fund manager commentary · fund manager commentary – november 2016 4 increase after opec agreed...

Fund Manager

Commentary

November 2016

Contents

Australian Shares 3

International Shares 10

Australian Fixed Income 14

International Fixed Income 14

Credit 16

Cash 18

Australian Property 21

International Property 22

Active Balanced 24

Performance as at 30 November 2016 27

Fund Manager Commentary – November 2016 3

Australian Shares

BT Wholesale Core Australian Share Fund

Market review

The S&P/ASX 300 Accumulation Index climbed an impressive 2.8% during the month, more than

recouping its losses in October. The surprise US election outcome ‘Trumped’ most other global macro

developments. Initial fears surrounding Trump’s ascendancy were quickly squashed by expectations of

pro-growth, pro-inflation policies. This in turn buoyed most major developed equity markets with the

S&P 500 gaining 3.9%, while bonds fell sharply.

Other developments State-side included another Fed gathering as well as the string of standard data

releases. On the former, the FOMC left rates unchanged as widely expected. However, their Statement

and Meeting Minutes suggested members were growing more comfortable with a December hike.

Alongside the Trump-fuelled risk on rally, this sparked a considerable increase in US 10 year yields

from 1.85% to 2.29% over the month. Data-wise; payrolls rose 161,000 and the unemployment rate

dropped 0.1% to 4.9% (which was partly attributable to a decline in the participation rate). Broader

economic data was more constructive; consumer confidence climbed, retail sales beat expectations, Q3

GDP was revised higher to 3.2% and in the corporate space 76% of S&P 500 companies beat

estimates with earnings growth surprising by 6%.

Elsewhere, the ECB did not meet during the month. While their prior meeting’s Minutes offered few

hints at future policy changes its tone was perceived as relatively dovish by investors. Closer to home,

official manufacturing figures from China revealed an encouraging pickup in activity from 50.3 to 51.2.

Fixed investment, industrial production and industrial profits were also reasonable, while trade data was

on the softer side. Also in Asia, the Bank of Japan left its recently-enacted range of policies intact at

their meeting on the first of the month. The country’s share market was the best performer with a

roughly -9% drop in the Yen stoking a +5.0% gain for the Nikkei 225.

At home, RBA Governor Philip Lowe issued another Statement with few changes from October and left

the cash rate unchanged at 1.5%. Local employment figures were relatively weak once more, which

was also echoed in the softest year-on-year wage growth increase on record. Consumer and business

confidence also deteriorated, as did building approvals and credit growth. Offsetting some of this

weakness was another round of strong gains for prices of key commodity exports. This included iron

ore, hard coking coal and copper, which rose +12.0%, 19.8% and 20.1% respectively. This was a large

contributing factor to market expectations shifting from another RBA cut to a potential hike in 2017.

Sector-wise, Financials (+6.0%) were the best performer. The banks were afforded a significant tailwind

on global enthusiasm fanned by Trump’s vows of deregulation for the industry. Utilities (+3.7%) and

Energy (+3.3%) also performed strongly. The latter benefited from a solid 6.8% crude oil (Brent) price


increase after OPEC agreed to a 1.2 million bpd production cut. At the bottom of the league tables was

the Health Care sector which fell -1.6% on a string of poorly-received updates from constituents. Telcos

(-0.4%) were not far behind as concerns over their ability to cope with industry changes related to the

NBN weighed particularly heavy on names like Vocus (-27.0%).

Portfolio performance

The BT Wholesale Core Australian Share Fund returned 3.56% (post-fee, pre-tax) in November 2016,

outperforming its benchmark by 0.76%.

Contributors

Qantas, QAN, OW, +7.8%

Shares in Australia’s national carrier, Qantas (+7.8%), more than recovered their losses from October.

The only noteworthy company-specific development was news that the US regulator had blocked its

enhanced partnership plans with American Airlines. However, this was met with a muted reaction from

investors. As such, it was more likely bargain hunting that helped drive its share price higher, rather

than a specific catalyst. We maintain a high conviction that the stock will outperform based on

expectations for significant returns to shareholders. This is given earnings are on a firmer footing than

previous years thanks to its Transformation program and industry capacity discipline.

Rio Tinto, RIO, OW, +6.6%

Further gains for its key commodity exports helped shares in Rio Tinto (+6.6%) retain their upward

trajectory in November. This was despite the miner copping flak from media reports of a bribery scandal

related to securing its Simandou site in Guinea. Looking ahead, Rio remains our preferred exposure in

the mining space, given the company’s successful cost reduction measures and sound balance sheet

management. Its recent bi-annual investor conference also highlighted an encouraging emphasis on

controlling capex, optimising free cash flow, as well as an improved outlook for areas like aluminium

and copper. Overall, this is promising for future returns to shareholders.

Woolworths, WOW, UW, -3.2%

The share price of Woolworths (-3.2%) floundered during the month and underperformed the index. The

major company-specific development was the surprise departure of its Big W CEO, which reinforced the

challenges faced by the struggling retailer. Our outlook for the broader business remains negative,

driven partly by expectations that its supermarkets division requires further painful adjustments to

generate a turnaround. This is amid one of the toughest competitive environments faced by the industry

that will require significant price investments, cost-outs and a highly capable management team. This in

turn suggests its forward earnings multiple of close to 20 times is unjustified.


ResMed, RMD, OW, +5.9%

Shares in sleep respirator developer, ResMed (+5.9%), recovered some of the ground lost in the

previous month. The stock had suffered in the wake of a disappointing quarterly update released at the

end of October. However, the prospect of pro-growth Trump policies in the US and strength of the

currency sparked an intra-month rebound. This is given its large operations stateside. Looking ahead,

we believe RMD remains fundamentally attractive based on double-digit earnings growth, without the

hefty valuation commanded by some of its other high-growth health care peers.

BHP, BHP, OW, +5.8%

Shares in BHP (+5.8%) continued their recovery in November. Amid an absence of major company-

specific developments, this was attributable to tailwinds from the rebound in prices for its key

commodity exports. Our outlook for the miner has improved alongside these increases, which we

believe should equate to reasonable upgrades. Our view also reflects more supportive demand

dynamics for its key commodities like iron ore from renewed Chinese stimulus efforts. That said, the

preferred exposure remains to rival Rio Tinto, which is less sensitive to energy price swings and is also

more attractively valued.

Detractors

Amcor, AMC, OW, -2.2%

Amcor’s (-2.2%) share price extended its slide before recouping some of its losses towards the end of

the month. This was likely due to further profit-taking following a strong run earlier in the year. During

November the global packaging giant announced a deal to acquire a Chinese flexibles provider for

A$36 million. Management cited the region’s attractive growth prospects as a rationale behind the

acquisition - the latest in a series of takeovers by the company. We maintain a constructive outlook for

the Melbourne-headquartered multinational based on its positive growth prospects both organically and

via new business.

Caltex, CTX, OW, -2.2%

Following October’s sizeable drop, Caltex saw a more modest -2.2% decline during the month. The

stock was hurt by media speculation that it would lose a contract to supply Woolworths’ petrol station

network. We believe the market’s reaction to the news was exaggerated given the earnings hit would be

smaller than suggested by the punishment of its share price. More generally, we remain positive on

CTX with a view that there are still significant benefits to be realised from its greater supply chain

control.


Dulux, DLX, OW, -7.1%

Shares in paints producer Dulux extended October’s decline to finish the month 7.1% lower. A

reasonable FY16 result that revealed an increase in NPAT of 4.6% (before non-recurring items) had

little effect on its stock price. Our positive view has been moderated by a less constructive outlook for its

core business where growth prospects have diminished and margins unlikely to expand.

