 Hello and welcome to FIG's Managed Income Portfolio Services webinar. My name's Simon Michele and I head up our FIG Advisor Services, been with FIG for about eight years and I'm joined today by Emma Jenkins. Emma Jenkins is the product specialist and developer of our new Managed Income Portfolio Service. So Emma, maybe you'd like to give us a little bit of a brief overview of your background. Great. Thanks Simon. So my background is in fixed income. I've been in fixed income for over 15 years with the last three years at FIG and one of the projects that I've been working on and that I'm very excited to talk about today is our Managed Income Portfolio Service, which as you mentioned I've developed or helped to develop. And really, you know, what is this all about? It's about providing scalable access to fixed income. Fantastic. Thank you very much and we do have a presentation to run through which everyone should be seeing on your screens. I'm going to keep things very much sort of Q&A today and I'll be asking Emma about some of the key features of this new Managed Income Portfolio Service. If anyone does have a question they'd like to send through to us, you can certainly do that by the panel on the right hand side of your screen and if we have time we'll get around to some of those questions. I hope to keep things relatively short. People are busy so we should be done in around 30 minutes. So let's get started. So Emma, Managed Income Fixed Income. Why is this the next step we've taken? Great. Well over the past few years, FIG has been working to open up the Bond Asset Class. You know, this is a traditional asset class that's been around for hundreds of years but people haven't had access. So we've been opening up the market to individual investors, SMSFs either directly or through advisors and we've been looking to break down those bond parcel sizes below $500,000 down into, say, even $1,000 parcels. You know, many people being locked out of the market so this is an initiative that FIG has led and there are another couple of brokers and banks in the market now as well who are offering access to the bond markets. So when we talk about breaking down bonds into smaller parcels, what do we exactly mean there? Yeah, it makes it sound like a complicated process but it's not really at all. In the documentation of the bonds it determines how small you can trade those parcels and in a lot of them it's down to $1,000. So really it's about custody and settlement. That's what's restricted the flows previously. It's been an in-store market so it's just been in $500,000 parcels. So FIG solves that by offering a custody service and providing that settlement in those smaller parcel sizes. Great. And I know that we've been offering direct bond ownership down into smaller parcel sizes for about five years now. So what does this new Managing Come Portfolio Service bring to the table as far as accessing those bonds? The MIPS adds another layer. So what we're now offering wholesale and sophisticated investors with an investment size of $250,000 is the ability to have a portfolio that's managed. So the key element here is bringing in the professional portfolio management team. And in doing so we've created an end-to-end service so that it's simple and scalable. And the key elements of this service, you know, there's still a lot of it revolves around direct bond ownership. So these portfolios are directly held by the clients, which means they've got access to that regular and timely income streams and the protection of fixed income, which people are looking for in the defensive traditional asset class. The real key difference is that it's managed professionally, as I mentioned, by a team that's got a wealth of experience in fixed income markets. So they're looking for opportunities and they're mismanaging the portfolio. So it's that direct bond access, but in a more hands-off way. Fantastic. Well, it sounds a little bit like a managed fund. Would that be right or...? It is similar to a managed funding that you've got management, but the really key difference is you don't own a unit, you're not, and you've got a lot more transparency because you can actually see on our online portal and also through our reporting and data feeds, you can see your bond portfolio and the actual bonds that you own. So you directly own those, and that's a really big and important key difference. Look, you're absolutely right. I know when I speak to advisors, the main concerns around accessing the bond market are really expertise, transparency, and connectivity, getting the information through reporting. So how does this managing income portfolio service meet those key concerns? Yeah, we spend a lot of time in the setting up of MIPS, thinking about advisors' needs and trying to address exactly those three points. And so maybe if I just talk you through around the key features of MIPS, you'll see what the service offers and how it addresses those key concerns. So I've touched on the discretionary portfolio management that is carried out by the portfolio management team. This is what you see a fund manager do as well. So they're looking at interest rate environments, macro conditions, and positioning that portfolio and selecting the securities, of course. Then the transacting is really important, because bond markets, as I mentioned, it's been an institutional market that still predominantly is. So there's efficiency in terms