Investors urged to look offshore

Investors should increase their exposure to overseas markets, according to ING Investment Management chief executive Grant Bailey.

Bailey believes the concentration of the domestic equity market, the size of the domestic equity market relative to the funds available for investment, and the scarce nature of domestic government bonds are good reasons for Australian investors to review their portfolios in order to find the right level of offshore exposure.

“Australians need to invest more overseas to take advantage of global investment opportunities and drive their investments further,” he said.

“This can be done by looking at the investment options available through your super fund and by adding additional offshore exposure through a range of global investment options now available to retail investors,” Bailey added.

He feels increasing the exposure to overseas markets will also have the added effect of greater portfolio diversification.

“The fact is many Australians have 75 per cent of their assets invested in less than 2 per cent of world markets — the risk is heavily skewed,” Bailey said.

He predicted the global component of superannuation portfolios could reach a level of 40 per cent in the medium to long term if investors decided to embrace overseas markets, which continue to provide a solid opportunity for Australian investors to increase the returns generated by their portfolio while at the same time lowering the overall risk of their portfolio.

In addition, Bailey believes the process of increased involvement in international markets has been made easier through products now available that specialise in global equities, single country exposures, diversified fixed income, emerging market debt and equity, and global listed property.