QBE Insurance Group, QBE, OW, 11.8%

QBE maintained a strong upward ascent during November to finish higher by X.X%. The insurer

received a tailwind from Trump’s surprise election victory and ensuing bounce-back in bond yields. This

is given the company’s earnings sensitivity to interest rates and its North American operations. While

we acknowledge its leverage to these positive macro developments it still faces overriding challenges.

Chief among these is the insurance cycle, which remains a headwind.

Strategy & Outlook

The Fund continues to benefit from the reversal of the same forces which drove underperformance

earlier in the year. Rising bond yields continue to drive underperformance in the same ‘bond-proxy’

defensive yield stocks which have done so well for the previous three years as yields compressed.

Meanwhile, we continue to see a succession of management downgrades and share price plunges from

some of the market’s favourite high-growth stocks – Vocus Communications being the latest example.

At the same time, we are seeing a re-rating of several of our highest-conviction overweights, such as

Qantas and ANZ, which also detracted earlier in the year.

We see several reasons why this recent outperformance can continue. Although the de-rating of bond

proxies may lessen intensity, it is unlikely that they will resume market leadership as bond yields

continue to increase, and we continue to avoid the highest-rated infrastructure, utility and property

stocks. At the same time, we are seeing a rotation into some lower-rated, long-neglected sectors of the

market, which is benefiting some of our higher conviction industrial cyclical stocks. The dispersion

between the highest and lowest rated stocks in the market has pulled back from its historical extreme of

mid-2016, but still remains high. Our portfolios continue to exhibit an unusual tilt to value which supports

the notion that supportive forces look set to continue.

Looking forward, we believe we remain in a reasonably low-return environment, with few ‘free-kicks’ for

corporate management, and an equity market that suggests mid-single digits returns. This is an

environment in which the additional return from an active manager becomes invaluable – and the

significant amount of stock return dispersion provides the opportunity to do so. Industrial disruption –

and management response to it – continues to drive significant opportunities to add value in stock

selection within industries. The twelve month divergence between Woolworths (0.0%) and Metcash

(+39.2%), or between JB Hi-Fi (+51.1%) and the defunct Dick Smith Holdings provide cases in point.


Chinese policy remains crucial for the resource sector outlook. A recent research trip to China suggests

there is real underlying commodity demand as a result of policy stimulus – with infrastructure set to

assume the baton from a moderating property sector. Whilst policy remains accommodative, resources

remain the only broad sector likely to benefit from earrings upgrades over the next twelve months, as

commodity prices have outstripped most analyst expectations. Nevertheless Chinese policy remains a

risk, so we maintain exposure through the larger, more liquid stocks such as BHP and Rio Tinto, which

are less vulnerable to a policy shock.

Australian Shares

BT Wholesale Smaller Companies Fund

Market review

The S&P/ASX Small Ordinaries Accumulation Index slipped -1.2% during the month, substantially

underperforming its larger sibling the S&P/ASX 300. The surprise US election outcome ‘Trumped’ most

other global macro developments in November. Initial fears surrounding Trump’s ascendancy were

quickly squashed by expectations of pro-growth, pro-inflation policies. This in turn buoyed most major

developed equity markets with the S&P 500 gaining 3.9%, while bonds fell sharply.














on the softer side. Also in Asia, the Bank of Japan left its recently-enacted range of policies in tact at



At home, RBA Governor Philip Lowe issued another Statement with few changes from October and left

the cash rate unchanged at 1.5%. Local employment figures were relatively weak once more, which

was also echoed in the softest year-on-year wage growth increase on record. Consumer and business


confidence also deteriorated, as did building approvals and credit growth. Offsetting some of this

weakness was another round of strong gains for prices of key commodity exports. This included iron

ore, hard coking coal and copper, which rose +12.0%, 19.8% and 20.1% respectively. This was a large

contributing factor to market expectations shifting from another RBA cut to a potential hike in 2017.

Sector-wise, Consumer Staples (+5.2%) was the best performer. This was attributable to a strong

performance from some of its largest constituents including Metcash, Costa and Asaleo Care.

Financials (+2.0%) also performed well on the back of an impressive 18.6% gain for the price of BT

Investment Management. At the other end of the spectrum, Health Care fell -5.3% with a similar move

witnessed for their larger cap counterparts.


The BT Wholesale Smaller Companies Fund returned -1.03% (post-fee, pre-tax) in November 2016,

outperforming the S&P/ASX Small Ordinaries Accumulation Index by 0.16%

Contributors

Metals X, MLX, UW, -18.3%

Shares in Metals X dropped sharply (-18.3%) in the month of November following a demerger

announcement. The metals and mining exploration group will separate its gold entity, which will list on

the ASX as Westgold Resources Limited. Uncertainty due to changes in the management structure

have further contributed to its poor share price performance.

Mainfreight Limited (NZ), MFT, OW, +10.8%

Shares in Mainfreight gained 10.8% during the month of November. This was partly attributable to an

impressive half-year result for the global logistics operator. Contrary to market expectations, net profit

after tax increased by 27.7% over the previous six months. A 7.5 magnitude earthquake in the upper

South Island of New Zealand created slight delays in operations. However, no significant impact was

noted to the groups operation. We are confident the group will continue to grow profits in the current

market and remain overweight.

Austal, ASB, OW, +22.7%

Austal’s share price rose following the US Navy awarding a contract to Austal USA, to provide

engineering and management services that support select combat ships. Further, Trump’s victory

contributed to ASB’s rally based on his vows to increase Navy fleets by 28%. It is also worth noting

Austal successfully delivered its second high speed crew transfer vessel this year, to Swire Pacific

Offshore. This product is transforming the global offshore crew transfer market by bringing completely

new levels of comfort, safety, versatility and economy to offshore operations and therefore enhances

the group’s growth prospects.


Detractors

Oz Minerals, OZL, UW, +17.5%

Oz Mineral’s share price enjoyed a 17.5% gain during November. This was likely underpinned by a

significant jump in prices for the miner’s key commodity export – copper. Alongside a broader set of

industrial metals, it benefited from prospective pro-growth, pro-construction Trump policies. This

development largely overshadowed company-specific developments that included an update on its

Carrapateena project. Going forward, we prefer to hold other opportunities linked to structural growth

rather than commodity price swings.

Sims Metal Management, SGM, UW, +24.8%

Sims Metal Management’s share price enjoyed a dramatic increase of 24.8% over the month. The

group operates in a global metal recycling market that is expected to reach $406 billion by 2020. In the

absence of major apparent company news, it’s probable that the steel price increase was the main

contributor to its share price improvement during November. The industrial metal has witnessed an

astounding ascent in recent months on a number of factors. These include supportive Chinese supply

and demand dynamics and more recently prospective pro-growth Trump policies. While these have

been positive in the short-term, we question the longer-term earnings potential and prefer other names

less sensitive to such volatile factors.

Strategy & Outlook

The Fund outperformed in November, benefiting from gains in Mainfreight, Austal and Collins Foods, as

well as an underweight in gold miners St Barbara, Syrah Resources and Resolute Mining. The small

cap market as a whole remains reasonably volatile, with swings in sentiment driven by geopolitical

developments. The key underlying feature remains the increase in bond yields that we have seen over

the last six weeks, as the world increasingly expects the focus of growth stimulus to shift from monetary

to fiscal policy. This has seen sustained underperformance from the relatively defensive, high-yield

‘bond proxy’ stocks such as REITs, utilities and infrastructure. It also presents a stark shift in the

prevailing trend of the previous three years, which had seen these stocks outperform.

