Should Australians take their investments global?
Money Management looked at the equity sectors outside of Australia to see whether Australian equity investors should consider going global or stick to their own turf.
Australian equities have long been a key component of many investors’ portfolios, with FE Analytics allocating the funds in the ACS Equity – Australia sector a three-Crown average.
Of the 244 funds in the sector, over a three-year time-period, 126 beat the S&P ASX 200 benchmark and 69 sat in the top quartile for returns.
But, at a macro level, the equity sectors outside of Australia have managed to produce better returns over a three, five and ten-year time frame.
The table below shows the average performance of the Asia Pacific ex Japan, Asia Pacific Single Country, Europe, North America and Australian equities over a one, three, five and ten-year time frame.
Although Australian equities look like they’re making some ground, history suggests it might be time for investors to look for the best opportunities globally.
In the year to date, Australian equities have produced average returns of 12.77 per cent, which places them in the second quartile for this period. Over the longer term, Australia has placed in the third and bottom quartiles with returns of 7.19 per cent over three years, 9.31 over five years and 5.76 over ten years.
North American equities sat in the top quartile for returns over all time frames, with a solid year to date with average total returns of 20.16 per cent. The Asia Pacific ex Japan sector also sat in the top quartile over all time frames, producing returns of 16.21 per cent in the year to date.
Over five years, of the 15 funds in the sector, over half managed to sit in the top quartiles, with big names like BetaShares, BlackRock and VanEck producing top quartile returns.
The chart below shows the performance of the global giants compared to the sector over a five-year time period.
Fifty per cent of funds in the Asia Pacific ex Japan sector sat in the top and second quartiles, with 10 funds outperforming the sector over a five-year period.
Among the five top-quartile funds were Fidelity’s Asia fund, the Schroder Asia Pacific fund and BlackRock’s iShares Asia.
The chart below shows the performance of the top-quartile funds in the sector against the sector average.
European equities sat above Australian equities over a three, five and ten-year period, but returns fell to 7.80 per cent in the year to date.
The Asia Pacific Single Country sector outperformed the Australian equity sector over a ten-year and five-year period but dropped over three years to the bottom quartile at 6.22 per cent returns, and third quartile at 10.83 per cent over the year to date.
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