of transacting in big parcels and being in primary issues. And so what the MIPS does, it allows the retail investor to participate in that too. So there's real efficiency in the transaction. The Cassian been reporting, that's really about end-win service. So it's really hands-off for the advisor in terms of their clients. We look after all of that for you. But you've got the transparency that the reporting provides. You can see performance returns. You can see the current portfolio. You can see the bonds that are held. And as I mentioned, that comes in a hard-copy reporting form, but also is data-fed, so it's a complete service to really provide that connectivity. So that's a whole lot of detail about the service, but the aim is that's what we do. So for the advisor, it's really convenient, simple and scalable to provide direct fixed income to their clients. Well, I think that's key because I know previously financial advisors accessing direct bonds would have had to do an SOA, look at a portfolio construction, present that to the client, get the client signed off, and they have to do that each time for each new client. So it sounds like this eliminates a lot of that work. Yeah, we're taking that role of expert back. We're taking the decision-making, but a lot of the paperwork behind it as well. So in the old scenario, the advisor had to become a credit expert and get comfortable with bonds and which names they were investing in. And now what they're doing is they're handing that over to the professional management team. Fantastic. Now, I know there's a few different types of investment programs, so why don't we have a look at the detail of some of the offerings you've got there? Sure. So let's just have a look at those programs. So they are the core income, the income plus, the inflation linked, and then we've got the ability to customise for $5 million. So just touching on each of those and just I'll just highlight a few of the key features so you can get a sense of the three programs. The core income, this is a senior debt-only portfolio and it's got a very high allocation to investment-grade securities. So that's a conservative portfolio, but it derives really good, strong, reliable income. In current market conditions, that's sort of got a portfolio return net of fees of 4%. The income plus, that's sort of stepping up in credit exposure, so it can invest in sub-investment-grade and unrated paper, as well as up and down the capital structure. So senior debt plus sub-debt. So, and that derives a much stronger income stream, commensurate with that additional risk, and that is currently 5.2% net of fees. Inflation linked, as it suggests, it's a pure inflation hedge. There aren't many ways to get a pure inflation hedge in the market. A lot of people use equities for it, but it's not really linked to CPI. All these bonds are linked to CPI. So it protects the investors' purchasing power, and that's 3.55% net of fees. Fantastic. So you've got some indicated performance there. That's net of fees. What sort of variants would you expect to see in that? Well, the beauty of fixed income is that it's forward-looking. I mean, those coupons are legal obligation. They're known cash flows. So you can project forward what the return of that portfolio is going to be based on those cash flows. So these are the baseline expectation of the portfolio as it's set up today. We then expect the active management element. So that's the portfolio manager funding a new bond that's got relative value and trading out of one of the bonds in the portfolio, lad around 0.25% to 0.5% per annum, in addition to those baseline return figures. Fantastic. So you've got the protection of that as your income stream, the coupon payment that's coming through to you. So can I access part of my investment? Am I locked in? No, you can access your investment. So there's a couple of ways you can do this. As long as you keep the $250,000 minimum, you can crawl down, and we've got 10 business days to provide you with those funds. If you want to take all your money out, so complete sell-down, then that will take us 30 business days. I should also add that as a guide for implementation, we'd be looking for around 30 business days to fully implement the portfolio as well. Fantastic. Well, that compares pretty well with term deposits now. It does, and I guess the other point though is as we sell-down, you can access those bonds, those funds straight away. We don't hold them all until the end. As we sell-down, they go into your account, and then your client can access those. Fantastic. Fantastic. Now, I note there is all you've got to a customized program. What's the details on that? The customized program is intended for groups where they've got a specific requirement for a program that's different to the core income, income plus or inflation link. And so we can customize as long as the aggregate investment size is $5 million plus. Fantastic. Well, I mean, this is great, I suppose, for investors that want to be able to access some bonds, but they just don't want to have to worry about that on a day-to-day basis. I'm thinking about some clients that I've been working with that are about to take off on a trip, and they're moving their portfolio into the managed income portfolio service for the time that they're away. What are some of the other sort of scenarios you see where this would be beneficial to investors? We see it suits a