The other prevailing trend of the past few years has been the outperformance of those relatively few

stocks which have been delivering growth in an environment which has otherwise generally been

devoid of it. This has been the case throughout the entire market, however many of these stocks have

been small and mid caps. Again, we have seen a significant change in this portion of the market in

recent months as the market has punished stocks which fail to live up to the expectations implied in

some quite heady valuations. This demonstrates the vulnerabilities among some of these market

darlings, and the need to approach them with a high degree of caution.


The resource sector remains underpinned by stronger commodity prices, on the back of Chinese

stimulus. A recent research trip to China suggests this policy has led to a real increase in underlying

demand, with infrastructure picking up the baton as property construction looks set to roll over in the

first half of 2017. We have been adding to selected cash-generative resource and resource services

companies, such as Sandfire Resources in the copper space.

The steady IPO stream of recent years has seen the resource sector’s importance to the index wane,

however it appears this pipeline has slowed to a trickle. This is no doubt in part due to the market’s

fatigue as a result of the rich valuations and a series of high-profile downgrades of recent IPOs. Merger

and acquisition activity has stepped up in its place, with the depressed valuations in some segments of

the market offering attractive targets.

We continue to maintain our focus on companies offering structural growth at a reasonable valuation,

those with clear earnings visibility and relative stability, or a combination of the two. The small cap

sector continues to offer pockets of decent growth, such as in tourism and agriculture, as well as

companies which benefit from a degree of international exposure.

International Shares

BT Concentrated Global Share Fund

Market review

The surprise US election outcome ‘Trumped’ most other global macro developments. Initial fears

surrounding Trump’s ascendancy were quickly squashed by expectations of pro-growth, pro-inflation

policies. This in turn buoyed most major developed equity markets with the S&P 500 gaining 3.9%,

while bonds fell sharply.



















The BT Concentrated Global Share Fund returned 6.50% (post fee, pre-tax) in November 2016,


A key contributor to the portfolio performance this month was our weighting in US railways. We saw last

month’s weakness as an opportunity to increase out weighting in the sector. Buying businesses trading

below what we consider to be their intrinsic value and waiting until our investment thesis plays out is

core to our investment strategy. We now have a 7% weighting across three US railways: CSX Corp,

Norfolk Southern and Union Pacific Corp which were on average up 15.5% in November. We view all

three companies as having strong balance sheets, declining capital expenditure and being favourably

exposed to a normalisation of rail volumes in the US.

Our holding in Analog Devices is another name we believe is trading below its intrinsic value, and

hence we have taken the opportunity in previous months to add to our position. The stock rallied 16% in

November, with the October quarterly earnings addressing market concerns about the company’s ability

to grow revenues, which were up 15% quarter-on-quarter. Operating margins for the quarter were a

record 38.1%, with the company also announcing that the completion date on their acquisition of Linear

Technology will be bought forward by two months. The tax rate of the combined company was also

guided for 15%, rather than the previously indicated 19.5%. With the acquisition of Linear Technology,

which we think should be ~20% earnings accretive, the combined company will be a dominant force in

the fast growing automotive market. Ultimately our investment in Analog Devices is predicated upon the

fact it operates in an oligopoly market, has high margins, a high return on invested capital, and is

strategically positioned to take advantage of growth in the ‘Internet of Things’.

It was also pleasing to see our investment in Turquoise Hill increase by 9% in November. Turquoise Hill

own a 66% stake in Oyu Tolgoi, a copper and gold mine located in Southern Mongolia, with the

Mongolian Government owning the remaining 34%. The independent technical report that was released

late October confirmed the deposit to be one of the largest, highest grade and lowest cost copper mines

in the world, with a number of options to extend the mine life by developing all four separate deposits.

Our recent meetings with Turquoise Hill’s 50.8% shareholder, Rio Tinto, who also have management

rights of the mine, confirmed development of the underground pit is progressing well with operational

metrics currently ahead of most of the assets within the Rio Tinto portfolio. Rio Tinto CEO J-S Jacques,

who was personally responsible for negotiating agreements with the Mongolian Government when he

was head of Rio Tinto’s copper division, is clearly as excited as we are about the prospects for Oyu

Tolgoi.


Detracting from our performance this month were our holdings in consumer staple names. The

underperformance can best be explained by general sector rotation into more interest rate sensitive

names, with a market view that Trump’s presidency will be ‘inflationary’ and that the US Federal

Reserve will be more likely to raise rates in December. We do not view the consumer staples in our

portfolio as bond proxies and instead focus on strong and growing free cash flows, high margins and

growing dividends. Pernod Ricard is one such name, declining 9.5% over the month. Quarterly results

in late October beat expectations with 2017 guidance reiterated. We also expect Pernod to continue to

gain share, in what is already a dominant market share position in Asia, Europe and the US.

Strategy & Outlook

Our strategy has always been to pick stocks that operate quality businesses, have dominant positions

in their respective industries and have the balance sheets able to withstand economic downturns.

Whilst we are cognisant of macro risks, these factors do not form the basis of our stock selection

process, or our portfolio weighting decisions. We take the view that predicting the outcomes of macro or

geo-political events is difficult, and hence our emphasis is investing in companies that in our view can

prosper in a multitude of economic and geo-political scenarios.

We continue to believe that whilst macro and geo-political risks abound, our portfolio of stocks are well

positioned to prosper and reward shareholders. We also continue to believe that equity markets, unlike

the previous five years, are best suited to stock-picking than broader market exposure in the years

ahead.


BT Wholesale Core Global Share Fund, managed by AQR

Market review

The surprise US election outcome ‘Trumped’ most other global macro developments. Initial fears

surrounding Trump’s ascendancy were quickly squashed by expectations of pro-growth, pro-inflation

policies. This in turn buoyed most major developed equity markets with the S&P 500 gaining 3.9%,

while bonds fell sharply.



















The BT Wholesale Core Global Share Fund returned 4.33% (post-fee, pre-tax) in November 2016,

underperforming its benchmark by 0.17%.

The Fund underperformed its benchmark over November 2016, with mild positive contributions from

each of the North American, European regions outweighed by underperformance in developed Asia,

most notably Japan.

In terms of notable thematic performance drivers, relative-value for selecting stocks within industry

groups was positive in all regions. In Japan, the strength in relative-value, and investor sentiment,

signals was outweighed by weakness in business quality and indirect momentum measures.

Active industry/sector tilts were the source of underperformance over the month due to the underweight

to the Financials sector, which outperformed the broader market over the month, and overweight to

Utilities, which underperformed. Compensating to a large degree was outperformance of active stock

positioning within sector groups; most notably within Industrials and Information Technology.

At a stock level, strongest positive contributions came from overweight positions in: United Continental

Holdings Inc, the US based holdings company for United Airlines, a major international air carrier; PNC

Financial Services Group, Inc, an American regional bank and financial services company; and Applied

Materials Inc, a US based supplier of equipment and services to the semi-conductor industry. Largest

detractors were: an overweight in Tyson Foods Inc, a US multi-national food processor and supplier; an

underweight in Bank of America, a US headquartered multi-national banking and financial services

corporation; and an overweight in ConAgra Foods Inc, a US headquartered multi-brand packaged foods

producer and distributor.


