Global equities – a sector you can’t afford to ignore

The runs are on the board over the long haul – global equities exposures have rewarded investors over the past decade.

It has long been accepted that Australian investors tend to be overweight to domestic equities but over the past decade a healthy exposure to international shares would have delivered significant dividends.

As our reporter, Laura Dew, notes elsewhere in this guide, there was a significant benefit in looking at global options over the past 10 years, with global funds outperforming their domestic counterparts over both three and 10-year periods.

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Australian equity funds have, of course, been marginally stronger performers over the past 12 months largely due to the uncertainty created by the US/China trade war and the continuing volatility around Brexit.

Over the year to 30 September, 2019, the average global fund returned 7.1% versus returns of 8.8% by ACS Equity – Australia. However, this needs to be weighed against the average global fund returning 42% over three years versus average Australian sector performance of 32%. 

Perhaps more importantly, looking at a decade of performance, the ACS Equity – Global sector has returned 169% compared to 101% by the Australia sector.

The question for financial advisers is ultimately going to be how much exposure is appropriate for particular clients given the current uncertainty being driven out of the US and, indeed, a number of the fund managers interviewed for this guide acknowledge the complexity and the challenges.

However, with Australian equities equating to just 2% of the global listed market, global exposures will continue to represent a fundamental part of any well-balanced investment portfolio.

The 10-year performance of global funds suggests that while some uncertainties remain, some astute selection will generate rewards.

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