lot of clients for different reasons, but if we just take a look at Ryan and Amanda, which are a couple who are transitioning into retirement, they're really conservative, they want to protect their capital, but they need more income than they're getting from their TDs. I mean, TDs now are in the high 2%, which is just not enough to fund their living expenses. And then this couple, they're new to bond investing, and they don't want to become the credit experts. They're not interested in reading all the different reports. They actually want to announce all that expertise and enjoy their retirement. So they've selected the core income investment program because that fits their risk profile, and it generates 4%, which is a good 1 to 1.5% above their TD rates that they're seeing at the moment. Fantastic. So obviously handing over the discretion to the portfolio management team. So what sort of work are they doing on a day-to-day basis monitoring these investment programs? That's a great question. This is a portfolio that just shows what the team has put together in terms of the names inside the portfolio there. So what they're doing is they're constructing this portfolio. They're looking at the bond universe, which is a very large one, and then they're choosing the best of to create portfolios that generate those strong income streams with an appropriate balance of industry, sector, risk and interest rate exposure. So you can see that there in the chart that we've got up the top in the top pie chart. You know, it's got a mixture of fixed rate bonds, floating rate bonds and inflation link bonds, and a spread there across the rating in that pie chart to the right of that one. So these names many, many people may recognise. There's a lot of infrastructure in there, Sydney Airport, some global Dalrymple Bay Coal Terminal, Energy Partnership to Gas Pipeline, and then there's also global companies like Sarvamila. So these are all very well-known companies that are sitting in this conservative core income portfolio. But just to give you a demonstration of what they do down a company name basis, so looking at an individual credit if you like, our portfolio management team loves SET logistics. Right. So this is their favourite bond, and this will give you insight into the work they do and how they think about credit, which is a different type of investing skill than investing in equities where you're looking at growth. In fixed income, what you're interested in is are they going to pay my coupon, which is a legal obligation, and will I get my money back at maturity? So they, in Bond World, we like much more boring investments, and this is what SED logistics is. They're a national multi-modal transport and logistics company. It's owned by a family, got a very strong market share, and they've got consistent predictable revenue streams, which is all great for bonds, but might not be as exciting for equities. They've got a strong balance sheet, and then it's good value. So that is why the portfolio management team selected this bond as the unrated bond to go into that core income portfolio. Fantastic. So they're doing a lot of work in the background, and that's determining the relative bonds within those investment programs. So I suppose before we move on, let's talk money. What sort of fees are we paying for the service? The fees, they range depending on the investment program that's selected. But for the core income and the income plus, they are 0.85% and for the, sorry, core income and inflation link, and for the income plus, it's 1.05%. And that's an all-in fee there. And so that reflects the fact that you're buying more of the unrated, more of the managers' expertise in the income plus. That's right. So with analyzing SED logistics, they would meet with management. They'd spend two to three weeks analyzing the balance sheet, looking at cash flows, and really interrogating that company to ensure they're comfortable investing in it in the bonds. Fantastic. Well, I've been in fixed income for 28 years. I believe this is the first individually managed account for investors in fixed income in bonds. So it's a great innovation. I think it's going to be really beneficial for advisors that want to be able to access that market, but in a much easier and efficient fashion. So let's wind things up and summarize. What do you see having developed this as some of the key benefits for this managing income portfolio service? I think the top highlight for me is really it's about convenience, simple, and an easy way to access direct fixed income. You know, it's a traditional asset class that people haven't been able to gain exposure to. So what MIPS is aiming to and what I believe it achieves is just providing that easy point of access. So you're handing over to the experts who do all of the in-depth credit and market insights that professionally manage your portfolio, which is important for risk management but also for opportunities. So you're really outsourcing that to professionals, but you're keeping all those benefits of your regular income and the protection of the maturities which you get with direct bonds. And then importantly, though, for advisors, and we understand this, it has to integrate into their business. So those data feeds have to connect into reporting systems so that an advisor can create aggregate reporting for their clients and they've got complete transparency around their clients, holdings, what