Strategy & Outlook

Entering December, the largest active sector positions are overweights to Information Technology and

Industrials and underweights to Financials and Consumer Discretionary. Relative to long-term

allocations, we remain mildly tilted towards higher quality companies with positive momentum and away

from cheaper industry peers in Europe, while mildly tilted towards relative value considerations in Japan

and the US.

Australian Fixed Income

BT Wholesale Fixed Interest Fund

Market review

Australian yields steepened and followed their US siblings higher with the 3 year yield climbing 21 basis

points to 1.87% and 10 year yields increasing by 38 basis points to 2.73%. Domestic developments

were largely ‘Trumped’ by the surprise US election outcome in November. This quickly overshadowed

the RBA’s monthly get-together earlier in the month. At its meeting the recently-inducted Governor,

Philip Lowe, issued another Statement with few changes from October and left the cash rate

unchanged at 1.5%. Later in the month, employment data was weak once more with only a modest

9,800 jobs added and September’s change revised lower to -29,000. Consumer and business

confidence figures continued the string of soft data, as did building approvals and credit growth

releases. However, another impressive round of gains for prices of key commodity exports helped

swing the dial from the market pricing another RBA cut, to a potential hike in early 2018.


The BT Wholesale Fixed Interest Fund returned -1.60% in November 2016 (post-fees, pre-tax),


The Portfolio underperformed its benchmark in November. The Alpha overlay underperformed with the

Duration, Cross-Market and FX strategies being the main detractors while the Yield Curve and Macro

strategies added to performance. The Government bond component underperformed its benchmark.

Losses were mainly from Yield Curve strategy due to steepening in the front end, offsetting gains in the

Duration and Cross-Market strategies. The Credit component outperformed its benchmark this month.

Positive performance was experienced from long infrastructure, utilities and real estate.

Strategy & Outlook

The Reserve Bank of Australia is likely to remain on hold in the nearer term. Third quarter gross

domestic product (released on 7th December) and 4th quarter inflation (released in late January) are


the key domestic economic data releases coming up that may influence market pricing. Labour market

data has continued to be weak and is increasingly concerning, as is the decline in business credit

growth. It is likely however that external developments drive market pricing and expectations more than

domestic events.

We see monetary policy easing as being more likely than tightening over the next 12 months, however

the hurdle for any further change from the Reserve Bank is high. It would require very weak inflation

data or a sharp deterioration in the external environment, although given the amount of uncertainty

currently that is not something that can be ruled out.

International Fixed Income

BT Wholesale Global Fixed Interest Fund

Market review

Expected pro-growth, pro-inflation policies from Trump were the dominant force driving global bond

yields higher during the month. This in turn had a bearing over Fed policy expectations with markets

now pricing a greater probability of a December hike from the central bank. This was echoed in its

November Meeting Statement and Minutes that suggested FOMC members were growing more

comfortable with a ratchet higher for rates. Data-wise, labour market figures from the world’s largest

economy were lacklustre with 161,000 jobs added. However, broader economic data such as consumer

confidence, retail sales and Q3 GDP was more constructive - as were corporate earnings. Overall,

these developments helped push US 10 year bond yields higher by 56 basis points with their UK

counterparts climbing a more modest 17 basis points and the same maturity in Japan climbing 7 basis

points (constrained by BOJ yield targeting policy). The Trump effect was also felt strongly in FX markets

with significant US dollar strength pulling the AUD/USD lower by 1.9%. Meanwhile, most major equity

indices and hard commodities enjoyed significant gains.


The BT Wholesale Global Fixed Interest Fund returned -1.97% in November 2016 (post-fees, pre-tax),


Over the month Yield Curve and Macro strategies added to performance while the Duration, Cross-

Market and FX strategies detracted over the month. Gains in the Yield Curve strategy were from our

USD front-end steepening positions, which we took profit after the US election. In Macro strategy we

took profit on our FX option position in USDMXN which made excellent profits as both the underlying

and volatility spiked after the election. The Duration strategy detracted and losses were from long

duration positions as yields climbed after the US presidential election, although profits were made on

election day. In FX strategy, we have been running long AUD against a basket of currencies as a

reflection of our short-term bullish view of China stimulus and commodity strength, but this suffered as


the increased market volatility weighed on the AUD, and we stopped a number of the positions. The

loss in the Cross-Market strategy was from the long New Zealand versus Australia front end position

which saw the spread widening as NZ economic data surprised on the upside.

Strategy & Outlook

The election of Donald Trump raises many questions. The market is now pricing for the Federal

Reserve to start tightening monetary policy more quickly due to the increase in inflationary expectations

that accompany some of Trump’s policy ideas. What ends up being executed, and when, remains to be

seen. US infrastructure spending is likely to support commodity prices and benefit Australia’s terms of

trade. The approach taken however to international trade is also key, particularly for China. Any policy

that reduces China’s exports will weigh on Chinese growth and may in turn result in Chinese stimulus. If

that stimulus is in the form of infrastructure spending it may also benefit commodity prices that are key

to Australia. Given the growth in Chinese credit growth more recently, any material slowing in economic

growth does have the potential to see risk aversion rise quickly.

Credit

BT Wholesale Enhanced Credit Fund

Market review

Domestic cash credit spreads continued to tighten in November, not dissimilar to the prior month as

underlying energy market pricing moves were comparatively benign. Equity markets continued to

perform whilst yields on rates increased.

Issuance of corporate credit remained comparable to the prior month and industrial names were

generally well received. During the month financial issuers underperformed due to investor perception

of better value in offshore markets and weak technicals on the back of expectations of large near term

primary issuance by the majors. The major game changer impacting the markets in November was the

outcome of the US election.

Commodity markets continued to perform during November albeit oil prices spiked at month end on the

expectation of a supply cut agreement amongst major producers. Continued solid numbers from China,

one of the world’s greatest consumer of commodities, has underpinned stability.

European growth continues to be soft with annualised third quarter GDP at 1.6%. European bond

market performance has been more focused on the near term actions of the ECB as rumours circulated

the bank was considering tapering its bond buying activities. UK growth has started to disappoint post

Brexit and recently UK bank stress tests showed some of the major banks (such as RBS) need to raise

more capital. Also, other banks such are Barclays showed vulnerabilities.


During the month the better performing sectors were infrastructure and real estate. In infrastructure it

was ConnectEast, the owner of Eastlink, a 39km tollway in Victoria. In real estate, Investa Office Fund

outperformed on the back of renewed interest by Cromwell Property.

The Australian iTraxx widened 5bp while US CDX tightened by 6bps. EU Main widened by 7bp.


The BT Wholesale Enhanced Credit Fund returned -0.71% in November 2016 (post-fees, pre-tax),

underperforming the benchmark by 0.03%.

Performance from credit was strong during the month. Positive performance was experienced from long

infrastructure, utilities and real estate. Performance was negative from being short in supra-nationals.

Activity over the month was subdued.

Strategy & Outlook

Our macro credit view remains neutral. There continues to be near-term headwinds as risk markets

continue to perform but exhibit low liquidity increasing the risk of future volatility. Commodity demand

and pricing uncertainty and potential central bank actions represent risks to the downside in the latter

part of calendar 2016. We believe this will continue to make a volatile and uncertain mix in the near

term.

Whilst we maintain a more sanguine longer term view we believe near term volatility could erupt to

negatively impact credit performance. Risk markets will continue to suffer from uncertainty and

unexpected consequences from events such as Brexit. In addition, shifting expectations on central bank

interventions will feed volatility.

