Direct exposure to growth markets, such as Brazil, Russia, India and China, was essential for Australian investors, Goldman Sachs Asset Management (GSAM) senior portfolio strategist Kathryn Koch said yesterday.
GSAM predicted those growth markets would drive around 60 per cent of global growth in the next decade, contributing more than the United States and eurozone combined, Koch said.
"This takes [growth markets] from being very niche or optional, which clients used to think of it as, to actually needing to be a very core part of client portfolios," she said.
"We believe that 25 per cent of clients' portfolios both in equity and fixed income should be allocated directly into some of these bigger countries that we call the growth markets."
GSAM believed the rise of growth markets would be the most important investment theme in the next decade, marking a shift from global developed markets to growth markets, she said.
"We believe that it is actually critical for Australian clients to get direct exposure into the growth markets," she said.
"[Also], right now valuations for these countries are actually incredibly compelling."
She said moving forward it would not be enough for Australian investors to invest in Australia-based mineral companies or even US or European companies.
Previously, investors have been agnostic about where to invest because developed country markets have given a similar return to the growth markets.
"We don't think that is going to be the case over the next decade," Koch said.
"We feel very strongly that the growth and emerging markets are set to have better emerging market performance than the Australian equity markets."
She said she expected the increasing importance of domestic consumption in these markets would drive growth.
"We think the story in growth markets going forward is going to be increasingly about the domestic consumer," she said.
