Craig Mowll

Demand from Australian investors for international shares increased markedly in July, according to the Certitude Global Investing Intentions Index (CGIII). The CGIII, which collates the views of over 630 actively engaged leading investors and measures their net demand for global investments, revealed that 22% of investors plan to increase their exposure to international shares, up from 16% the month prior.

In fact, investors showed certain eagerness to increase their overseas investment sooner rather than later with 38% of investors saying they plan to increase exposure within three months, up from 30% saying so in June. And 4% said they would do it in the next week (up from 1%).

Investors’ concern levels with global markets fell further this month, reaching the lowest point observed since the GFC of 5.4 out of ten, as optimism about global and domestic markets soared. Three out of four Australian investors now believe global markets will rise over the next year, up from 67% in June, and only 11% believe they will fall, down from 13% over the same period.

Investors’ expectation of returns from domestic markets are higher this month as well. On average, Australian investors expect the All Ordinaries to rise by 6% in the next 12 months, compared with an expectation of 5% in the June study.

Craig Mowll, CEO of Certitude Global Investment said: “Results this month indicate that there is real optimism about investing in general. Despite some concerns about China and recent events in the Middle East and Ukraine, investors appear undaunted about any negative effect on offshore markets. This may be one reason that demand for international funds covering multiple regions decreased slightly this month when compared with other geographic options, as increased confidence can lead investors to want to overweight to particular regions themselves.”

The US/North America remained far and away the preferred option when it came to international markets. Its popularity has been rising sharply since May this year. This is likely the result of better economic data coming out of the US, and the fact that US corporate profits and earnings are strong.

Also of note, interest in investing in Western Europe reached a 12 month peak, which again reinforced the view that investors are positive about the pace of recovery in the Eurozone despite the issues in the Ukraine.

When investors were asked about which international asset classes they favoured, equities remained by far the most popular. What was interesting however, is that interest in infrastructure investments increased sharply (13%, up from 9% in June), as did interest in hedge funds (6%, up from 3%).

When it came to the barriers stopping or limiting investors from investing more in overseas markets, a lack of knowledge was again the biggest barrier. However, and perhaps reflecting investors’ optimism, it was down by 2% pts, from 25% in June to 23% in July. Concerns about market volatility were also up by a small amount, which may account in part for the increased demand for infrastructure and hedge funds, which are designed to help manage volatility.

Commenting on the reasons for significant uptick in interest in infrastructure and hedge funds, Mr Mowll said: “Over the past 6 months, Certitude has experienced a marked increase in investor appetite for alternatives, with a particular interest rising for hedge funds. One reason may be that investors are also dialling up their exposure to equities, and understand that alternatives are a great way of cushioning volatility and managing risk. Hedge funds have little correlation with equity and fixed income markets, and in the case of infrastructure, it can satisfy investors’ desire for income.”

Mr Mowll concluded by saying that this month’s CGIII shows that Australian investors clearly have a growing appetite for international exposure, and that even political turbulence in global hotspots has not affected their optimistic outlook.

“Nonetheless, it was interesting to see that a lack of knowledge was still the most commonly cited barrier to investing overseas and that actively managed international funds remained a strong preference for investors looking to make informed decisions.

It is great to see investors acknowledging that they need to look further afield than our domestic equity markets for returns, and that there are number of investment options in addition to equities, when it comes to structuring a balanced portfolio of global assets.”

July CGIII – Key findings

1. Investors’ concern level with global markets reached a record low of 5.4 out of ten, down from 5.6 last month.
2. 22% of investors plan to increase their exposure to international shares, up 8% pts, compared with June.
3. Australian investors are more optimistic in their outlook than in June. They anticipate a rise of 6% in the All Ordinaries over the next 12 months, and 5% for global markets.
4. The most popular overseas markets were the US/North America (51%), followed by international funds covering multiple regions (27%) and Western Europe (26%).
5. 41% would like to gain exposure via direct shares (up 3% pts); 33% would like to gain exposure via ETFs (up 6% pts) and 33% prefer actively managed funds (down 3% pts).

Craig Mowll

The proportion of Australian investors planning to increase their exposure to overseas assets is higher this year compared with the same time last year, according to the Certitude Global Investing Index (CGIII). The CGIII, which collates the views of over 500 actively engaged leading investors and measures their net demand for global investments, increased over the 12 month period from end June 2013 to end June 2014.

