State Street Global Advisors’ SPDR ETF business has released its Global Income Strategies for Australian Investors whitepaper, which details the opportunities for Australian investors to access new income opportunities through global income ETFs.
Overview
Following the market volatility of recent years, Australian investors have shown a strong appetite for yield-oriented investments. Our ageing population, combined with the seemingly unstoppable popularity of self-managed super funds (SMSFs) as an investment vehicle, has seen a growing number of Australian investors seeking to build portfolios generating a reliable income stream.
In a low-interest rate environment, it has become increasingly difficult to find high-yielding assets onshore, especially while maintaining diversification. Adding to this, cash and bonds yields have remained low and corporate earnings growth is still below the long-term trend, limiting dividend growth. Yield opportunities in the Australian share market also remain highly concentrated in a small number of sectors dominated by a few large companies, giving rise to high levels of concentration risk.
Key findings
Diversifying offshore through a global income ETF allows Australian investors to tap into the income-generating potential of some of the world’s most stable and profitable companies, while reducing risk through effective diversification across companies, sectors, markets, and regional economic cycles.
Diversifying offshore can help investors guard against potential impact of economic risks in Australia – including slowing demand from China, record property prices, more fully valued banking stocks, and constraints on consumer spending.
Why diversify offshore?
- Access to new companies and sectors with different economic and growth profiles
- Reduce portfolio risk through more effective diversification
- Resolve concentration of risk
- Benefit from more attractive equity valuations in undervalued markets
- Benefit from structural trends across the global economy, including growth in emerging markets
- Benefit from stable dividend yield despite large fluctuations in equities markets
