patterns and pressures . Investing in megatrends has become increasingly accessible in recent times due to the abundance of managed investments focused on them. There are a range of megatrends influencing the world. A few of these are covered below. 1. Virtual connectivity and digitisation The internet is becoming faster and cheaper to access, with close to 60% of the world’s population already users . There are a range of opportunities following from the movement online, such as ecommerce or online entertainment and gaming. Even data storage and security are becoming major concerns. Access to this megatrend can be broadly through sectors like technology that service and fuel this trend, regions with companies dominating this trend, such as the US or across Asia, or via niche subthemes like robotics and artificial intelligence. Products in focus: > ETFS Morningstar Global Technology ETF (TECH) > ETFS ROBO Global Robotics and Automation ETF (ROBO) > ETFS FANG+ETF (FANG) 2. The growth of the Asian middle-class Two-thirds of the world’s middle-class population are expected to reside across Asia by 2030 and this offers potential for a range of industries, such as luxury goods, tourism, education and healthcare. Many global players have turned their focus to targeting consumers in this region, while regionally based companies like Alibaba or Infosys Ltd are well positioned for future growth. Investors can consider sectors like healthcare which will benefit from the growth or take a more concentrated approach by investing across Asia or within specific countries, like India. Products in focus: > ETFS Reliance India Nifty 50 ETF (NDIA) > ETFS FANG+ETF (FANG) 3. Limited resources Ongoing population growth and climate change are placing pressure on available resources including minerals, energy, water and food sources. This has forced an evolution in terms of new products, how we consume and how companies interact with us. Renewable energy and battery storage is one area tipped to grow off the back of this megatrend. Many larger corporations have also started to adjust their operations too, for example, Amazon CEO Jeff Bezos pledged $10bn to fight climate change through the Bezos Earth Fund . Investors may consider sub-themes like battery technology or electric cars, or they could consider industries which may experience higher demand on the basis of restricted resources like agriculture. Products in focus: > ETFS Battery Tech and Lithium ETF (ACDC) > ETFS FANG+ETF (FANG) For more information on the solutions ETF Securities offers, please contact us on: Sales Trading Phone +61 2 8311 3488 Email: sales@etfsecurities.com.au Phone +61 2 8311 3483 Email: primarymarkets@etfsecurities.com.au

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The economic return of the Indian elephant

Mar 03, 2020

What drove India’s performance in 2019 and its outlook for 2020 Investors are increasingly seeing India as a high potential growth market, but it under-performed expectations in 2019. The country continues to see positive structural and economic reforms, leading to the question, what happened and does this change India’s prospects? Read the full paper here. Three drivers of negative performance in 2019 Global markets were generally affected by a range of events across 2019, including the US/China trade war, slowing growth and fear of recession. Beyond this, there were three key drivers behind India’s negative performance. 1. Non-banking financial companies (NBFC) crisis In the last quarter of 2018, an NBFC company called Infrastructure Leasing & Finance Services (IL &FS) defaulted on multiple loans and covenants across India. As a result, banks and mutual funds stopped lending to NBFCs which triggered a liquidity and confidence issue across India which dragged on performance, particularly in early 2019. 2. Government election Though Narendra Modi returned to power in the government election, the focus was on re-election rather than continued structural economic growth in the lead-up to polls. 3. Kashmir Hostilities between India and Pakistan escalated, with the volatility also felt in the economy. These drivers in turn affected manufacturing, core-sector production and consumer and capital goods production. India’s automobile and real estate sectors were also hard-hit. India’s future prospects The Indian government and Reserve Bank of India (RBI) implemented two key measures to resolve the problems of 2019. These included: > Five rate cuts by the RBI to 5.15%. > A corporate tax cut from 30% to 22%. India’s outlook for 2020 is further supported by factors such as low inflation, ongoing reforms and political stability. As such, the prospects remain positive and it is anticipated to continue to benefit from overarching themes across Asia such as the growth of the middle-class. You can access India through the ETFS Reliance India Nifty 50 ETF (ASX Code: NDIA). For more information on the solutions ETF Securities offers, please contact us on: Sales Trading Phone +61 2 8311 3488 Email: sales@etfsecurities.com.au Phone +61 2 8311 3483 Email: primarymarkets@etfsecurities.com.au

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The conflicting challenges of retirement

