MLC Private Assets - MLC - Perso by shimeiyan

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									 MLC Global Private
 Assets
 MLC Annual Review

 September 2009




 MLC Investment Management
 Level 12, 105 –153 Miller Street
 North Sydney NSW 2060




MLC review for the year ending 30 September 2009   Page 1 of 5
 Important information

 This information has been provided by MLC Limited (ABN 90 000 000 402) a member of the National
 Group, 105-153 Miller Street, North Sydney 2060. This material was prepared for advisers only.
 Any advice in this communication has been prepared without taking account of individual objectives,
 financial situation or needs. Because of this you should, before acting on any information in this
 communication, consider whether it is appropriate to your objectives, financial situation and needs. You
 should obtain a Product Disclosure Statement or other disclosure document relating to any financial
 product issued by MLC Investments Limited (ABN 30 002 641 661) and MLC Nominees Pty Ltd (ABN 93
 002 814 959) as trustee of The Universal Super Scheme (ABN 44 928 361 101), and consider it before
 making any decision about whether to acquire or continue to hold the product. A copy of the Product
 Disclosure Statement or other disclosure document is available upon request by phoning the MLC call
 centre on 132 652 or on our website at mlc.com.au.
 An investment in any product offered by a member company of the National group does not represent a
 deposit with or a liability of the National Australia Bank Limited ABN 12 004 044 937 or other member
 company of the National Australia Bank group of companies and is subject to investment risk including
 possible delays in repayment and loss or income and capital invested. None of the National Australia
 Bank Limited, MLC Limited, MLC Investments Limited or other member company in the National
 Australia Bank group of companies guarantees the capital value, payment of income or performance of
 any financial product referred to in this publication.
 Past performance is not indicative of future performance. The value of an investment may rise or fall with
 the changes in the market. Please note that all return figures reported are before management fees and
 taxes, and for the period up to 30 September 2009, unless otherwise stated.
 The specialist investment management companies are current as at 30 September 2009. Funds under
 management figures are as at 30 September 2009, unless otherwise stated. Investment managers are
 regularly reviewed and may be appointed or removed at any time without prior notice to you.




MLC review for the year ending 30 September 2009                                               Page 2 of 5
MLC Global Private Assets
Commentary
Benefits and risks of global                   These are investments in assets that are not traded on listed
private assets                                 exchanges. An example of this is an investment in a privately owned
                                               business.

                                               Things to consider
                                                    Private assets are illiquid which makes them difficult to buy or sell.
                                                    To access private assets you generally need to do so via a
                                                     managed fund.
                                                    Because private assets are not listed on an exchange, they’re
                                                     infrequently priced so determining their value is difficult and may
                                                     involve a considerable time lag. This means you need to be
                                                     careful in interpreting the unit price of any fund with a substantial
                                                     holding of private assets.
                                                    Returns are driven by many factors including the economic
                                                     environment in various countries.
                                                    Investing overseas exposes your investment to movements in the
                                                     exchange rate between the Australian dollar and foreign
                                                     currencies. These movements can largely be removed by hedging
                                                     the currency exposure back to Australian dollars.
                                                    Private assets can be volatile and are usually included in a
                                                     portfolio for their growth characteristics.


                                                                                                5          3                     3
The table outlines the                                                                                             1 Year
                                         Performance to 30-Sept-09           Product          Years      Years                 Months
                                                                                                                     %
performance                                                                                   % pa       % pa                    %
                                         MLC Global Private
                                         Assets Hedged
                                         (before taking into                                  10.4        5.2          -19.0    3.6
                                         account fees and tax)                MLC
                                                                           MasterKey
                                         MSCI All Country World              Super
                                         Index Hedged into AUD            Fundamentals
                                         (MSCI World Index Hedged                              5.1       -4.1          -4.0    15.9
                                         prior to July 2002)




Absolute and Market                     The MLC private assets portfolio has returned 6.2% from inception to 30
                                                         1
Relative Returns                        September 2009 . This is a premium of 8.6% when compared with the
                                                         2
                                        investable MSCI for the same period (-2.4%). The portfolio experienced
                                        an increased valuation of approximately 3.6% for the quarter based on
                                        Managers’ audited 30 June 2009 reports. In general, managers with
                                        which MLC invests have aggressively cut costs and paid down debt
                                        since the onset of the recession, and many have accumulated sufficient
                                        cash to purchase competitors or expand their market footprint. While
                                        trading conditions remain challenging, we believe this period offers
                                        excellent opportunities for well prepared and managed firms.


1 Performance represents the most recent valuations received from underlying management groups. Performance for this
asset class is reported with a lag of one quarter.
2 The investable MSCI is the benchmark return objective set out in MLC’s Private Assets mandates.




