Investors and advisers are ramping up their exposure to international equities to pre-Global Financial Crisis levels in the pursuit of some stellar, past performance.
The MSCI World ex-Australia Index returned 26.9 per cent in the year to October 31, 2013, beating the S&P/ASX 200 Index which returned 25.5 per cent over the same period. Global bonds delivered around 3.5 per cent.
A number of top quartile international funds delivered in excess of 50 per cent.
The strong performance of international shares and growing optimism about the US economy, saw financial advisers steadily boost their clients’ allocation to global shares by 5 percentage points to 31 per cent in 2013, according to Investment Trend’s August 2013 Adviser Product and Marketing Needs Report.
That figure is expected to rise to 34 per cent in 2014.
The report also found that 56 per cent of financial advisers are opting for unhedged global funds, compared to 48 per cent in 2012. This supports their long term view that the Australian dollar is overvalued and will fall.
Investment Trends senior analyst, Recept Peker said investor appetite for global equities had grown rapidly in the last three years off the back of strong past performance and improved investor sentiment.
“Five years ago no one wanted to invest in global equities because they took a battering during the GFC, primarily because of the United States, but people are talking about the US economy again,” he said.
“Our analysis shows that the proportion of sophisticated investors intending to increase versus decrease their exposure to international shares surged 15 percentage points between August 2012 and August 2013, from 3 per cent to 18 per cent.”
An increasing number of investors and advisers surveyed by Investment Trends also said they wanted dedicated exposure to US equities, and preferably directly rather than through the use of managed funds.
Of those who said they wanted to invest in US equities, 38 per cent said they preferred to hold US stocks directly compared to around 10 per cent for other country-specific equities.
Meanwhile, interest in China has dwindled, with the proportion of planners planning to recommend single-region Chinese exposure falling from 35 per cent in 2010 to around 12 per cent in 2013.
