Van Eyk recommends global share markets

Australian investors who have had a home bias in recent years should increase their exposure to international equities, according to new research by van Eyk.

Overseas share markets offer “more opportunities for skilful investors to profit, with relatively attractive valuation levels and diversification benefits” head of research Dr Jerome Lander said.

Van Eyk’s annual International Equities Sector Review, which analysed 47 fund managers, found that the increased set of opportunities in global markets provided greater scope for superior fund managers to outperform.

“Australian equities tend to rely heavily on relatively few drivers of return, including commodity prices and interest rate expectations,” Lander said.

“International markets offer investors a wider opportunity set from more stock and sector diversity.”

Of the managers surveyed, 23 were considered competitive enough to progress through to van Eyk’s rating process, with Lander adding that van Eyk currently favoured growth rather than value investing, as better quantitative managers are currently out-competing traditional value managers.

The research also examined the underperformance of US equities, with van Eyk stating that in the long-run the region would continue to face “significant headwinds”.

Of the managers assessed, 10 received van Eyk’s AA or A rating, six received a BB, and an additional six were awarded a B rating.

“We predict the majority of managers we rate highly will again outperform the MSCI World Index ex-Australia over the medium term,” Lander added.