Adviser appetite for international funds on the rise

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Zurich’s investment business in Australia has released survey results that found the overwhelming majority of advisers are expecting positive returns in international markets in the next 12 months. 

The survey of more than 100 advisers also found that almost 70 percent of advisers will increase their clients’ allocation to international equities in the next six to twelve months; and that 75 percent of those will do this via managed funds.  

Patrick Noble, Senior Investment Strategist – Zurich Investments, said the results were significant given the trend towards cash and direct, local shares that has dominated investment behavior in the past several years. 

“With the huge number of Australians facing retirement in the next few years, advisers need to find strategies that do not rely solely upon cash rates or a rise in local markets to provide income for the future.  Importantly, they need to do this at a time when investor confidence remains subdued. 

“We believe it is significant therefore that, advisers are now turning their attention to international markets and that they recognise the value a specialised investment manager can deliver.” 

According to the survey, the majority of advisers are expecting positive returns from international shares over the next 12 months with 54 percent expecting single digit returns.  Just three percent believed international shares would deliver negative returns. The results show a bias towards international over local shares when compared to a Zurich survey from June 2012. 

Mr Noble said the strong Australian dollar is almost certainly a factor in why international markets are more attractive, it could also be about the increased familiarity Australian investors have with international companies and markets. 

“According to the survey, almost 70 percent of advisers believe the Australian dollar will be above or at parity with the US dollarover the next 12 months. A strong dollar is definitely beneficial, but Australians are also more familiar with both offshore markets and companies such as Google and eBay.” 

Mr Noble said the search for income did not mean Australian investors had to rely upon Australian share dividends, as skilled managers could implement strategies for achieving income from internationalshares.  

“We recently launched the Zurich Investments Global Equity Income Fund, which provides investors access to global equity markets, with enhanced levels of income and reduced downside risk.  The Fund is typically comprised of a portfolio of 30 – 50 income-producing, international stocks across a range of sectors and geographies.  The Manager utilises innovative options and currency strategies to help reduce downside risk.” 

“Advisers know that staying in cash over the long run is not going to deliver the returns or income investors need for a comfortable retirement.   And funds such as this, have the potential to deliver income, yet with a decreased level of risk.”

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