Recession could be best time to invest
Although Australia is officially in a recession, investors shouldn’t be fearful as it may represent the best time to invest.
Alex Vynokur, BetaShares founder and chief executive, said history showed that investing at a time of recession tended to be one of the best periods because the market was pricing “doom and gloom” which would not last forever.
“If you look at the Australian market, whether you look at the Global Financial Crisis or previous recessions, allocating towards it at that time has proven to be quite effective,” Vynokur said.
“Australian equities have been a bit of a laggard in terms of relative performance, compared to the likes of the NASDAQ 100, but at the same time the doom and gloom doesn’t last forever.
“I have every confidence to say Australia will of course manage its way through the recession and will emerge strongly on the other side.
“My message is to not lose sight of the fact that yes we are now officially in a recession, but the sentiment is so negative at the moment and those are usually the times when the uncomfortable decision to invest actually pays very handsomely over the long-term.”
According to FE Analytics, within the Australian Core Strategies universe, the best-performing exchange traded fund (ETF) in the Australian equities sector was BetaShares Australian Sustainability Leaders, which lost -1.15% over the last year to 31 August, 2020.
This was followed by BetaShares Australian Ex-20 Portfolio Diversifier (-3.04%) and Australian Equities Bear Hedge (-3.5%).
VanEck’s Vectors MSCI Australian Equity (-3.63%) and Australian Equal Weight ETF (-4.38%) rounded out the top five.
BetaShares’ BEAR hedge fund was negatively correlated to the performance of the A200, which saw it post a massive gain during March.
The Ex-20 fund invested in the ASX 200 minus the top 20 funds and Vynokur said that it had generated significant interest.
“That strategy has been quite popular with investors who want to be a little underweight in the Aussie banks because they’re dominating the top 20,” Vynokur said.
“Between Ex-20 and A200, those are very strong foundations for Australian equity allocation in a portfolio.
Best-performing Australian equity ETFs within the Australian equity sector over the year to 31
AUTHOR
Chris Dastoor
Recommended for you
Milford Australia has welcomed two new funds to market, driven by advisers’ need for more liquid, transparent credit solutions that meet their strong appetite for fixed income solutions.
Perennial Partners has entered into a binding agreement to take a 50 per cent stake in Balmoral Investors and appoint it as the manager of Perennial's microcap strategy.
A growing trend of factor investing in ETFs has seen the rise of smart beta or factor ETFs, but Stockspot has warned that these funds likely won’t deliver as expected and could cost investors more long-term.
ASIC has released a new regulatory guide for exchange-traded products (ETPs), including ETFs, on the back of significant growth in the market.
