Appetite for international investments grows year on year

The proportion of Australian investors planning to increase their exposure to overseas assets is higher this year compared with the same time last year, according to the Certitude Global Investing Index (CGIII). The CGIII, which collates the views of over 500 actively engaged leading investors and measures their net demand for global investments, increased over the 12 month period from end June 2013 to end June 2014.

Annual results taken at the end of June 2014 revealed a number of key insights into the global investing intentions of Australian investors:

• The appetite of all active investors for global investments rose over the year by 11% (from 157 to 175) and now sits above the 12 months average.
• Concern levels about global markets fell significantly year on year and remain at their lowest level ever, at 5.6 out of 10, down from 6.4 out of 10 at the end of June last year.
• When it came to international equities specifically, investors were slightly less bullish in their outlook this year compared with last year, with slightly fewer investors intending to increase their exposure (16% compared with 17%), but also fewer investors intending to decrease their exposure (2% compared with 5%).

Craig Mowll, CEO of Certitude Global Investment said: “Results from the CGIII over the past 12 months indicate that Australian investors remain positive about global markets generally, and have indicated that they are keen to increase their exposure to these markets.

“Even though monthly figures were volatile throughout the year, with the percentage of those intending to increase exposure to international shares reaching a high of 25% and a low of 16%, the bottom line is that the intention to invest was up on an annual basis, which may well indicate that Australian investors are continuing to actively look overseas for returns.”

US/North America most favoured market, again.

It was no surprise that the US/North America was once again the market of choice for overseas investment. The majority (46%) of investors who intend to invest overseas say they would choose the US. This was down from 50% at the same time last year, which may indicate that investors’ level of concern about other markets has dropped over the same period.

“The preference for the US as a market has been down over the past few months, so the fact that it is rising again may well indicate that investors are responding positively to better economic figures out of the US, in particular strong jobs growth. They are clearly becoming more comfortable with the pace of economic growth and with the US Federal Reserve’s management of the tapering of quantitative easing,” said Mr Mowll.

Gap closes between desire for Australian and international shares

Closer to home, the proportion of investors planning to invest in Australia fell over the year (34%, down 4% pts), whist the proportion planning to invest in international shares fell just slightly (16%, down 1% pts) over the same period.

What is more interesting is the fact that the gap between the net proportion of investors planning to invest in Australian shares (24%, down 5% pts) and those planning to invest in international shares (14%, up 2% pts) has been shrinking over time and is now much smaller than it was 12 months ago. This supports the trend that Australians are exhibiting a growing interest in international shares.

Investors again overwhelmingly favoured equities when it came to a decision about which investment class they prefer, and this preference rose over the year. Over 80% of investors favoured equities as at end June 2014, whereas the percentage was 70% at the same time last year.

Commenting on the findings as they regard international equities, Mr Mowll said: “Investors indicated that their preferred method of overseas investment was via direct purchase of shares (38% of those interested in investing overseas), although actively managed funds (36%) was only very marginally lower. These two methods of exposure have been the top two preferred all year, with each taking their turn at number one depending on the prevailing economic conditions at the time.

“The most common barrier cited by investors for not investing overseas was a lack of knowledge, with 25% saying they didn’t know enough about it. At end June 2013, over 30% of investors cited market volatility as the most common barrier to investment, now only one year later that has reduced to only 20%.

“Clearly investors are continuing to feel more at ease with international markets, and understand that an exposure to international markets is necessary in a balanced portfolio, and the fact that overall demand for international assets increased over the year really back this up.”

Mr Mowll concluded by saying that anecdotal evidence taken from the comments of investors participating in the CGIII indicated that right now their major areas of concern internationally are China and the Middle East.

“A number cited the economic slowdown and potential debt crisis in China worrying, particularly if this was to cause a sell-off in risk assets in Australia. In the same way, on-going conflict in the Middle East is sparking debate about volatility in oil prices and potential flow-on effects.

“Ultimately, however, it was great to see that Australians overall remain positive about global markets, despite some volatility during the year. Their appetite for overseas investments continues to increase, and we are hopeful that this positive trend will continue looking forward.”