Whilst the global growth pulse is waning we continue to be constructive on global growth underpinning

corporate creditworthiness as companies focus on margins with soft top-line conditions. We remain

positive longer-term here.

With near term top-line revenue softness management are at risk of looking to purchase growth through

M&A. This behaviour has been already exhibited in the US with telecom/media giant AT&T’s proposal

to purchase Time Warner and a number of other significant company mergers. Further, companies

might consider strategy changes if they are challenged in the current slow environment. We will

continue to maintain a watching brief on any developments.

Accordingly, whilst the near term market tone is weaker we remain cautious albeit positive in our longer

outlook. Domestically we see growth largely dependent on commodity price stability and housing and

we continue to recommend a defensive approach that is flat with any overweights in operationally

resilient sectors such as utilities and infrastructure that provide a higher yield to index returns as we

don’t foresee continued strong compression of spread to swap as experienced in the prior years.


Cash

BT Wholesale Managed Cash and BT Wholesale Enhanced Cash Funds

Market review

Domestic developments were largely ‘Trumped’ by the surprise US election outcome in November. This

quickly overshadowed the RBA’s monthly get-together earlier in the month. At its meeting the recently-

inducted Governor Philip Lowe issued another Statement with few changes from October and left the

cash rate unchanged at 1.5%.

In terms of local economic data, employment figures were relatively weak once more. While full time

employment increased by 41,500, part-time jobs decreased by 31,700 and the prior month’s overall

number was revised down to -29,000. This softness was echoed in the quarterly wage growth data that

revealed a mediocre 1.9% lift year-on-year – the lowest on record.

Later in the month, consumer confidence ended its ascent and fell back by a marginal 0.1%. Similarly,

business confidence slipped with the gauge dropping 2 points to 4 – it’s weakest since May 2015.

Building approvals also declined, by a slightly concerning 13% for the month alone, taking the year-on-

year fall to -25%. Credit growth was also benign and business credit growth slowed.

Offsetting some of the weaker domestic data points, was another round of impressive gains for prices of

key commodity exports. This included iron ore, hard coking coal and copper, which rose +12.0%, 19.8%

and 20.1% respectively. This influenced comments from RBA Assistant Governor Chris Kent that

Australia’s terms of trade had shifted from a “headwind” to a “tail breeze”. Importantly this also helped

swing the dial from the market pricing a cut from the Reserve Bank to a potential hike in 2017.

In terms of foreign monetary policy developments, the US Federal Reserve left rates unchanged as

widely expected. Its Statement suggested FOMC members were growing more comfortable with a

December hike, which was also evident in the ensuing Minutes. Data-wise; payrolls rose 161,000 and

the unemployment rate dropped 0.1% to 4.9% (which was partly attributable to a decline in the

participation rate). Broader economic data was more constructive; consumer confidence climbed, retail

sales beat expectations, Q3 GDP was revised higher to 3.2% and in the corporate space 76% of S&P

500 companies beat estimates with earnings growth surprising by 6%.





on the softer side.


Finally market-wise, prospective pro-inflation, pro-growth Trump policies generated a dramatic jump in

rates. Australian yields steepened and followed their US siblings higher with the 3 year yield climbing 21

basis points to 1.87% and 10 year yields increasing by 38 basis points to 2.73%. The 3 month Bank Bill

Swap rate also rose, but by a more modest 2 basis points and its 6 month counterpart increased by 4

basis points. The Trump effect was also felt strongly in FX markets with significant US dollar strength

pulling the AUD/USD lower by 1.9%.

Credit markets performed reasonably well in the face of significant events over the month of November.

An unexpected Trump win in the US elections saw a sharp rise in global rates which would normally

see credit spreads widen, however physical credit spreads were actually a little tighter on the back of a

rally in commodity prices. The markets have also been grappling with the upcoming Italian constitutional

reform referendum which could have a meaningful impact on markets.

The Trump election win saw a sharp rise in global bond yields on the back of an increase in future

inflation expectations as well as more government debt supply to help fund the potential new policies

which would generally see a widening of credit spreads. Trump policies are expected to be pro US

growth through fiscal spend on infrastructure, manufacturing and tax cuts for corporates and individuals.

Also, policies around reducing banking regulation was taken positively by markets. However, there are

concerns around his protectionist stand on international trade due to his comments on raising tariffs on

imported goods. This could see a trade war with China that could result in a reduction in global GDP

growth.

Weighing on markets was the upcoming Italian constitutional referendum and implications for the

country’s troubled banks. Italy is grappling with slowing growth, high unemployment and distress in its

banking system. Italian banks have been under pressure because of the high number of nonperforming

loans they are holding and worries about whether the banks can recapitalize.

The strength in oil (+5.5%), iron ore and coking coal prices over the month on the back of the expected

Trump infrastructure spend and supply constraints has supported credit market spreads this month.

The Australian iTraxx index (Series 26 contract) traded in a 12bp range finishing the month 5bps wider

to +109bps. However, physical credit spreads were generally 1bp tighter - the best performers being

infrastructure and real estate sectors tightening 4 and 2 basis points respectively, whilst domestic banks

and resources sectors underperformed with both finishing the month 1basis point wider. Semi-

government bonds underperformed widening 4 basis points to government bonds.


Managed Cash

The BT Wholesale Managed Cash Fund returned 0.15% in November 2016 (post-fee, pre-tax),



The Fund marginally outperformed its benchmark for the month and outperformed by 24 basis points for

the year. With a higher running yield than the index, the Fund remains well positioned to outperform.

Themes and credit exposure remain consistent with prior months, with excess spread from A-1 rated

issuers and yield curve positioning likely to be the main driver of outperformance. The Fund ended the

month with a weighted average maturity of 69 days (maximum limit of 70 days). Yields further out the

curve continue to offer better relative value and the weighted average maturity has consistently been

longer than benchmark due to this. With longer dated yields offering better value and with Reserve

Bank monetary policy tightening a distant prospect we will remain longer than benchmark.

Enhanced Cash

The BT Wholesale Enhanced Cash Fund returned 0.16% in November 2016 (post-fee, pre-tax),


The portfolio outperformed the benchmark by 4 basis points in November. Positive performance came

from infrastructure, industrials and RMBS sectors. Activity during the month included investing in RMBS

whilst reducing exposure in transport and infrastructure sectors.

As at the end of the month, the portfolio had a credit spread of 84 basis points over bank bills, interest

rate duration of 0.12 years and credit spread duration of 1.46 years.

Strategy & Outlook

The Reserve Bank of Australia is likely to remain on hold in the nearer term. Third quarter gross

domestic product (released on 7th December) and 4th quarter inflation (released in late January) are

the key domestic economic data releases coming up that may influence market pricing. Labour market

data has continued to be weak and is increasingly concerning, as is the decline in business credit

growth. It is likely however that external developments drive market pricing and expectations more than

domestic events.

We see domestic monetary policy easing as being more likely than tightening over the next 12 months,

however the hurdle for any further change from the Reserve Bank is high. It would require very weak

inflation data or a sharp deterioration in the external environment, although given the amount of

uncertainty currently that is not something that can be ruled out.

The election of Donald Trump raises many questions. The market is now pricing for the Federal

Reserve to start tightening monetary policy more quickly due to the increase in inflationary expectations

that accompany some of Trump’s policy ideas. What ends up being executed, and when, remains to be

seen. US infrastructure spending is likely to support commodity prices and benefit Australia’s terms of

trade. The approach taken however to international trade is also key, particularly for China. Any policy

that reduces China’s exports will weigh on Chinese growth and may in turn result in Chinese stimulus. If

that stimulus is in the form of infrastructure spending it may also benefit commodity prices that are key


to Australia. Given the growth in Chinese credit growth more recently, any material slowing in economic

growth does have the potential to see risk aversion rise quickly.

