SMSFs lead institutional investors in allocations to emerging markets

Self-managed super funds (SMSF) are leading the way in Australian investment into non-traditional emerging markets, according to East Capital Asia chief executive Michael Hanson-Lawson.

Super funds were largely governed by consultants and likely to allocate between 1 and 2 per cent to emerging markets, he said, with the funds likely to be invested in Asia.

But SMSFs were more flexible and willing to place larger allocations to emerging markets, Hanson-Lawson said.

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He said advisers to self-managed super funds he had recently spoken to had allocated between 3 and 10 per cent to emerging markets.

"I think these groups are ahead of their time and most people feel the allocation here [Australia] may be 1 or 2 per cent to emerging markets, but over time that's probably going to grow," he said.

East Capital last month launched a fund focusing on the Russian domestic market. It has over 20 years history in the region and now invests in 24 countries. Hanson-Lawson said it was the largest fund manager in the area.

Despite the Russian state maintaining control of largely "inefficient" banks, oil and utilities industries, Russia's domestic economy delivered good returns and had a promising long-term future off the back of high incomes and high levels of university education he said.

He said inflation, interest rates and mortgages were low. Due to government policy many people owned their own homes and so had low levels of private debt.

Wages were three times higher than pre-Putin levels and 68 per cent of the country was considered middle class in a World Trade Organisation study on the BRIC countries (Brazil, Russia, India, China) two years ago, according to Hanson-Lawson.

"Over time these economies are going to grow, they're going to be much bigger in the world economy, allocations are going to have to grow, it's a matter of time if you're looking longer term," he said.




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