BT Private Wealth chief on how to invest in a zero-yield world
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Elissa Crowther-Pal outlines opportunities in debt, her best investments and how she unwinds.

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Walking on the beach at sunrise is a way of preparing for the day rather than being thrown straight in. Yianni Aspradakis

In an AFR summer series, investment experts give us their thoughts on what’s ahead for investors and tell us how they relax when they’re not caught up in market events. Elissa Crowther-Pal is head of wealth services at BT Private Wealth.

What investment themes do you see for 2020, both offshore and in ?
One of the key themes includes the ongoing challenge of a zero real yield global environment. Australia has historically held a 30-year high-yielding status relative to other developed economies, but we are now facing a low-yield world that is challenging for investors. The theme of “lower for longer” will apply to growth and yield and will continue. We’ve sharpened our focus on the identification and selection of risk-considered, yield-based investment opportunities.

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The rapid growth of is a key investment theme to watch in 2020, says Elissa Crowther-Pal.  Louie Douvis

Next year will be dominated by the theme of ongoing change and rapid innovation. Technology continues to revolutionise and disrupt industries globally and we are fascinated by the intensifying need for services such as computing and processing by the global . Domestically, as the government concludes its NBN rollout by 2020 and 5G infrastructure is gradually deployed, the Australian digital economy will emerge with improved connectivity, greater network speeds and bandwidth, and very low latency. We will be closely watching this opportunity as the digital economy empowers sectors and industries.

While there has been much talk over the last few years about the Asian region and its growth, we believe Asia’s potential as an investment opportunity is still under-appreciated. This is particularly in light of the IMF’s forecast for the Asian region to become the largest contributor to the world’s economic momentum – not just by the rate but also by the size – within the next couple of years. This rapid growth of Asia is a key investment theme to watch in 2020.

Where do you see good value?
Good value will arise in areas of global growth and in certain geographies such as the US and Asia. Domestically, the low interest rate environment and outlook remains, with expected lower inflation throughout 2020 and 2021. However, the RBA seems prepared to ease monetary policy further if needed to support sustainable growth in the economy. We are still seeing good value in select unlisted (or private markets) investments – in particular for those investors who have a longer-term investment horizon and therefore can tolerate lower liquidity. We see opportunity in this category from the broad choice available and how uncrowded it is.


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We are certainly seeing some pockets of listed markets with stretched valuations.

— Elissa Crowther-Pal, BT Private Wealth

Given the low-growth environment, we are also looking for ways to selectively participate in rapid growth. This will represent good value, not just in valuation terms but in relative and comparative terms against stagnating businesses. Opportunities that leverage our thematics in technology include offshore participation in the upside of 5G and the growth of the US consumer. We are interested in these themes and like certain exchange traded funds () to take advantage of these themes. Domestically we are attracted to listed and unlisted investments in property and logistic companies that cultivate growth from the shift to consumer-empowered online shopping.

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Where are your high-net-worth clients allocating their capital and what are their concerns?
The predominant concerns are ongoing low interest rates, an overall inverted yield curve and lower term deposit rates, meaning there are limited opportunities to generate yield. Our clients are allocating capital in a variety of ways to capture yield and are contemplating a greater tolerance to risk given the current environment.

Our clients are interested in senior credit options such as wholesale bonds, real estate (senior debt) and active management (investment grade senior debt) all of which offer slightly more risk but a propensity for greater return.

Generally, we’ve observed that clients in this low interest rate environment are open to taking on slightly more risk because they are retaining senior investment-grade attributes. Clients are willing to move down the capital structure, transitioning from secured debt to senior debt, where the risk of losses may increase but not to a large magnitude if they stay within a highly selective approach.

Of course, as investors move from debt to equity, the risk increases. In the context of a liquidation scenario, the priority of payments will change over the investment. But investors have the option to move in increments, and within debt there is a high variance in quality – so selecting high-quality debt opportunities is one way to enhance yield.

Similarly, managed funds with an equity yield objective or equity-based ETFs can also be an appealing option for investors.

Are traditional listed markets overvalued? If so, what are the other options for investors?
While we don’t think listed markets are overvalued, we are certainly seeing some pockets of listed markets with stretched valuations and believe it’s important for investors to be selective when investing in this space.

