An Australian prime minster once branded this nation as the “arse end of the world”, but despite this tyranny of distance, offshore managers are prepared to make the long haul in the hope of nabbing a mandate from the country’s lucrative compulsory super system.
Many have revealed to me their frustration that Australian investors remain domestically focused, unwilling to seek offshore opportunities.
Recently, Investec global strategist Michael Power joined the chorus.
Power said Australian investors had too much of a home bias and were missing out on viable assets in growing economies, such as emerging markets. This blinkered focus would eventually cost them returns in the long term.
United States investors had already paid the price for their home bias, Power said. Now US pension funds were looking at overseas investments because local investment opportunities could no longer fund their deficits.
Investors should look at thematic investing, capturing opportunities from investment themes such as emerging markets and global macro strategies, Power said.
He said Australia’s geographical positioning now worked to its advantage, enabling the country to capitalise on growing Asian economies.
Power may like others before him, just be talking up his book, but he has highlighted not just an investment rethink, but a new world that has moved on from a traditional approach to investing.
Pengana Capital executive (and former Av Super chief executive) Denis Carroll said this meant investors would need to look at what were the big challenges for the next 10 years.
Carroll said factors such as food shortages would mean investors would need to look at consumer food staples as well as gold, oil and other key minerals.
He said terrorism and geopolitical risk had heightened market volatility and so investors needed to consider catastrophe bonds, while investing in life insurance premiums would allow investors to address the challenges of an ageing population.
Superannuation funds can sometimes be captive to short-term performance from monthly media reporting on performance. It can be difficult to look beyond peer performance.
Recently, AMIST Super changed its portfolio to take advantage of emerging themes.
This could be a sign that more funds are moving to thematic investing as they seek greater prospects away from home.