Feb 11, 2020

To access the 'No retirement for investments' white paper, please click the download now button above. Important notice: a previous version of this whitepaper incorrectly stated the ASFA comfortable retirement standards for a couple as $43,787/year and superannuation balance of $545,000. These figures relate to the comfortable retirement standards of a single not a couple. The standards for a couple are $61,786/year and $640,000 in superannuation balance. Managing a retirement portfolio for income and growth Retirement portfolios offer a particular challenge in advice, given their more complex needs. They need to generate a stable income, preserve capital and still offer some level of growth to allow investors to manage inflation and longevity risks, along with a reasonable standard of lifestyle. In the paper No retirement for investments, ETF Securities considers how assets, portfolio construction and product selection can be used to manage retirement in the current market environment. You can download the full paper above, or read the summary following. Part of the solution comes down to diversification of the assets used for income. Retired investors have traditionally relied on domestic fixed income to support their yield needs but are now forced to consider other options. Fixed income can still play a role, for example, diversifying to international sources such as US fixed income which currently offers a higher interest rate may be part of the answer. Commonly, investors are being forced into riskier income approaches, such as through dividend streams. High yield equities may work for some retired investors, pending their risk tolerance along with overall portfolio construction. For example, they may consider how to offset the higher risks of high yield shares in other parts of their portfolio. Using alternatives in the form of commodities like gold may assist with offering stability and diversification to manage the volatility which could occur in high yield shares. Alternatively, looking to investments in more stable, less cyclical industries may be more suitable. Infrastructure is one option. It includes many essential services areas like utilities, telecommunications, industrials and transport which tend to be less vulnerable to market movements and cycles. Finally, product choice can be part of the solution to market conditions. Flexibility is important in this environment, but retired investors also need to be conscious of costs, risks and quality. Bearing these in mind, ETFs may be a suitable option due to characteristics such as low costs, ease of use, liquidity and a wide range to assist in meeting specific portfolio needs or gaps. For more information on the solutions ETF Securities offers, please contact us on: Sales Trading Phone +61 2 8311 3488 Email: infoAU@etfsecurities.com.au Phone +61 2 8311 3483 Email: primarymarkets@etfsecurities.com.au

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2020 Trends in Robotics, AI, and Healthcare Innovation

Jan 27, 2020

This is an extract of the ROBO Global paper 2020 Trends in robotics and AI innovation. To access the ROBO Global white paper, please click the download now button above. Companies around the globe are revising and rethinking their strategies to cement their futures in a world that is dictated by robotics, automation, and AI (RAAI). Deep learning, 5G, and computer vision are among the trends to watch in 2020 and beyond. 1. Computer vision Computer vision is the technology that gives computers and machines the sense of sight and the ability to analyse and understand the content of digital images. It is increasingly used throughout the manufacturing process to enhance product quality, reduce waste, and improve productivity in a variety of endmarkets, including consumer electronics, automotive, pharmaceuticals, and many more. 3D vision, a type of computer vision which has long been prohibitively expensive and complex, is set to accelerate with the help of Isra Vision in manufacturing, Koh Young in semiconductor and electronics inspection, and FARO and Hexagon in metrology and surveying. Computer vision is also enabling collaborative robotics and advanced driver assistance. Ambarella, the video processing technology provider, is rapidly morphing into an AI computer vision company. The company has received design wins for its CV chip in the professional security camera market and is engaged in several use cases in the automotive market. 2. Deep learning A subfield of machine learning, deep learning uses algorithms that strive to mimic the deep neural networks of the human brain. Reinforcement learning (RL), an aspect of deep learning, refers to goal-oriented algorithms that are the key to enabling autonomous robots, improving personalization, and accelerating drug discovery. RL will be used to dramatically improve the personalization of news and other content—a shift that will transform the massive data sets available to the advertising industry into practical, usable information— and to revolutionize myriad processes that can be simulated, including fraud detection and credit loan processes in the banking industry. 3. 5G The fifth generation of mobile wireless communications—5G—boasts features that have the potential to supercharge everything from business processes to how we engage with the Internet. Once it is fully deployed, 5G is expected to deliver up to 100x faster connection times than 4G and is expected to enable download speeds of 500-1500 Mbps in a matter of seconds. Major carriers are expected to roll out some type of 5G services in late 2020 and into 2021. Consumers will soon be able to choose 5G-compatible mobile devices from leaders like Apple, Samsung and Xiaomi, powered by Qualcomm’s latest 5G Mobile Platform Snapdragon. This best-in-class RF System provides peak speeds that promise to surpass most wired connections and transform the mobile experience. The Internet of Things (IoT) currently includes about 30 billion devices. The power of 5G will be more crucial than ever as this figure accelerates thanks to investments in autonomous vehicles, smart cities, smart factories, big data, and AI. ETFS ROBO Global Robotics & Automation ETF (ROBO) helps investors capture these trends across robotics, automation and enabling technologies. Find out more about ROBO here. For more information on accessing these trends through ETFs for your clients, please speak to ETF Securities. Sales Trading Phone +61 2 8311 3488 Email: infoAU@etfsecurities.com.au Phone +61 2 8311 3483 Email: primarymarkets@etfsecurities.com.au

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