From Decimal to Digital

LESSONS FROM 50 YEARS OF INVESTING IN AUSTRALIAN SHARES

We’ve been helping clients invest in Australia’s best industrial companies for 50 years. Our new eBook tours those five decades of change and shares the crucial investment lessons we’ve learned along the way.

ISF 


Our new eBook looks at how Australia went from Banana Republic to miracle economy and sums up the lessons we’ve learned from five decades of sharemarket investing.


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DECEMBER 1976 - JUNE 2016

Perpetual Industrial Share Fund Vs Blended All Ordinaries Accumulation 
Index $1,000 investment since inception (December 1976 - June 2016)

Source: Perpetual. Return has been calculated from December 1976 to 30 June 2016 for Perpetual’s WealthFocus Investments Industrial Share Fund, using the first audited figures available. Total returns have been calculated using exit prices after taking into account all of Perpetual’s ongoing fees and assuming reinvestment of distributions. No allowance has been made for contribution or withdrawal fees or taxation (except in the case of superannuation funds). Past performance is not indicative of future performance. The current benchmark for the Perpetual Industrial Share Fund is the S&P/ASX 300 Industrials Accumulation Index. As the Industrials Index series is not available prior to 1979, the S&P/ASX All Ordinaries Accumulation Index has been used for reference purposes.

The 1970s:
Australia unsettled

We started the decade still surfing the crest of a long commodity/agriculture boom. Yet the economy was more unfit than it appeared. Today we are a leader in the fight for freer trade. In the 70s we reduced our involvement in the General Agreement on Tariffs and Trade because it didn’t suit a nation where we dug money out of the ground.

Economically, the first half of the 20th century was disfigured by the great depression of the 1930s, and the second half by the high inflation of the 1970s.

Ian Macfarlane, former RBA governor

The 1970s saw the end of Australia’s long commodity boom as other quarry countries fought for buyers and the global economy weakened. By the end of the decade our cricketing dominance was challenged by the calypso kings of the West Indies. In our economy too, it was time for a change of tune. 

Lesson: Don’t pour your money into holes in the ground.

The 1980s:
banana republicans?

The 1980s were a tumultuous time – featuring a long sharemarket boom and the clattering crash of 1987. A free Nelson Mandela, the Ashes lost to Gatting and Gower, Australia II, the Bicentenary and a new Parliament house.

I would have to conclude that the decision to float the exchange rate in 1983 ranks among the most important economic reforms, if not the most important reform, of the past 30 years.

Ric Battelino, Reserve Bank Deputy Governor
ISF

Decimal to Digital: lessons from 50 years of investing in Australian shares.

Lesson: Bank on the balance sheet, not the banks.

The 1990s:
the long boom begins

The Keating recession of the early 90s – and good policy in its aftermath – effectively killed inflation, just as Fed Secretary Paul Volcker had done in the US in the early 1980s. For the first time in decades, our economy was free of the structural imbalances inflation creates.

The first thing to say is, the accounts do show that Australia is in a recession. The most important thing about that is, that this is a recession that Australia had to have.

PAUL KEATING, TREASURER, 1990

Lesson: Chaos isn’t the pit, chaos is the ladder.

The 2000s:
a place of greater safety

In the index of Timothy Geithner’s Stress Test, Reflections on Financial Crises, the former US Treasury Secretary mentions Australia not once. His 560-page survey of various smaller financial crises and then of the 2007-2009 Global Financial Crisis (GFC) has nothing to say about Australia – perhaps because we endured few of the massive dislocations that affected the US, UK and Europe.

Unlike the US, the UK and the Euro area, Australia didn’t have a recession and we didn’t have any bank failures.

MALCOLM EDEY, RBA FORMER ASSISTANT GOVERNOR
ISF

Decimal to Digital: lessons from 50 years of investing in Australian shares.

Lesson: BE BORN IN, OR MOVE TO, AUSTRALIA

2010 and beyond:
The 3D years

The 2000s were the era of the binge and the hangover. In the 2010s the world economy wanted to throw a recovery party but couldn’t get enough guests onto the dancefloor. Perpetual’s Matt Sherwood says the recovery from the GFC has been slowed by the three Ds – debt, disruptive technology and demography. The three Ds have made it hard to fuel global economic growth as savings rates have gone up and wage and profit growth has declined as a result.

Simple things stand the test of time – and I think the Perpetual Industrial Share Fund is doing that – it’s about value, quality and dividends and as more and more people look for retirement income it’s just going to be more relevant.

GRANT KENNAWAY, GLOBAL PRACTICE LEADER, MANAGER RESEARCH, MORNINGSTAR

Lesson: THERE’S MORE THAN ONE KIND OF DISRUPTION

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Lessons from 50 years of the Industrial Share Fund - buy quality at a good price.

The Case for Industrial Shares

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More information about the Industrial Share Fund can be found in our investor tools and brochures

Source: Perpetual. Return has been calculated from December 1976 to 30 June 2016 for Perpetual’s WealthFocus Investments Industrial Share Fund, using the first audited figures available. Total returns have been calculated using exit prices after taking into account all of Perpetual’s ongoing fees and assuming reinvestment of distributions. No allowance has been made for taxation. The current benchmark for the Perpetual Industrial Share Fund is the S&P/ASX 300 Industrials Accumulation Index. As the Industrials Index series is not available prior to 1979, the S&P/ASX All Ordinaries Accumulation Index has been used for reference purposes. Past performance is not indicative of future performance.

^Total returns shown for the fund(s) have been calculated using exit prices after taking into account all of Perpetual’s ongoing fees and assuming reinvestment of distributions. No allowance has been made for contribution or withdrawal fees or taxation (except in the case of superannuation funds). Past performance is not indicative of future performance.