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DIRECTORS : CHRIS BURRELL ROGER BURRELL ( Non-Exec ) IAN DAVEY ROBERT CHAN ELAINE ANDERSON ALICIA KENDALL MICHAEL BURRELL

ASSOCIATE DIRECTORS : JAMIE ELGAR SASKIA JO DYLAN KATZER

ASSOCIATES : BRUCE McLEARY SHAUN MINAHAN JAMIE KEMP WAYNE MATTHEWS

clientcare @ burrell . com . au internet : www . burrell . com . au

Global and domestic markets have been volatile from the outset of 2022 . Many have entered or flirted with correction territory ( defined as a fall of 10 % or greater ). A number of factors have weighed heavily on sentiment , including :

• the threat of an overly zealous US Fed ,

• the Omicron wave ,

• tensions over Ukraine ; and

• question marks over China ’ s recovery .

While these concerns have merit , our overarching view remains that equity markets , as a whole , can withstand the pressure .

Over the past 10 to 15 years , early-year jitters in equity markets have been more common than not . Through the period , the MSCI World has started on the back foot more than 50 % of the time , and whilst not casting off the latest pullback in equity markets , this year ’ s decline is only the 4th worst of the period . Prior to the GFC returns in January were typically positive , with an average uplift of 40bp . Since the GFC , however , the average has turned negative .

Australia has followed a similar pattern to the MSCI World , with January often descending into the red over the past 15 years . Comparing various global and local indices shows much the same profile , with returns for January typically strong pre GFC and the reverse post .

FEBRUARY - 2022

Beyond January , the picture turns far more positive . A factor worth considering is the level of speculation and predictions leading into reporting season and the impact of “ confession period ” which precede reporting seasons . “ Beyond January ”, we enter the reporting season and the market receives real financials from companies and real operational updates .

The investment management industry has seen 10 % compound annual growth in funds under management ( FUM ) in the past 30 years , underpinned by :

1 . mandatory superannuation contributions ; 2 . an increasing population ; and 3 . strong economic growth in Australia .

The superannuation system remains supportive of flows , with guaranteed contributions set to increase to 12 % by 2025 , providing further flows into the broader superannuation and managed funds sector . However , risks related to performance , regulation and the increased penetration of passive management potentially imped sector performance .

• Industry tailwinds : The superannuation guarantee remains a positive backdrop for sector flows as does product differentiation . Environmental , social and governance ( ESG ), active exchange-traded funds ( ETF ) and retirement products all have potential to support flows if implemented successfully by the fund managers .

Participant of ASX Group and NSX ABN 82 088 958 481 ASFL No 247431