The knock on effects of the geopolitical and economic concerns surrounding Europe’s ‘financial mess’ should not stop Australians investing internationally, as the region is key for great opportunities, strong diversification and a well-balanced portfolio, according to State Street Global Advisers (SSGA).
The firm said European stocks had lower expected returns and higher expected risk than the rest of the world, but there were still ‘attractive individuals’ within the region that could be expected to significantly increase returns for Australian investors.
SSGA Asia-Pacific head of active quantitative equity, Olivia Engel, said that investors needed to remember that they were buying into companies, not countries.
“You may think the Eurozone is structurally flawed, but that doesn’t mean you can’t find great investments there,” she said.
“To reduce total volatility, we should look to construct a portfolio that explicitly aims to reduce total volatility. We believe that geo-political and economic concerns should not keep us at home.”
SSGA drew attention to a number of possible investments around the world if Australian investors were willing to go offshore. With opportunities of finding suitable investments and a broader range of possible outcomes, SSGA said that building a well-diversified, portfolio of good-quality stocks still should include strong European companies.
According to SSGA, their global equity strategy had seen benefits in the last month from holdings across Europe, including Netherlands supermarkets group Ahold, Italian oil company ENI and German manufacturer Henkel.
Despite Brexit, the SSGA Global Equity Fund outperformed the MSCI World ex-Australia Index after fees by 2.6 per cent last month.