Australian Property

BT Wholesale Property Securities Fund

Market review

The ASX AREIT index was up 0.8% in November, underperforming the broader market which was up

3%. Year to date AREITS are up 5.3% outperforming the market by 2.6%. The AREITs have been

negatively impacted by rising bond yields with the 10 year bond rate up 38 basis points to 2.72% over

the month and up 91 basis points since the low of 1.8% in August 2016. The worst performing AREITs

over the month were Charter Hall Group and Shopping Centres Australia.

The major news over the month was that Donald Trump was elected the 45th President of the US and

will take office in January 2017. Global equity markets were extremely strong following the news, with

US Banks +18% and Industrials +8.5%. As a result of his pro-growth spending and tax cut policies, the

US yield curve steepened, with the spread between long and short term rates widening 28 basis points

with US 10 year bonds now at 2.38%. Data out of the US was very strong with 3Q16 GDP revised up to

3.2%, non-farm payrolls up 161,000 and the unemployment rate falling to 4.9%. October US retail sales

were +0.8% and the Conference Board consumer confidence index rose 6.3 points to 107.1, the highest

reading in nine years.

The RBA left the cash rate unchanged at 1.5%. However, following a steepening of yield curves in the

US, the Australian yield curve steepened 18 basis points with 10 year bonds yielding 2.72%.

Residential building approvals fell sharply in October (to an annual rate of 195,000), falling 12.6% with

apartments down 24%. Retail sales were reasonably strong +0.6% for September (from +0.4% in

August), the largest month to month increase in a year. Employment for October rose a weaker than

expected 9,800 jobs and the unemployment rate was steady at 5.6%. The wage price index for Q316

was +0.4% (Q/Q) and up 1.9% (Y/Y), a record low growth rate.

M&A activity escalated over the month with ICPF acquiring Morgan Stanley’s 8.9% stake in IOF at

$4.23/security and Cromwell submitting a conditional and non-binding offer for IOF to IOF’s Board at

$4.45/security. Shopping Centres Australia also acquired a 4.9% stake in Charter Hall Retail, a

redeployment of sales proceeds from its NZ portfolio as well as a tactical play.


The BT Wholesale Property Securities Fund returned 0.34% in November 2016 (post-fee, pre-tax),



The portfolio underperformed the benchmark over the month. Overweight positions in Investa Office

Fund and GPT Group and underweights in Shopping Centres Australia, BWP Trust and Hotel Property

Investments all added to performance. Underweights in Iron Mountain Inc and Abacus Property Group

and overweights in Charter Hall Long Wale and Lifestyle Communities detracted from performance.

Over the month we increased our overweight positions in Scentre Group (taking advantage of the steep

sell off) and Mirvac Group, reduced our overweight position in Westfield Corporation to a small

underweight position and reduced our overweight positions in Charter Hall Group and Stockland Trust

Group. We invested in a new IPO – Charter Hall Long Wale REIT, a diversified REIT with 66 properties,

managed by Charter Hall Group with a WALE of 12.5 years.

Strategy & Outlook

Following the strong sell off in AREITs, valuation support has been somewhat restored to the sector.

The sector is now priced on an FY17 dividend yield of 5.0%, 22% premium to NTA and a PE ratio of

17.3 times. While this is still some way ahead of its long term average, AREIT valuations still lag the

physical market, so there is still some catch up in NTA. Balance sheets are stable with sector gearing at

30% and falling slowly as asset prices continue to rise. Low cash rates continue to be supportive. The

better managed REITs continue to use the buoyant direct market as an opportunity to divest non-core

assets.

International Property

BT Wholesale Global Property Securities Fund, managed by AEW

Market Review (In USD)

Performance of the global property securities market (on an ex-Australia basis) as measured by the

FTSE EPRA/NAREIT Developed Index continued to decline in November, posting a total return of -

2.7%. Europe (down 4.1%) was the weakest performing region, followed by Asia Pacific (down 3.8%),

and North America (down 1.9%). In Asia Pacific, results were negative across the region. Hong Kong

(down 5.2%) posted the largest decrease, followed by Singapore (down 4.4%), Japan (down 2.8%), and

New Zealand (down 1.3%). Results in Europe were mostly negative. Italy (down 10.2%) posted the

largest loss, followed by Ireland (down 9.1%) and France (down 8.3%). Conversely, positive

performers included Israel (up 2.6%) and the United Kingdom (up 1.6%). Within North America, the

U.S. and Canada returned -2.0% and -1.2%, respectively.


The BT Wholesale Global Property Securities Fund returned -1.43% in November 2016 (post-fee, pre-

tax) matching its benchmark.


North America

BT’s North America portfolio returned -1.70% in November before fees, beating the FTSE

EPRA/NAREIT North America Index by 23 basis points. Outperformance relative to the benchmark was

attributable to positive sector allocation results, which were partially offset by negative stock selection

results. Regarding sector allocation, positive results were driven by the portfolio’s underweight to the

underperforming health care and triple net lease sectors. Moreover, the portfolio’s small cash position

was a modest contributor to relative performance in light of the REIT sector’s negative absolute

performance for the period. In terms of stock selection, results were weakest in the apartment,

diversified, and office sectors and were strongest in the hotel, industrial, and triple net lease sectors.

Among the portfolio’s holdings, top individual contributors to relative performance included overweight

positions in outperforming Host Hotels & Resorts (HST), Extended Stay America (STAY), and Rexford

Industrial Realty (REXR). Detractors most notably included overweight positions in underperforming

Forest City Realty Trust Class A (FCE.A) and Ventas (VTR) and a lack of exposure to outperforming SL

Green Realty (SLG).

Europe

BT’s European portfolio returned -4.65% in November before fees, lagging the regional EPRA

benchmark by 52 basis points. Underperformance relative to the benchmark was driven by both

negative stock selection results and negative country allocation results. In terms of stock selection,

results were weakest in Sweden, Spain, and France and were strongest in the United Kingdom and

Germany. Regarding country allocation, negative results were attributable to the portfolio’s overweight

to the underperforming Netherlands and France, as well as an underweight to the outperforming

Switzerland. Among the portfolio’s holdings, top contributors to relative performance included

overweight positions in outperforming Workspace Group Plc. (United Kingdom), Unite Group Plc.

(United Kingdom) and St. Modwen Properties Plc. (United Kingdom). Detractors most notably included

overweight positions in underperforming Gecina SA (France), Merlin Properties SOCIMI SA (Spain) and

Fabege AB (Sweden).

Asia

BT’s Asia portfolio returned -4.02% in November before fees, underperforming the regional EPRA

benchmark by 18 basis points. Underperformance relative to the benchmark was attributable to

negative stock selection results, while country allocation results were largely neutral. In terms of stock

selection, results were negative in Hong Kong, Japan and Singapore. Among the portfolio’s holdings,

top contributors to relative performance included a lack of exposure to underperforming Orix J-REIT

(Japan) and New World Development (Hong Kong) and an overweight position in outperforming Swire

Properties Ltd (Hong Kong). Detractors most notably included an underweight position in outperforming

Sumitomo Realty & Development (Japan), an overweight position in underperforming Advance

Residence Investment (Japan) and a lack of exposure to outperforming Hang Lung Properties (Hong

Kong).


