According to the Certitude Global Investing Intentions Index (CGIII), net demand for overseas assets from Australian active investors reached an 8-month high in December 2014. The CGIII also reported a spike in demand for overseas assets among High Net Worth investors (HNW, $1m+ in investable assets) reaching its highest level since January 2014.
The December CGIII, which collated the views of over 600 actively engaged investors and measured their net demand for global investments, found that 44% of active investors believe they need more international assets in their investment portfolio (up 3% pts from November 2014). In fact, of those interested in investing overseas, 50% (up 9% pts from November) intended to do so within the next three months – the highest level recorded since the Index began.
Conversely, while interest in overseas assets was on the rise, confidence levels in the Australian economy fell a staggering 17% pts in December 2014, with only 26% of investors citing that they think the Australian market will record healthy growth in the next 12 months.
Craig Mowll, CEO of Certitude Global Investment said: “Results this month show that over half (53%) of investors are most concerned about the health of the local economy. With this confidence declining it’s unsurprising that there has been a significant increase in investors who are keen to seize the opportunities presented by international assets, and sooner rather than later.
“Against this backdrop, the net proportion of investors planning to invest in Australian shares decreased to its lowest level since the CGIII began. This downward trend continues with other asset classes, which are usually overweight, including investment property and term deposits. These movements are largely driven by concerns of the China slowdown, concerns around the resource sector and Australian debt.
“Elsewhere in the CGIII we are seeing an increase in the amount of investors interested in investing in overseas developed markets over the next 12 months. This demonstrates that although investors’ demand for offshore investments is increasing, they still are remaining cautious in their investment approach. Fifty-three per cent of investors said they were concerned about another global financial crisis or market crash, highlighting that people are conscious about where they spread their money geographically. This means developed markets tend to be an area of greater interest.”
Interestingly, while equities remain the preferred investment tool for gaining international exposure (81%), the CGIII recorded a substantial increase in the proportion of investors wanting to invest in infrastructure for their overseas exposure (16%, up 5% pts). Interest in hedge funds also increased in December, with 6% (up 2% pts) of investors wanting to invest in these structures for their overseas exposure.
Mr Mowll commented, “Interest levels in infrastructure and hedge funds could be a result of investors recognising that alternatives can be a good way of managing risk. Infrastructure tends to be a more solid asset class and can satisfy investors’ desire for income.”
Mr Mowll concluded by saying that December’s CGIII shows that investors are clearly losing confidence in the Australian economy as a result of domestic issues and this could be fuelling the demand for international investments. Nevertheless, while demand for overseas investment continues to increase, investors still remain cautious.
December CGIII – Key findings
The CGIII went up slightly in December, from 172 in November to 178 in December. It also went up amongst HNW investors (from 186 in November to 193 in December) reaching its highest level since January 2014.
More investors say they need more international assets in their investment portfolio (44%, up 3% pts) compared to November; 26% think the Australian market will record healthy growth in the next 12 months (down 17% pts).
The net proportion of investors planning to invest in Australian shares decreased to 18% (down 10% pts). More investors want to gain international exposure via international shares (17%, up 4% pts).
18% of investors are interested in investing in developed markets over the next 12 months (up 10% pts).
Half of those interested in investing overseas would like to do so within 3 months (50%, up 9% pts).
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