Zenith releases diversified sector report
Zenith Investment Partners has released its 2010 diversified sector report, which aims to address several sector specific issues identified by Zenith’s adviser client base such as home-country bias, term deposits and emerging markets.
Despite a strong local economy, a home-country bias was unlikely to be advantageous from a risk-adjusted returns perspective due to the market’s concentration in the volatile resources and financials sectors, according to Zenith investment analyst Graeme Miller.
While term deposits are a popular ‘risk-free’ form of income-focused investment, they may pose a risk to those looking to invest for income whilst maintaining a standard of living over a long period of time, according to Zenith.
The MSCI All-Country World Index is most relevant for the purposes of performance evaluation against emerging markets investment since managers are currently able to outperform MSCI World by including emerging markets exposure, Zenith said.
Managers need to ensure that defensive assets within a diversified portfolio are truly defensive, Zenith added.
“This issue is part of a broader industry problem of inconsistent naming conventions being used for managed funds,” Miller said.
Within the review Zenith reclassified funds based on their underlying portfolio data, so for example the Advance Balanced Fund was classed by Zenith as a ‘growth’ fund.
“This allows us to make more accurate comparisons between funds, and results in funds being categorised according to their defensive/growth asset allocation,” Miller said
The review classified three funds as ‘highly recommended’ and 22 as ‘recommended’ from an initial group of 109 diversified products.
Two funds from BlackRock, the balanced fund and the global allocation fund, along with Colonial First State Global Asset Management’s enhanced yield fund, were the three funds to be rated ‘highly recommended’.
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