Active Balanced

BT Wholesale Active Balanced Fund

Market review

The S&P/ASX 200 index was up 3% in November, led by: Energy, Materials and Financials while the

Healthcare, A-REITs and Consumer Discretionary sectors trailed. After the surprise Trump election

early in the month, markets rallied on potential positive outcomes and bonds sold off dramatically.

Interest-rate-sensitive areas bounced off intra-month lows but remained significant underperformers

despite rising interest in some of the more aggressively sold-off large cap names. Large caps continued

the trend of recent outperformance, supported by banks and insurance.

Global developed equity markets had a strong month led by the US (S&P500 + 4%) as expectations

around Trump’s spending programs accelerated. The US market was at the epicentre of the election

results, which saw futures markets initially sell off quite dramatically then rebound and turn positive for

the month. Key sectors that benefitted from Trump were banks and financials which rose 17.7% and

13.7% respectively on the back of perceived changes to regulations and restrictive policy. Materials

(+6.6%) and Industrials (+8.5%) were also key beneficiaries of potential infrastructure policy under a

Trump administration.

European markets were not as positive with the broader Eurostoxx Index flat for the month, but within

Europe the French CAC index was positive (+1.63%) while the UK (-2.45%) and German Dax (-0.23%)

were negative, as concerns over increasing political instability and impact to European trade under

Trump dragged on returns. Asian markets were mixed with the Japanese Nikkei returning over 5% as a

significant slide in the Yen saw optimism that Trump may be able to help with increasing growth in

Japan. The rest of Asia was more negative with the Hang Seng Index dropping 0.49%.

Currency markets were dominated by a strong USD as expectations around Fed tightening increased

significantly after the Trump win and the markets started to price in increasing inflation expectations for

2017 and beyond. Emerging market currencies and the Yen were the big casualties against the USD.

The AUD experienced a sharp depreciation, falling 2% from US$0.761 to US$0.738, although it fared

much better on a trade-weighted basis.

The US yield curve steepened, with the spread between long term and short term rates widening

28basis points. The US 2-year bond yield rose 27 basis points to 1.11%, while the US 10-year bond

yield rose 55 basis points to 2.38%.The Australian yield curve also steepened, with the spread between

long and short term rates widening 18 basis points. The Australian 3-year bond yield rose 20 basis

points to 1.90%, while the 10-year bond yield rose 38 basis points to 2.72%.


As a consequence, bond indices were negative for the month, with the Bloomberg Composite Bond

down 1.44% and the JP Morgan Global Bond Index down 1.77% for the month.


The BT Wholesale Active Balanced Fund returned 1.37% (post-fee, pre-tax) in November 2016,


The key drivers of the positive absolute returns was stronger equity markets that rallied post Trump on

renewed optimism of fiscal policy driving growth in the US and hopefully globally. This was offset by

negative bond markets where yields rose dramatically as markets started to price in more rate rises due

to increasing inflation.

Our Australian equity strategy outperformed the market by 0.87% as our key stock overweights

performed strongly post Trump including our banking and financials exposure in ANZ and Macquarie

group, as well as material overweight positions in BHP and RIO.

Our global equities exposure underperformed its benchmark over the month due to our slight

underweight exposure to US and strong overweight exposure to European equities, which didn’t

perform as well. Our emerging markets exposure detracted from returns, as emerging markets sold off

on perceived negative implications of the Trump election win.

Our alternatives strategy underperformed in November, delivering a negative return of -0.60% vs cash

of 0.14%. Adding to returns was our global macro, equity market neutral and equity income strategies.

Our managed futures, pure alpha fixed income and risk parity strategies detracted from returns.

Our tactical asset allocation detracted from returns as did our long Australian, US and German Bonds

and long oil exposure. Our long equities allocation offset some of these losses.

Strategy & Outlook

Equity markets look to be taking the recent political uncertainty quite positively in the hope that the

changing guard to more unorthodox governments leads to change in policy from monetary to fiscal

where there is potential to have a sustainable impact on both growth and inflation. If the US is

successful this may become a template globally for countries to follow.

Of course there is a long road ahead and many of Trump’s statements during his campaign may not

eventuate into reality when faced with enactment of legislation. However, the optimism is definitely

having a positive impact on both consumer and company expectations. The pace of the rise in both the

US dollar and US bond yields is something the market will watch closely as this has the potential to

derail any positive outcomes from fiscal stimulus.


Europe is more mixed as we have significant political events over the next 12 months, with many major

countries heading into elections. With the uncertain economic backdrop we believe the secular rise in

populism and political risk factors will become a semi-permanent part of the investment landscape and

something we definitely consider in our investment decisions.

We remain cautious in our positioning, relying on our active management of the underlying asset

classes to help offset some of this volatility combined with our exposure to alternatives as well as

tactically moving the portfolio around. As always, active management plays an important role in

managing these risks and taking advantage of market dislocations driven by sentiment rather than

underlying fundamentals.


Performance as at 30 November 2016

F YT D 1 year 2 Years 3 Years 5 Years Since

(pa) (pa) (pa) (pa) Incp. (pa)

Australian Shares - All Cap

B T Who lesale C o re A ustralian Share F und A P IR - R F A 0818A U

Total Return (post-fee, pre-tax) 3.56 1.84 1.98 5.97 4.50 5.13 4.74 10.27 9.75Total Return (pre-fee, pre-tax) 3.63 2.04 2.37 6.31 5.32 5.96 5.57 11.14 10.76Benchmark 2.80 1.09 3.26 5.84 10.07 6.02 5.35 10.38 9.82

B T Who lesale Imputat io n F und A P IR - R F A 0103A U


B T Who lesale F o cus A ustralian Share F und A P IR - R F A 0059A U


B T Who lesale Ethical Share F und A P IR - R F A 0025A U


Australian Shares - Mid Cap

B T Who lesale M idC ap F und A P IR - B T A 0313A U

Total Return (post-fee, pre-tax) 0.97 -3.92 1.34 4.31 11.56 12.90 12.51 13.80 9.22Total Return (pre-fee, pre-tax) 1.05 -3.71 1.79 4.70 12.43 14.26 13.94 15.65 11.58Benchmark 0.34 -4.65 0.62 2.57 14.33 12.77 11.61 10.93 3.98

Australian Shares - Small Cap

B T Who lesale Smaller C o mpanies F und A P IR - R F A 0819A U

Total Return (post-fee, pre-tax) -1.03 -5.35 -0.54 0.79 4.22 11.22 7.52 11.56 13.11Total Return (pre-fee, pre-tax) -0.93 -5.06 0.07 1.30 5.52 12.61 8.86 12.95 14.39Benchmark -1.19 -4.42 0.81 2.15 13.51 9.95 5.88 3.22 7.35

Australian Shares - Micro Cap

B T Who lesale M icro C ap Oppo rtunit ies F und A P IR - R F A 0061A U

Total Return (post-fee, pre-tax) -1.63 -1.66 11.00 9.34 18.40 22.57 18.90 20.90 18.94Total Return (pre-fee, pre-tax) -1.79 -0.66 14.25 11.68 21.19 27.39 23.71 27.15 24.69Benchmark -1.19 -4.42 0.81 2.15 13.51 9.95 5.88 3.22 1.62


B T Who lesale C o re Glo bal Share F und A P IR - R F A 0821A U

Total Return (post-fee, pre-tax) 4.33 2.72 0.82 6.31 -0.85 7.99 11.02 17.53 5.37Total Return (pre-fee, pre-tax) 4.42 2.96 1.29 6.73 0.10 9.03 12.08 18.65 6.53Benchmark 4.50 1.70 1.06 5.08 0.94 8.87 11.52 17.59 6.88