Annual results taken at the end of June 2014 revealed a number of key insights into the global investing intentions of Australian investors:

• The appetite of all active investors for global investments rose over the year by 11% (from 157 to 175) and now sits above the 12 months average.
• Concern levels about global markets fell significantly year on year and remain at their lowest level ever, at 5.6 out of 10, down from 6.4 out of 10 at the end of June last year.
• When it came to international equities specifically, investors were slightly less bullish in their outlook this year compared with last year, with slightly fewer investors intending to increase their exposure (16% compared with 17%), but also fewer investors intending to decrease their exposure (2% compared with 5%).

Craig Mowll, CEO of Certitude Global Investment said: “Results from the CGIII over the past 12 months indicate that Australian investors remain positive about global markets generally, and have indicated that they are keen to increase their exposure to these markets.

“Even though monthly figures were volatile throughout the year, with the percentage of those intending to increase exposure to international shares reaching a high of 25% and a low of 16%, the bottom line is that the intention to invest was up on an annual basis, which may well indicate that Australian investors are continuing to actively look overseas for returns.”

US/North America most favoured market, again.

It was no surprise that the US/North America was once again the market of choice for overseas investment. The majority (46%) of investors who intend to invest overseas say they would choose the US. This was down from 50% at the same time last year, which may indicate that investors’ level of concern about other markets has dropped over the same period.

“The preference for the US as a market has been down over the past few months, so the fact that it is rising again may well indicate that investors are responding positively to better economic figures out of the US, in particular strong jobs growth. They are clearly becoming more comfortable with the pace of economic growth and with the US Federal Reserve’s management of the tapering of quantitative easing,” said Mr Mowll.

Gap closes between desire for Australian and international shares

Closer to home, the proportion of investors planning to invest in Australia fell over the year (34%, down 4% pts), whist the proportion planning to invest in international shares fell just slightly (16%, down 1% pts) over the same period.

What is more interesting is the fact that the gap between the net proportion of investors planning to invest in Australian shares (24%, down 5% pts) and those planning to invest in international shares (14%, up 2% pts) has been shrinking over time and is now much smaller than it was 12 months ago. This supports the trend that Australians are exhibiting a growing interest in international shares.

Investors again overwhelmingly favoured equities when it came to a decision about which investment class they prefer, and this preference rose over the year. Over 80% of investors favoured equities as at end June 2014, whereas the percentage was 70% at the same time last year.

Commenting on the findings as they regard international equities, Mr Mowll said: “Investors indicated that their preferred method of overseas investment was via direct purchase of shares (38% of those interested in investing overseas), although actively managed funds (36%) was only very marginally lower. These two methods of exposure have been the top two preferred all year, with each taking their turn at number one depending on the prevailing economic conditions at the time.

“The most common barrier cited by investors for not investing overseas was a lack of knowledge, with 25% saying they didn’t know enough about it. At end June 2013, over 30% of investors cited market volatility as the most common barrier to investment, now only one year later that has reduced to only 20%.

“Clearly investors are continuing to feel more at ease with international markets, and understand that an exposure to international markets is necessary in a balanced portfolio, and the fact that overall demand for international assets increased over the year really back this up.”

Mr Mowll concluded by saying that anecdotal evidence taken from the comments of investors participating in the CGIII indicated that right now their major areas of concern internationally are China and the Middle East.

“A number cited the economic slowdown and potential debt crisis in China worrying, particularly if this was to cause a sell-off in risk assets in Australia. In the same way, on-going conflict in the Middle East is sparking debate about volatility in oil prices and potential flow-on effects.

“Ultimately, however, it was great to see that Australians overall remain positive about global markets, despite some volatility during the year. Their appetite for overseas investments continues to increase, and we are hopeful that this positive trend will continue looking forward.”

Craig Mowll

Following a record high in April, in May Australians revealed themselves to be less likely to invest overseas, according to the Certitude Global Investing Index (CGIII). The CGIII, which collates the views of over 500 actively engaged leading investors and measures their net demand for global investments, fell for the first time since February this year.