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We select equities that have solid dividend characteristics that will drive equity-based yield if an investor is comfortable with equity risk. This includes companies across sectors that are supportive of strong future dividends. Growing companies with sustainable earnings that are willing to pay dividends to their shareholders will always be attractive and represent value.

But in a low-rate environment, looking beyond listed and unlisted markets to the private sphere may be more appealing, particularly for high net worth clients. They can access private equity, venture capital, direct investing in debt and equity which can be otherwise difficult to access due to minimum investment levels. Importantly, private markets can also offer lower correlations with other asset classes and in some cases better valuations than listed investments.

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Time on Balmoral Beach, even briefly, is a weekend well spent.  Yianni Aspradakis

Like any investment that offers higher potential returns by undertaking more risk, competence and experience from an established fund manager with strong fund selection expertise is integral.

What’s been your best investment?
Personally, my family! I have two boys George and Felix who are now 15 and 13. They represent a huge investment in time, energy, resourcing and food but are the most rewarding investment that I have ever made. They are now teenagers, so I am looking forward to seeing our reward as they mature into brave, strong, independent and empathetic men.

I have always been an active investor and interested in the equity market. Since I first started working in Australia, and then in San Francisco, I have invested in equities both directly as well as through expert fund managers. Many of the US tech stocks in the early 2000s proved to be a great investment for me. I’ve also found ETFs a way to participate in a low-cost way in certain market sectors too. I am happy to pay an active manager when I believe they have expertise that I don’t have in order to achieve alpha performance in the market. I am equally happy to utilise an ETF to get exposure to a certain part of the market at a low cost.

What’s been your worst investment?
My husband Damon (also a great investment!) is from the Bay Area, , and we lived in San Francisco together for 15 years before we moved to Sydney in 2010. Around the tech bubble in 2000, there was a start-up frenzy. As we lived in the heart of at the time, we – like many of our friends – invested in an early-stage healthtech start-up directly. The start-up eventually folded. It was definitely the worst investment we have made: our decision was made on emotion, we followed the crowd and did not undertake proper due diligence. Like any investment, it was a powerful lesson and taught us the importance of doing the work beforehand and ignoring the hype. However, the process of making great investment decisions never changes and we leverage the learnings from this experience so that we won’t make it again!

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How do you relax?
We spend most of the weekend as a family, watching the boys play water polo. Saying that, we have a rule that unless we’ve been to Balmoral Beach we haven’t really had a weekend! Even if it’s just slipping in for a quick swim or going for a walk. That sliver of time allows me to completely switch off and helps me refocus. On the weekends I try and swim in the ocean swims at the beach club during the summer. I am not very fast – just completing the course is usually my aim.

Damon and I both work and we’re always juggling driving the boys to sport. Some days I’ll be at school before dawn for swimming and in the evenings Damon will be taking the boys to training. It’s a pretty full-on schedule between us.

I grew up in Sydney and Damon’s American. I met him while he was out in Australia playing water polo through my two flatmates who also played. We ran into each other a year later at the Slug & Lettuce pub in Notting Hill when I was working in London. He said: “Come to San Francisco for the summer” – I agreed and then somehow stayed for 14 years. In the Bay Area I worked for Charles Schwab, ’s largest brokerage platform, a fintech start-up and an investment consulting firm. I did a lot of travel to meet clients and attend conferences all across the US, Korea and Japan, it was really interesting. The boys were born in San Francisco and we lived in the city but when they were 5 and 3 we got tired of dressing in fleeces and beanies to go the park in the middle of another foggy summer and decided that it was time to move back to Sydney.

Being in financial services means you’re always on, you never switch completely off. I’ll sometimes go for a walk on the beach at sunrise, listening to podcasts and getting really immersed in someone talking about new ideas. It’s so amazing being on the beach that early and it can be spectacularly peaceful looking out over the water. It’s a way of preparing myself for the day rather than being thrown straight in. When I start my day that way I feel prepared for anything. It’s about just thinking – taking deep breaths and getting in a really calm state, not having cluttered thoughts. The ocean can be a very calming force.

Debra Cleveland

Debra ClevelandSmart Investor EditorDebra Cleveland writes on personal specialising in superannuation & SMSFs, , tax. Based in our Sydney newsroom, Debra has over 30 years experience as a journalist and editor. Connect with Debra on Twitter. Email Debra at [email protected]

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