MLC review for the year ending 30 September 2009                                                                           Page 3 of 5
The graph shows absolute                                                                                           Rolling Performance in Excess of the Index
returns of your strategy                                                                                               MLC Global Private Assets Portfolio
                                                                                                                            (before taking into account fees and tax)

                                                                      50.0%

                                                                      40.0%




                              (MSCI All Country World Hedged Index)
                                                                      30.0%




                                    Annualised Excess Return
                                                                      20.0%

                                                                      10.0%

                                                                       0.0%

                                                                      -10.0%

                                                                      -20.0%

                                                                      -30.0%

                                                                      -40.0%

                                                                      -50.0%




                                                                               Mar-00




                                                                                                 Mar-01




                                                                                                                   Mar-02




                                                                                                                                      Mar-03




                                                                                                                                                        Mar-04




                                                                                                                                                                          Mar-05




                                                                                                                                                                                            Mar-06




                                                                                                                                                                                                               Mar-07




                                                                                                                                                                                                                                 Mar-08




                                                                                                                                                                                                                                                   Mar-09
                                                                                        Sep-00




                                                                                                          Sep-01




                                                                                                                             Sep-02




                                                                                                                                               Sep-03




                                                                                                                                                                 Sep-04




                                                                                                                                                                                   Sep-05




                                                                                                                                                                                                     Sep-06




                                                                                                                                                                                                                        Sep-07




                                                                                                                                                                                                                                          Sep-08




                                                                                                                                                                                                                                                            Sep-09
                                                                                                                             1 Year                                 3 Years                                   5 Years



Strategy exposures           The MLC private assets portfolio is invested in Western Europe, the
                             United States, China, India, Japan, and Australia. Across our markets
                             we’re generally seeing public debt and equity markets continue to
                             improve, resulting in increased deal activity as investors begin to regain
                             confidence. However, the average macro numbers mask a wide
                             dispersion in regional, economic, sector and industry activity. Further,
                             the speed with which all this has occurred, and the valuations being
                             attributed to public companies, are of some concern when the more
                             sobering underlying economic conditions are considered, especially in
                             the United States and Europe. Asia and Australia are presenting more
                             optimistic data. We are also cautious about the sustainability of the US
                             recovery after the massive government stimulus is withdrawn.
                             The alternative asset market has certainly benefited from the recovery in
                             the equity and debt market in 2009, however it’s still unclear whether
                             institutional investors as a whole have regained a sustained appetite for
                             new investment. Nonetheless, improvement in public market valuations
                             has flowed through to our portfolio as public market comparables impact
                             private assets portfolio company valuations. Accordingly, we are seeing
                             our NAV gradually improve.
                             Australia is increasingly being recognised globally as a reliable source of
                             stable capital due to our compulsory superannuation system. This has
                             favourably benefited MLC’s ability to access managers and opportunities
                             globally in a capital constrained environment. In order to capitalise on
                             this opportunity while the window remains open, the private assets team
                             has been on the road pro-actively searching for new opportunities in a
                             number of areas, including venture capital and distressed debt. The
                             team travelled extensively through the US and Asia during 2009. We
                             were also active participants at premier international industry events
                             representing MLC on investor panels, and furthering our global
                             reputation as a through-the-cycle global investor.
                             We anticipate achieving a 2009 vintage year commitment exceeding
                             AUD $500 million. This maintains our strategic objective for vintage year
                             diversification. Our portfolio currently has AUD $1.6billion in undrawn
                             commitments (‘dry powder’) yet to be invested into the recessionary
                             environment, an opportunity that historically has produced the best
                             vintages for private assets.
                             During the year we were presented with a unique opportunity to second
                             Richard Baker for 6 months to one of our important venture capital
                             managers in Silicon Valley. MLC has circa $1billion of commitments to
                             the venture capital strategy, largely centred in Silicon Valley, and this


MLC review for the year ending 30 September 2009                                                                                                                                                                                           Page 4 of 5
                             opportunity enabled us to better understand the asset class, develop
                             deeper relationships, investigate co-investment opportunities, and
                             elevate our profile among key managers in the close-knit venture capital
                             community. We have already seen early benefits of this with some
                             exceptional quality co-investment deal opportunities being presented to
                             us from top-tier venture capital managers.

Sector and region                                                                                           USA Growth, 3%
exposures
                                                 Australia Buy-Out,
                                                         6%                          USA
                                                                                 Buy-Out, 19%
                                            Asia Other, 2%                                              USA
                                                                                                   Venture Capital,
                                          Asia Buy-Out, 3%                                              19%
                                         Europe Other, 1%
                                                                                                                           USA Distressed,
                                                  Europe                                                                        4%
                                              Distressed, 2%
                                                                                      Europe Buy-Out,
                                          Europe Venture                                   34%
                                           Capital, 4%                                                                 USA Other, 1%
                                            Vintage year commitments
                                                         Europe Growth,
                                                              2%

                                                                                                                               975
Vintage year commitments                 1000



                                           750
                              $ AUD Ms




                                                                                                                 530
                                                                                                          500                          486
                                           500

                                                                                                                         320
                                                                          288
                                                                                                   240
                                           250                   174            186
                                                           126                         135
                                                    46                                        61

                                             0
                                                  1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
                                                                                                              YTD

Stock story                  During the quarter, the Investment Committee met twice and approved
                             two investments. The first was a commitment to a global distressed debt
                             manager established by two former senior Goldman Sachs partners in
                             New York. In addition, approximately 20% of the fund was already
                             called, which enabled us to buy in at a substantial discount to market
                             value.
                             The second was a co-investment in an Australian industrial rental-
                             services firm managed by one of our trusted managers. As part of an
                             industry consolidation to create an Australasian market leader, with
                             strong leadership, potential for economic growth and attractive pricing.
                             We are optimistic as to the potential for this investment.
                             In aggregate, the third quarter commitment activity for 2009 totalled $59
                             million bringing total commitments for the calendar year 2009 to $205
                             million. As at 30 September 2009, MLC’s private assets programme
                             invests with 46 managers across 105 funds (including legacy
                             investments).




MLC review for the year ending 30 September 2009                                                                               Page 5 of 5

								
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