The Global Outlook Is the Safest
The recent downturn in local markets means investors are looking overseas again.
Isle of Man, United Kingdom, December 15, 2015 (Newswire.com) - A worse than expected global commodity price slump has dampened local share market returns, prompting superannuation funds to switch money into international shares and alternative assets.
"Lots of investors re-positioned themselves this time last year ahead of an expected continued downturn in iron ore, coal and oil prices but even many of them have been surprised by how hard the sell-off has been," NAB Asset Management portfolio adviser John Owen said.
"Global equities have significantly outperformed over the past three years and offer more opportunities for diversification away from the local market that is dominated by banks and miners."
Resources stocks have been smashed over the past 12 months as the prices producers can fetch for their exports have fallen through the floor. The iron ore spot price has almost halved, while thermal coal and crude oil prices are down roughly 30 per cent.
BHP Billiton, which represents 4.2 per cent of the local benchmark index, has lost around 38 per cent of its value in 2015. Other major resource stocks, including Rio Tinto and Woodside Petroleum, have lost at least 25 per cent of their market capitalization.
With 10 full trading days to go in 2015 the benchmark S&P/ASX 200 Index is down 6.6 per cent. While the poor performance of local shares has made it harder for super funds to make money this year, a falling currency and strength in global equity markets has helped. The most recent Chant West data forecast super fund balances were still on track for a 6.1 per cent annual return.
A saving grace for many of the stronger performing super funds has been a strategy to shift capital out of the domestic share market and into international equities or alternative asset classes.
Q Super, one of the strongest performing super funds over the past couple of years, stands out for having just 11.4 per cent of its capital invested in homegrown stocks compared to an industry wide norm of around 30 per cent.
It posted the strongest returns of any balanced growth fund, the category most workers are invested in, last financial year with 12.3 per cent and is ranking in third place in the calendar year-to-date, ahead 7.5 per cent.
Australian Super is tracking as the second top-performing balanced growth fund for 2015, ahead 7.6 per cent.
The fund redirected $2.4 billion away from listed assets and into direct property this year.
"A long-standing strategy of diversification into unlisted property and infrastructure has allowed us to better manage our exposure to such sectors as mining and energy," Australian Super head of equities Innes McKeand said.
The top-performing of the balanced growth funds year-to-date is MTAA Super, which is ahead 8.5 per cent, in large part due to a 24 per cent return from selling a chain of UK petrol stations.
The solution is Global investing again for 2016,if investors want to get back on track and meet the targets they all have.