With Prime Minister Julia Gillard signing a historic pact with China this week, Professional Planner asked Jonathan Wu if perceptions on investing in Asia are changing in Australia.
Client perceptions of risk have once again changed and, after seeing a brief rally into the last quarter of 2013, both advisers and clients are starting to come out of their shells.
Term deposit rates have continued to fall throughout 2012, and are now getting to rates just slightly higher than 4 per cent, forcing investors to reconsider their income requirements in retirement.
The unfortunate thing within the Australian advice industry is that Asia is always the one who is left behind during the recommendations stage in portfolio construction. As always, there is room for improvement.
Off the radar
From what we have seen, Asia is allocated to client portfolios using a “last in, first out” mentality, meaning Asia is the last considered area for clients, and once they are in, when a crisis inevitably hits, they would sell down Asia first.
The result of this for the client is extremely detrimental. As an example, The Premium China Fund, which was introduced to the local market in October 2005, has a net return to investors of over 10 per cent per annum. But the average investor in the fund has only achieved a net performance annualised of – 2 per cent pa. Why the large difference?
Simply put, it goes back to the last in, first out mentality. Advisers are placing their clients in Asia at the height of the market, and then selling at the bottom, hence providing a negative experience for the investor. And this gives the adviser another reason not to have Asia on their radar.
A reasonable basis
However, there is hope. Advisers are now more open to Asia given the lack of other investment options for investors.
In the past we have provided an Asian Information Service, but as a raft of information is provided, confusion also arises, and hence we have produced “Reasonable basis for Asia” – a succinct and simple guide for advisers to provide to their clients on the benefits of tapping into the fastest growing region for the foreseeable future.
Additionally, the third edition of my book has just been released, Asia – The New Investment Paradigm, and with over 15,000 copies being distributed in the past three years. It provides another piece to the puzzle for investors and their advisers.
Jonathan Wu is associate director of Premium China Funds Management
