Lonsec looks at global shares

Lonsec has shifted its strategic asset allocation weights for traditional balanced risk profile, with the majority of the recommended equity allocation now tilted towards global shares.

In its "Strategic Asset Allocation Review", the company revised down its long-term expected returns across most asset classes.

Lonsec Investment Solutions chief investment officer, Lukasz de Pourbaix, said that given the current outlook, a higher global allocation was appropriate and that investors should look abroad to maximise the benefits from diversification.

"Australian equities represent only a very small part of the global equity market capitalisation and are predominantly concentrated in the financials, energy and materials sectors," he said.

"The main drivers of this decision were the reduced risk and return benefit offered by domestic shares relative to global shares, as well as the diversification benefits achievable through a global allocation."

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At the same time, across Lonsec's non-traditional risk profiles, including alternative assets, increases were made in global fixed interest and diversified income weights across the defensive and conservative risk profiles, funded by reductions in conservative and alternative assets.

"The main benefit of alternative assets is they tend to have a lower correlation with traditional asset classes. But investors need to ensure that they are using the right alternative strategies for their investment objectives,"

"Given the current outlook, we felt a slightly lower allocation to conservative alternative assets was appropriate for the defensive and conservative risk profile," de Pourbaix said.