On the other hand, the level of concern about global markets is at its lowest level since the inception of this study, and demand for international shares, while weaker this month, was only marginally so. Slightly fewer investors (19%, down from 20%) intend to increase exposure, however 3% (up from 1%) of investors plan to actively decrease their exposure.

Half of all investors surveyed believe that Australia’s economy will record healthy growth in the next 12 months and Australians remain confident that the All Ordinaries will outperform global markets, anticipating a rise of 5%, compared with 4% for global markets; 38% of investors intend to increase their exposure to Australian shares.

Craig Mowll, CEO of Certitude Global Investments said: “Results from the CGIII this month indicate that while Australian investors are not worried about global markets, the fact remains that a greater number of investors are looking to actively decrease their exposure to international shares than last month, which may indicate that they are cashing in and taking profits.”

The US/North America once again outstripped other regions and remained the most popular choice for leading Australian investors. Having said that however, its popularity fell by 5% pts this month, which is perhaps a comment on the pace of economic recovery in the US, as well as uncertainty surrounding the effects of the tapering of quantitative easing.

On the other hand, Western Europe and Asia both gained ground, and intention to invest in these markets was up 8% pts and 4% pts respectively. It’s clear that investors are beginning to move on from concerns about the sovereign debt crisis and economic stagnation and are beginning to eye Western Europe with more interest.

On the home front, the sweeping cuts announced in the Federal Budget and their likely implications for the local economy may have shaken investor confidence in the short term. 49% of investors (down from 60%) believe that Australia’s economy will record healthy growth in the next 12 months.

US/North America remains region of choice, managed funds investing globally still popular

International funds covering multiple regions again ranked second after the US/North America as the most popular ‘region’, however the intention to invest via managed funds fell slightly this month.

Investors again overwhelmingly favoured equities over other investments for gaining their overseas exposure, with over 80% planning to use equities over the next most popular option, property, which only 10% of investors preferred.

For those investors intending to invest in equity markets in the next 12 months, 43% said that they intended to invest via actively managed international funds. The next most popular option was direct purchase of international equities, at 28%.

Commenting on investors’ strong preference for equities, Mr Mowll said, “Investors feel confident with equities, particularly when they are investing overseas. It is well known that over the long term equity markets perform better than many other options, but they are also relatively well-understood and have the added benefit of liquidity, which gives investors comfort.”

It was interesting to note that investors continue to see value in having an experienced active fund manager take responsibility for their overseas exposure. Lack of knowledge was cited as a major barrier to investing overseas, suggesting that investors’ preference for managed funds could be interpreted as their way of offsetting a lack of knowledge, through the choice of a quality active manager.

Mr Mowll concluded: “Investors may have been concerned about their lack of knowledge rather than the inherent riskiness of global markets in April, but this month, concern about international markets is at an all-time low. Investors were more cautious generally this month, and the convergence between demand for international shares and Australian shares which we have been witnessing recently reversed slightly. Nonetheless, demand for offshore investments remained strong overall, indicating that Australian investors continue to look beyond our shores for opportunity.”

May CGIII – Key findings

1. Net demand for international assets decreased by 11% from its record high in April 2014. The Certitude Global Investing Intentions Index now sits at 170, down from 186, and in line with the 12 month average.

2. Concern level with global markets remained low at 5.6 out of 10.

3. Slightly fewer investors (19%) intend to increase exposure to international shares this month, while slightly more (38%) intend to increase their exposure to Australian shares.

4. The US/North America remained the number one market of interest, although interest fell by 5% pts. Interest in Western Europe rose by 8% pts and emerging markets fell by 2% pts.

5. More investors prefer to gain international exposure via actively managed fund (43% down 3% pts) rather than through direct shares (28% down 10% pts).

Craig Mowll

Demand by Australian investors for offshore assets shows no sign of slowing down, according to the Certitude Global Investing Intentions Index (CGIII). The CGIII, which collates the views of actively engaged Australian investors and measures their net demand for global investments, jumped again in April to a record high. Following a rise of 15% in March, the CGIII rose a further 5% in April, taking it to its highest level since the Index began in June 2013.

Equities continued to lead the charge, with demand for both Australian and international shares far outstripping that for other asset classes, such as property, term deposits and exchange traded funds. In addition, the net proportion of investors planning to invest in international shares jumped sharply month-on-month.