they own, and how they're performing. Fantastic, that's great. And look, I know that I'm getting a lot of questions from some of the advisors I've worked with around being able to actually transition the existing bond portfolios into the managed income portfolio services. Is that something we can do? It is. We've endeavoured to set up MIPS to be really flexible. So you can do a couple of things. You can transfer your bond portfolio into MIPS and equally, if an investor changes their minds and a mind wants to hold the bond portfolio directly, they can transfer it back out again as well and hold it directly. Now then it wouldn't have the management, but it just provides that other alternative. They don't have to cash out of the whole portfolio if they're doing a partial sell-down. Great, great. And I note there as well on the platform integration. So what exactly do investors see when they're looking at their reporting on this? So what they see is they see the individual names in their portfolio. So they'll see, as to that model portfolio, they'd see how much SCT logistics they hold, how much sub-millar they hold. Then they'd also see the amount of the holding and the value of that holding. So they can see their overall portfolio value and then they can create returns. Of course, they also need to see the coupons as well so they can see income streaks and they would also feed through. Great, fantastic. Well, look, thank you very much for that, Emma. We have had some questions come through as we've been talking. So we might just hit a couple of those before we finish up. Martin has just typed through here. He just wants to know what sort of turnover you'd expect in that relation to the underlying loan portfolios. So these portfolios are set up to be good portfolios that the investment management team's happy holding. So in terms of turnover, we'd expect around about 35% year turnover. It's not a hedge fund. You're not going to see the whole portfolio turnover three times a year. It's to generate good, strong income streams for people who use for their retirement. Fantastic. And I think we spoke about the income provided by the coupon payments, but Barb just asked whether they have to be utilised or whether they can actually be reinvested into the portfolio. You have two options. You can choose to reinvest if you like and then the portfolio management team will go and purchase the bonds. Or you can choose to have that sort of bounce back out to your own account so that you can use those funds for living expenses or anything you like. Fantastic. Matt asked a question we've already covered which was about moving existing holdings into MIPS. So you said that that can be done. So we'll move on to a question here from Petra who basically says her clients are in term deposits for their defensive allocation. She's sort of asking is it, would this be a useful transition for her out of term deposits to improve the performance, moving some of that cash exposure into bonds essentially? Yeah, we're seeing a lot of clients asking exactly this question. Bonds are a traditional asset class and they are a defensive asset class. And again, the reason they're defensive is, you know, the coupons and immaterial payments, they are legal obligations. The company has to pay them. So you've got great certainty and you can do income planning, but it's offering a higher level of yield creating a diversified portfolio than your TDs. So take the core income programme that's going to return to you about four, four and a quarter over the year per annum. So it's a good one to one and a half over your TDs. Now, yes, you have different exposure, but that's diversified across infrastructure assets, international companies, but again, they're legal obligations. So yeah, there's real benefit in looking at moving some of that TD money into bonds. We know a lot of people are using equities for that, but equities are much, much more volatile. You don't know what you're gonna get if it ends a discretionary and you're not sure where the share prices are going to be in the future. So what we recommend is look at your whole asset allocation and there's a place for each, but at the moment there's a gaping hole in the middle for many investors, which is where their bonds should be sitting. Fantastic, that's marvelous. Well, listen, thank you very much, Emma, for that presentation. I suppose some advisors certainly know that they can access some further information via our network of BDMs. And I imagine we would have some further information would be on the website. We do, we've got a great amount of collateral that we can provide to advisors to help communicate with their clients. And we're very happy to provide those and the BDMs are a great first point of contact. But in addition to that, you can also have a look on our website and you can see a lot of information on there about MIPS as well. Fantastic. Well, we'll wrap it up there. Thank you very much, Emma, again, for providing that expertise on this new innovation, our new Manishing Comp Portfolio Service. Up on the screen at the moment, you will see details of our webpage and also the number to contact your relevant BDM by your geographic region. Thank you very much, everyone, for listening in. Thank you very much for the questions. They're very, very much appreciated. And we look forward to touching base with you in the future. Thanks, Emma. Great, thanks, Armin.