Appeal of global investments on the rise

The Certitude Global Investing Intentions Index (CGIII) rose in August, continuing the trend of the past quarter, indicating that more Australian investors are planning to increase their exposure to overseas assets.
The Index, which tracks net demands for global investments, rose to 175 points in August, representing a 3.5% increase from last month (169) and an 11.4% increase over the past quarter (rolling).

In addition, the timeframe for the intended overseas allocation continues to shrink. In August, 36% of investors stated that they intend to make their next overseas investment within the next three months. Over the past rolling quarter, the amount of investors planning to go global in the next three months has grown by 33%.

This is a reflection of investors’ view that global markets are likely to rise over the next year, with 74% of those surveyed expecting a rise compared to only 15% who anticipate global markets will fall.

Craig Mowll, CEO of Certitude Global Investments said: “This research has shown that not only are investors more interested in global investments but they are also becoming more serious about actually allocating assets overseas. 43% of the investors we surveyed believe they need more international exposure in their portfolios – this has remained consistent over the past quarter. What has changed is that their intentions to act on this by increasing their overseas assets have risen steadily, according to the CGIII.

“The research confirms that Australian investors, who have long held a very strong domestic bias, recognise the opportunities for growth, income and diversification that come from investing globally.”

Investors warming to Europe and China

The US/North America has held a firm lead on other regions in terms of popularity with investors over this quarter, with 51% of investors interested in gaining overseas exposure indicating they would like to invest in this region in the 12 months from August.

Interestingly, the findings reveal that both China and Western Europe gained in popularity during August. Western Europe was a choice for 17% of investors looking to invest globally, representing a 5 percentage point increase from July. Similarly, China’s appeal grew 3 percentage points since July with 15% of investors interested in using China for their upcoming global investments.

Offshore equities most attractive global asset, fixed income on the rise

While equities have consistently held the most interest to investors looking overseas, fixed income has begun to see an uptick in popularity, with 7% of investors saying fixed income is a global asset class they are planning on using, up from 4% last month.

Mowll said, “Though this remains a relatively small proportion of investors’ interest when looking at global investment opportunities, the research shows significant increases in certain fixed income categories over the past quarter.

“Investment grade credit is the most popular category of global fixed income among those surveyed. However, both emerging market debt and sovereign debt have more than doubled in popularity since May. No investors preferred sovereign debt in May and this is now the choice of 20% of investors who plan to use fixed income. Similarly, emerging market debt has gone from 9% in July to 24% in August, which is especially interesting considering that as an overall region, the research shows a decline in interest in emerging markets as a whole.”

Mowll concluded: “This quarter’s findings show consistent growth in the appeal of global investments for Australian investors, as these investors become even more attuned to the opportunities available offshore.

“We believe the intentions of these sophisticated investors can be seen as a leading indicator for where and when other Australians will move to specific markets and asset classes around the globe. And with Australia representing just 2% of the investment opportunities out there, investors stand to reap the benefits from diversifying offshore.”

August CGIII – Key findings

• The Certitude Global Investing Intentions Index increased by 3.6% in August, up to 175 from 169 in July. The Index has increased by11.5% over the past quarter.
• 43% of Australian investors believe they need more international assets in their portfolio, this is consistent from July.
• 51% of investors planning on investing overseas named US/North America as the most attractive overseas market, an increase of 7 percentage points from July. Meanwhile, Western Europe and China have increased in attractiveness by 5 percentage points and 3 percentage points respectively from July.
• 72% of investors are most interested in equities for their overseas exposure, but fixed income has started to see an increase.
• Investors are bringing the decision to invest globally forward, with more investors (36%, up from 32% in July) looking to invest overseas within the next 3 months.