Demand for most other asset classes remained largely steady, with the exception of term deposits which has been falling since February this year. The downward trend continued in April, with investors again signalling their lack of appetite for this more defensive investment option.

Craig Mowll, CEO of Certitude Global Investments said: “Results from the CGIII in April suggest that far from being influenced by geo-political events, such as turbulence in the Ukraine and its ramifications for global markets, active investors continue to see increased opportunities in international investment markets.

“While it is true that a number of investors expressed concerns about some of the big issues, including instability in the Ukraine and Russia, a slowdown in the Chinese economy and the possibility of another market crash, this clearly did not influence their positive outlook for international markets. In fact, the CGIII revealed that the level of concern about global markets across the board actually decreased in April.

“Given the on-going weakness in parts of the Australian economy combined with the looming prospect of a tough Federal Budget, it is not altogether surprising that Australian active investors, traditionally overweight Aussie equities, are seriously considering a greater allocation to offshore markets.

“This is borne out by the results of the CGIII, which indicated an increasing convergence in demand between Australian and international equities in April. When combined with the fall in demand for term deposits, it appears that investors are gaining confidence with equities, and view them as a suitable alternative to term deposits, which continue to struggle to perform as interest rates languish at historically low levels.”

Interest in multiple region managed funds gains ground

When investors were asked which international markets were of most interest over the next 12 months, the US/North America again came in as the clear favourite, even though the level of interest was down slightly compared with March.

On the other hand, international funds covering multiple regions were once again investors’ second choice, but contrary to demand for US/North America, demand for these funds rose compared with all other markets, the notable exception being emerging markets, which also rose.

In addition, the intention to gain international exposure via actively managed funds increased by 7 percentage points to a record high (46%), compared with direct purchase of overseas shares (38%) which also increased, but only by 3 percentage points.

Commenting on the increase in demand for managed funds investing overseas, Mr Mowll said, “It is interesting to note that as demand for international exposure increases, demand for international funds covering multiple regions has also increased. One explanation may be that investors understand the challenges inherent in trying to be a specialist in every international market. Choosing to invest with an experienced investment manager, capable of structuring a portfolio across multiple regions makes good sense.

“In fact, this hypothesis is supported by the fact that nearly a quarter of all investors said that lack of knowledge was the number one barrier preventing them from investing in international markets. In a further sign that investors are less concerned about market volatility than they have been in the past, lack of knowledge ranked as the biggest barrier to investing overseas in April, whereas market volatility was cited as the number one barrier in March.”

When investors were asked when they intend to next invest overseas, nearly half (41%) of respondents said that they would like to do so within 3 months. This was up from 37% in March.

Mr Mowll concluded: “It is promising to see that demand for Australian and international shares continues to converge over time, showing an increased appetite for offshore investments and a desire for an asset allocation less heavily skewed to Australian equities. It is not surprising investors are choosing managed funds to gain exposure to international markets given their concern about a lack of knowledge and information; an expert fund manager is the best choice to help them make optimum investment choices.”

April CGIII – Key Findings

1. Net demand for international assets increased in April 2014 by 5%, following an increase of 15% in March 2014 – the Certitude Global Investing Intentions Index now sits at 186, up from 177 in March.

2. The net proportion of investors planning to invest in international shares increased to 18% in April, up from 16% in March. Meanwhile, the convergence between demand for Australian and international shares continued, while demand for term deposits continued to fall month-on-month.

3. The US/North America remained the number one market of interest, followed by international funds covering multiple regions. In April, interest in the US/North America fell slightly from 48% to 46% whereas interest in international funds covering multiple regions continued to rise to 32%.

4. Intention to gain international exposure via actively managed funds increased to 46%, up 7% pts) and direct purchase of overseas shares increased to 38% (up 3% pts). Intention to gain international exposure via actively managed international funds is now at a record high.

5. The number of investors intending to invest internationally in the next three months increased to nearly half (41%), up from 37% in March.

]]> Certitude Global Investing Intentions Index Report shows convergence in demand for Australian and international shares

Craig Mowll

Demand by Australian investors for offshore assets shows no sign of slowing down, according to the Certitude Global Investing Intentions Index (CGIII). The CGIII, which collates the views of actively engaged Australian investors and measures their net demand for global investments, jumped again in April to a record high. Following a rise of 15% in March, the CGIII rose a further 5% in April, taking it to its highest level since the Index began in June 2013.

