Sovereign debt no longer a safe haven
The emergence of sovereign debt issues in Greece and other European economies has had the upside of making Australia a safe haven for investors, according to new research released by Russell Investments.
The Russell research paper argues that sovereign debt can no longer be viewed as a uniformly safe asset class, but it includes Australian bonds among the assets that hold a safe haven status.
It said that an exposure to sovereign debt not needed to be monitored with the same vigilance as more risky investment such as corporate credits.
Commenting on the research, Russell Investments portfolio manager for Australasia, Clive Smith said investors using sovereign debt as a risk-free anchor in a balanced portfolio should cast a critical eye over many global bond issues.
“The recent events in Greece and Dubai have shown that in the future, investment managers will need to have the resources to properly identify the risks inherent in investing in sovereign debt,” he said.
“As public debt is continuing to grow in many countries the problem is not going to go away any time soon,” Smith said.
He said that active management of exposures within portfolios would be paramount to properly managing the risks inherent in sovereign debt, with ‘set and forget’ being a thing of the past.
AUTHOR
Mike Taylor
Recommended for you
Results are out for the latest sitting of the ASIC financial advice exam, with the pass rate falling for the second consecutive sitting.
Adviser losses for the end of June have come in 143 per cent higher than the same period last year, and bring the total June loss to over 350.
ASIC’s enforcement action is having an active start to the new financial year, banning a former Queensland financial adviser for 10 years in relation to fees for no service conduct.
ASIC has confirmed the industry funding levy for the 2024–25 financial year, and how much licensees can expect to pay.