B T Glo bal Emerging M arkets Oppo rtunit ies F und - Who lesale A P IR - B T A 0419A U

Total Return (post-fee, pre-tax) -1.33 -3.95 4.66 3.36 -0.24 2.47 5.11 N/A 8.52Total Return (pre-fee, pre-tax) -1.21 -3.62 5.40 3.97 1.16 3.91 6.73 N/A 11.04Benchmark -1.75 -1.48 6.31 5.07 6.38 1.99 4.02 N/A 8.23

B T C o ncentrated Glo bal Share F und A P IR - B T A 0503A U

Total Return (post-fee, pre-tax) 6.50 3.48 N/A N/A N/A N/A N/A N/A 5.00Total Return (pre-fee, pre-tax) 6.61 3.79 N/A N/A N/A N/A N/A N/A 5.43Benchmark 4.50 1.70 N/A N/A N/A N/A N/A N/A 3.02

Property

B T Who lesale P ro perty Securit ies F und A P IR - B T A 0061A U

Total Return (post-fee, pre-tax) 0.34 -11.26 -5.34 -8.53 9.37 11.83 14.35 15.95 7.36Total Return (pre-fee, pre-tax) 0.39 -11.11 -5.02 -8.27 10.08 12.54 15.09 16.69 8.18Benchmark 0.75 -11.02 -5.54 -8.76 10.31 12.56 14.93 16.37 7.23

B T Who lesale Glo bal P ro perty Securit ies F und A P IR - R F A 0051A U

Total Return (post-fee, pre-tax) -1.43 -6.41 -2.04 -4.37 1.51 3.30 10.28 12.69 9.30Total Return (pre-fee, pre-tax) -1.35 -6.20 -1.61 -4.00 2.44 4.25 11.30 13.74 10.29Benchmark -1.43 -6.65 -1.35 -4.20 2.63 3.74 10.91 13.35 9.02Fixed Interest

B T Who lesale F ixed Interest F und A P IR - R F A 0813A U

Total Return (post-fee, pre-tax) -1.60 -3.30 -0.85 -2.36 1.70 2.74 5.08 4.69 6.63Total Return (pre-fee, pre-tax) -1.56 -3.18 -0.60 -2.16 2.21 3.26 5.61 5.21 7.19Benchmark -1.44 -2.92 -0.49 -1.79 3.44 3.70 5.30 5.15 6.83

B T Who lesale Glo bal F ixed Interest F und A P IR - R F A 0032A U

Total Return (post-fee, pre-tax) -1.97 -3.41 -0.68 -3.31 2.75 3.40 5.64 5.63 6.45Total Return (pre-fee, pre-tax) -1.93 -3.29 -0.41 -3.10 3.30 3.95 6.20 6.18 7.04Benchmark -1.77 -3.10 -0.42 -2.89 4.61 4.69 6.23 6.28 7.36

B T Who lesale Enhanced C redit F und A P IR - R F A 0100A U

Total Return (post-fee, pre-tax) -0.71 -1.32 0.62 -0.11 3.71 3.86 5.07 5.69 5.90Total Return (pre-fee, pre-tax) -0.67 -1.21 0.85 0.08 4.18 4.33 5.55 6.17 6.43Benchmark -0.74 -1.39 0.58 -0.17 3.82 3.97 5.05 5.72 6.02Cash & Income

B T Who lesale Enhanced C ash F und A P IR - WF S0377A U


B T Who lesale M anaged C ash F und A P IR - WF S0245A U


B T Who lesale M o nthly Inco me P lus F und A P IR - B T A 0318A U

Total Return (post-fee, pre-tax) -0.45 -1.40 0.17 0.38 3.37 3.72 4.35 5.20 5.61Total Return (pre-fee, pre-tax) -0.39 -1.24 0.50 0.65 4.04 4.40 5.04 5.89 6.27Benchmark 0.12 0.37 0.80 0.65 1.79 1.98 2.17 2.64 3.20

Diversified

B T Who lesale A ct ive B alanced F und A P IR - R F A 0815A U

Total Return (post-fee, pre-tax) 1.37 -0.63 0.56 2.17 2.07 4.81 6.22 9.23 7.53Total Return (pre-fee, pre-tax) 1.44 -0.40 1.03 2.58 3.04 5.81 7.23 10.28 8.60Benchmark 1.62 -0.26 1.66 2.69 6.36 6.12 6.86 9.60 7.40

(%)1 M o nth 3 M o nths 6 M o nths

For more information Please call 1800 813 886, contact your Business Development Representative or visit btim.com.au

All returns calculated by BT Investment Management (Fund Services) Limited, ABN 13 161 249 332, AFSL 431426 (BTIM). No part of this Fund Manager Commentary (Commentary) is to be circulated without this page attached.

This Commentary is dated 12 December 2016 and has been prepared by BTIM. The information in this Commentary is for general information only and should not be considered as a comprehensive statement on any of the matters described and should not be relied upon as such. The information contained in this Commentary may contain material provided directly by third parties and is believed to be accurate at its issue date. While such material is published with necessary permission, neither BTIM nor any company in the BTIM Group of companies accepts any responsibility for the accuracy or completeness of this information or otherwise endorses or accepts any responsibility for this information. Except where contrary to law, BTIM intends by this notice to exclude liability for this material.

This Commentary has been prepared without taking into account your objectives, financial situation or needs. Furthermore, it is not intended to be relied upon for the purpose of making investment decisions and is not a replacement of the requirement for individual research or professional tax advice. Because of this, before acting on this information, you should seek independent financial and taxation advice to determine its appropriateness having regard to your individual objectives, financial situation and needs.

BTIM does not give any warranty as to the accuracy, reliability or completeness of the information contained in this Commentary. This Commentary is not to be published without the prior written consent of BTIM.

Performance data (post-fee) assumes reinvestment of distributions and is calculated using exit prices, net of management costs. Performance data (pre-fee) is calculated by adding back management costs to the (post-fee) performance. Past performance is not a reliable indicator of future performance. The term ‘benchmark’ refers to the index or measurements used by an investment manager to assess the relative risk and the performance of an investment portfolio.

BTIM is the issuer of the following products:

BT Wholesale Core Australian Share Fund ARSN 089 935 964 BT Wholesale Smaller Companies Fund ARSN 089 939 328 BT Concentrated Global Share Fund ARSN 613 608 085 BT Wholesale Core Global Share Fund# ARSN 089 938 492 BT Wholesale Global Fixed Interest Fund ARSN 099 567 558 BT Wholesale Enhanced Credit Fund ARSN 089 937 815 BT Wholesale Fixed Interest Fund ARSN 089 939 542 BT Wholesale Property Investment Fund ARSN 089 939 819 BT Wholesale Global Property Securities Fund ARSN 108 227 005 BT Wholesale Managed Cash Fund ARSN 088 832 491 BT Wholesale Enhanced Cash Fund ARSN 088 863 469 BT Wholesale Active Balanced Fund ARSN 088 251 496

A product disclosure statement (PDS) is available for each of the above products and can be obtained by contacting BTIM on 1800 813 886, or by visiting btim.com.au. You should consider the relevant PDS in deciding whether to acquire, or to continue to hold, the product. BT® is a registered trade mark of BT Financial Group Pty Ltd and is used under licence.

# AQR began managing international equity for BT Financial Group in June 2006.

http://www.btim.com.au/

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