Equities continued to lead the charge, with demand for both Australian and international shares far outstripping that for other asset classes, such as property, term deposits and exchange traded funds. In addition, the net proportion of investors planning to invest in international shares jumped sharply month-on-month.

Demand for most other asset classes remained largely steady, with the exception of term deposits which has been falling since February this year. The downward trend continued in April, with investors again signalling their lack of appetite for this more defensive investment option.

Craig Mowll, CEO of Certitude Global Investments said: “Results from the CGIII in April suggest that far from being influenced by geo-political events, such as turbulence in the Ukraine and its ramifications for global markets, active investors continue to see increased opportunities in international investment markets.

“While it is true that a number of investors expressed concerns about some of the big issues, including instability in the Ukraine and Russia, a slowdown in the Chinese economy and the possibility of another market crash, this clearly did not influence their positive outlook for international markets. In fact, the CGIII revealed that the level of concern about global markets across the board actually decreased in April.

“Given the on-going weakness in parts of the Australian economy combined with the looming prospect of a tough Federal Budget, it is not altogether surprising that Australian active investors, traditionally overweight Aussie equities, are seriously considering a greater allocation to offshore markets.

“This is borne out by the results of the CGIII, which indicated an increasing convergence in demand between Australian and international equities in April. When combined with the fall in demand for term deposits, it appears that investors are gaining confidence with equities, and view them as a suitable alternative to term deposits, which continue to struggle to perform as interest rates languish at historically low levels.”

Interest in multiple region managed funds gains ground

When investors were asked which international markets were of most interest over the next 12 months, the US/North America again came in as the clear favourite, even though the level of interest was down slightly compared with March.

On the other hand, international funds covering multiple regions were once again investors’ second choice, but contrary to demand for US/North America, demand for these funds rose compared with all other markets, the notable exception being emerging markets, which also rose.

In addition, the intention to gain international exposure via actively managed funds increased by 7 percentage points to a record high (46%), compared with direct purchase of overseas shares (38%) which also increased, but only by 3 percentage points.

Commenting on the increase in demand for managed funds investing overseas, Mr Mowll said, “It is interesting to note that as demand for international exposure increases, demand for international funds covering multiple regions has also increased. One explanation may be that investors understand the challenges inherent in trying to be a specialist in every international market. Choosing to invest with an experienced investment manager, capable of structuring a portfolio across multiple regions makes good sense.

“In fact, this hypothesis is supported by the fact that nearly a quarter of all investors said that lack of knowledge was the number one barrier preventing them from investing in international markets. In a further sign that investors are less concerned about market volatility than they have been in the past, lack of knowledge ranked as the biggest barrier to investing overseas in April, whereas market volatility was cited as the number one barrier in March.”

When investors were asked when they intend to next invest overseas, nearly half (41%) of respondents said that they would like to do so within 3 months. This was up from 37% in March.

Mr Mowll concluded: “It is promising to see that demand for Australian and international shares continues to converge over time, showing an increased appetite for offshore investments and a desire for an asset allocation less heavily skewed to Australian equities. It is not surprising investors are choosing managed funds to gain exposure to international markets given their concern about a lack of knowledge and information; an expert fund manager is the best choice to help them make optimum investment choices.”

April CGIII – Key Findings

1. Net demand for international assets increased in April 2014 by 5%, following an increase of 15% in March 2014 – the Certitude Global Investing Intentions Index now sits at 186, up from 177 in March.

2. The net proportion of investors planning to invest in international shares increased to 18% in April, up from 16% in March. Meanwhile, the convergence between demand for Australian and international shares continued, while demand for term deposits continued to fall month-on-month.

3. The US/North America remained the number one market of interest, followed by international funds covering multiple regions. In April, interest in the US/North America fell slightly from 48% to 46% whereas interest in international funds covering multiple regions continued to rise to 32%.

4. Intention to gain international exposure via actively managed funds increased to 46%, up 7% pts) and direct purchase of overseas shares increased to 38% (up 3% pts). Intention to gain international exposure via actively managed international funds is now at a record high.

5. The number of investors intending to invest internationally in the next three months increased to nearly half (41%), up from 37% in March.

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