SQM Research Ratings Update
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SQM Ratings Research Update - Monday 19th May 2014
Property Valuations
Research Reports
Discounted/Distressed Properties
Funds Research
The Count's 
Comments for the Week

After the reception of last week's budget, that’s One worried Prime Minister. I love politics!..ha ha ha haaa!

Ratings Table
To see the entire table of SQM Research's fund ratings, click HERE

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SQM Research Media Release
SQM Research has released its rating on the Market Vectors Australian Property Exchange Traded Fund (ETF)
SQM Research has completed its review of the Market Vectors Australian Property Exchange Traded Fund (ETF). SQM Research has awarded the ETF a rating of 4 stars. This is the first time that the ETF has been reviewed by SQM Research.  
The rating awarded has been driven by a number of factors. The ETF provides exposure to a portfolio of Australian Real Estate Investment Trusts (REITs). Furthermore, it is listed on the Australian Securities Exchange (ASX) which provides daily liquidity. The parent entity of the ETF – Van Eck Associates displays a solid track record in issuing and managing ETFs.
The ETF is managed by a vastly experienced investment team. The ETF applies physical replication to emulate the performance of the benchmark index - the Market Vectors Australia A-REITs Index. The fee charged by the ETF is slightly below peers.
For further information:
Louis Christopher
Managing Director
SQM Research
Tel: (02) 9220 4666
Leanne Truong
Senior Investment Analyst
Tel: (02) 9220 4602
Aakriti Chona
Investment Analyst
SQM Research
Tel: (02) 9220 4601
About SQM Research
SQM Research is an investment research firm that undertakes research on investment products exclusively for its wholesale clients, utilising a proprietary review and star rating system. The SQM Research star rating system is of a general nature and does not take into account the particular circumstances or needs of any specific person. The rating may be subject to change at any time. Only licensed financial advisers may use the SQM Research star rating system in determining whether an investment is appropriate to a person’s particular circumstances or needs. You should read the product disclosure statement and consult a licensed financial adviser before making an investment decision in relation to this investment product. SQM Research receives a fee from the Fund Manager for the research and rating of the managed investment scheme.
For more information please visit

Research Methodology

In general, the assessment approach adopted by SQM Research incorporates a combination of qualitative and quantitative research techniques to assess property investment products,
Information generated is passed through the SQM Research assessment model at the completion of the assessment process. The assessment model generates a product score, which correlates to a specific star rating (out of a maximum of five stars). Each star rating covers a scoring range, allowing products to be ranked within quarter star increments.
Following are descriptions for each of the star ratings, which have been developed as a guide for dealer group research teams and investment committees:
4.5 stars and above – Outstanding. Highly suitable for inclusion on APLs.
4 stars to 4.25 stars – Superior. Suitable for inclusion on most APLs.
3.75 stars – Favourable. Consider for APL inclusion.
3.5 stars – Acceptable. Consider for APL inclusion, subject to advice restrictions.
3.25 stars – Caution required. Not suitable for most APLs.
3 stars – Strong caution required. Not suitable for most APLs.
Below 3 stars – Avoid or redeem. Not suitable for APL inclusion.
Hold – The rating is currently suspended until SQM Research receives further information. A rating is typically put on hold for a period of 2 days to 4 weeks.
Withdrawn – The rating is no longer applicable. Significant issues have arisen since the last report was issued, and investors should avoid or redeem units in the fund.
Not rated – the fund has not been rated by SQM.


Musings from Managing Director, Louis Christopher

“Free market capitalism is the best path to prosperity” was the claim cited every day by Harry Kudlow from CNBC’s Kudlow report. I used to sporadically watch it while having breakfast in the mornings if not for merely the entertainment value, as the guy was ridiculously pro George Bush and would pump out ultra bullish and ultra right wing musings which would inadvertently lead to shouting matches with his guests. Funnily enough the show has been recently pulled by CNBC....  

The claim itself about free market capitalism was something I used to have very strong faith in and arguably I still think, while it has its flaws it is the most efficient and fair way to distribute the economy’s wealth and ensure the best possible output.

However what happens when the system appears to be increasingly rigged or abused? When the largest are getting a lot bigger. How do we deal with situations where companies get too big that they can potentially be damaging to the economy because they are growing at the populace’s expense?

I make these points in light of the four major banks most recent half-yearly operating results. You will see these below. In each instance they recorded double digit earning growth over the year to December 2013.


Source: Bloomberg, ABS Cat No 5206.0, SQM Research
I find it most interesting how the major banks continue to report ongoing strong earnings growth in the vicinity of 15% plus during a time when the economy is growing below trend  (4.8% in nominal terms) and credit growth itself is now only just getting off the canvas. And yet most small to medium size businesses are still reporting reasonably tough conditions.

Basically when your business is growing faster than nominal GDP, you are doing something right; something that others are not doing and it effectively entitles you to a greater slice of the economic pie. That’s all fine when you are a small business, and growth (if you are doing things right) is expected to be strong. 

But when the largest, most matured  companies in Australia are growing at nearly twice or even three times the speed of the economy it means these organisations are effectively growing at the expense of the economy. They are taking a larger slice of the economic pie and that means they are growing at many others expense. By others, that may well mean more banking jobs shipped out to overseas, higher bank fees or perhaps the squeezing out of other smaller competitors in vertically integrated sub sectors such as funds management and financial planning.

That is of course no criticism of those who work within the banking sector of which I know many. Many of these people do a great job  and I have no qualm with many of the products and services themselves. Indeed we highly rate some of those products.
It's more so it is the machine itself that I am becoming wary of. ..

In Other News…
Investment Analyst – Cynthia Rouse departed the BT Wholesale Property Securities Fund investment team last week stating personal reasons. Cynthia was a part of the three-member team. However, she was on maternity leave till August 2014. As a result, the Fund would continue to be managed by the existing two members, Head of Listed Property – Peter Davidson and Portfolio Manager – Julia Forrest. SQM Research currently has a 4.5 star rating on the Fund. The departure of Ms Rouse has not affected the rating at this stage. However, SQM Research will conduct a full review of the Fund in the coming months as part of our Domestic Property Securities Review for 2014. The final reports would be issued in August 2014.

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