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Tuesday, March 5, 2002

Investing Offshore with Confidence, and Spreading your Risk



Many of our clients prefer to invest into Australian shares directly. However, investing directly into International shares from Australia can be difficult. Internet transacting is beginning to make this possible, but the need to constantly monitor the companies, and make decisions on when to buy or sell your shares is an on-going and difficult task. This job is made even more difficult by the fact that many overseas markets are only open while we are asleep!

We find the best solution for clients wishing to invest a portion of their portfolio offshore is to use Managed International Share funds.

Large Fund Managers, such as Colonial First State, Credit Suisse and ING for example, have investment analysts stationed overseas, where they are close to the major international markets. By having experienced professionals ‘on the ground’, it is more likely your international share portfolio will deliver your expected returns.

When you consider that Australia makes up less than 2% of the world combined sharemarkets, and that the largest 12 companies listed on the Australian Stock Exchange make up 51% of our overall market, it makes our sharemarket a fairly small and narrow place to invest.

This can be put into some perspective, when we compare the value of America’s largest company – General Electric (recently valued at around $946 billion) to the value of Australia’s entire market (valued recently at around $731 billion). In simple terms, GE is worth more than $200 billion more than the value of the whole Australian Share Market combined!

Whilst sheer size is not a guarantee of future returns, the sheer range of choices in International share markets makes the chance of good returns much higher.

For example, UK based GlaxoSmithKline operates in the pharmaceuticals sector, and is one of the world’s leading companies, producing Ventolin as well as other well known products. We cannot compare this company to one in Australia, as there really isn’t one. The pharmaceuticals industry is tipped to be one of the world’s high growth industries over the next decade. The vast majority of this growth will be from companies operating overseas.

With large global players such as Coca-Cola, Sony, Adidas, IBM and Pfizer (to name a few) operating outside of Australia, consider for a moment the truly global players in the Australian Stock Market. News Corp?

It is also important to bear in mind that returns from International Shares have tended to outperform Australian Shares over the long term. 16.57% per annum (MSCI World Index) versus 13.24% per annum (S & P ASX 300 Accumulation Index) over the last 5 years.

Whilst International Share funds produced the worst returns last year (mostly negative), the feeling is that the pace of world economic growth is picking up.

If you believe you do not have sufficient exposure to this very important asset class, we are able to assist you with a wide range of Managed International Share Funds to suit your needs.

MLC’s Platinum - Global Fund, for example, has produced strong returns over many years, and is available in Managed Funds, Superannuation, and now in their Allocated Pension.

Other large Fund Managers such as ING, BT, Perpetual, Zurich and Colonial First State also have International Share Funds which have produced returns averaging between 12-17% over several years.

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