Intention to invest overseas returned to August high

The net number of Australian investors intending to take advantage of the returns on offer in international markets has reached a new high.

This is the major finding of the Certitude Global Investing Intentions Index (CGIII) for October, released yesterday. The latest Index, which measures actively engaged Australian investors’ current appetite for investing overseas, increased from 160 points in September to 175 points in October, representing a rise of 9% month-on-month.

Once again, high net worth individuals, described as those with more than $1 million in investable assets, and generally seen as a proxy for sophisticated investors, were more bullish than others. However, the gap between high net worth investors and other active investors narrowed this month, indicating that sentiment towards global markets in general may be improving.

The CGIII, which is produced each month by Investment Trends, collates the views of nearly 800 actively engaged investors, including high net worth individuals, self-managed super funds and higher income investors.

In other findings, this month more investors are looking to invest overseas sooner rather than later, with the highest number since the inception of this study in May (41%) saying that they intend to invest within the next three months.

Interest in international funds covering multiple regions sees steady increase

Appetite for international funds covering multiple regions has steadily increased and is at its highest point observed at 34% planning to utilise in the next 12 months, outstripping interest in Asian markets where investing intentions has suffered its biggest drop yet to 21%. US/North America, though having declined significantly this month, remains the region of most interest to investors with 40% planning to invest in that region.

Craig Mowll, CEO of Certitude Global Investments said: “It’s interesting to note that US/North America, Asia and international funds covering multiple regions have remained the top three choices since the CGIII started. What is surprising this month is that international funds covering multiple regions actually overtook Asia as the preferred option.

“There are a couple of possible reasons for this. Economic data out of Asia hasn’t been as positive as investors would have liked, and with US markets still uneasy about the future, investors are looking to spread their risk through multiple regions. Investing in international funds gives them access to markets and regions that they may not feel comfortable about investing in directly.”

Actively managed funds remain more popular than direct share purchases

The CGIII revealed that more investors prefer an actively managed portfolio (44%) over direct purchase of overseas shares (37%) to gain their overseas exposure.

According to Mr Mowll, over the course of the CGIII, investors have vacillated between direct share purchases and actively managed funds. “The CGIII has found preferences between actively managed funds and direct share purchase changing almost every month. We find that this can be reflective of investors’ concern with markets or the regions of interest. With appetite at an all-time high for international funds covering multiple regions, investors may be looking for guidance from investment experts. ”

Interest in equities peaks

When investors were asked about preferred investment classes, equities, up 15 percentage points from September, remained firmly in the lead at 89%, with the next most popular asset class, property, coming in at just over 10%.

Mr Mowll said that this result was not particularly surprising, as equities are better understood as an investment class than some other options.

“Also, as global economic conditions improve, equities are generally regarded as a good growth play, and have long been a favourite with Australian investors,” he explained.

Sovereign debt in Europe remains top of mind risk

When investors were asked about the main barrier to investing overseas, “sovereign debt problems in Europe” remained the most cited reason month on month. Notable in the October Report was a significant reduction in “I don’t have sufficient funds” as a reason for not investing, compared with September. It moved from being the second most quoted reason at 16% down to 6% perhaps implying cash reserves are coming of term deposits maturity dates and these funds are being prepared for investment.

Mr Mowll finished by saying that the CGIII is an excellent tool to provide insights where sophisticated Australian investors are looking to invest now and in the future and what this says about global investment markets in general.

“There are so many options for investors looking to invest overseas, understanding where market leaders see value and how they intend to invest can be very valuable,” he said.

October CGIII – Key Findings

• The net number of active Australian investors looking to increase investment in overseas assets returned to its August high of 175 points, a rise of 9% month-on-month.
• This month indicated that the highest number of investors intending on investing overseas (41%) within the next three months.
• Interest in international funds covering multiple regions is at its highest point observed in 6 months (34%) with interest falling in US/North America and Asia.
• More investors intend to obtain international exposure via actively managed fund (44%) compared with direct investment in shares (37%).
• Equities remain the asset class with most appetite at 89% ahead of the next most popular asset class, property, at just 10%.
• The major barrier to investment remains the sovereign debt risk in the Eurozone at 17%.