David Llewellyn-smith is Chief Strategist at the MacroBusiness Fund which is currently allocated 70% offshore so he is unquestionably talking his book. The MacroBusiness Fund has been put together to help readers of the blog take advantage of its themes and put the power of MacroBusiness to work in their portfolio. You can invest directly in the local or international share portfolios or let us determine the appropriate risk mix between them and other assets for you. To find out more click here.
Via Domainfax:
An analysis of 586 large long-only funds managing $1.4 trillion shows money managers are decidedly underweight Australian shares, making the ASX the most underweighted index in the region for the third month in a row, according to Bank of America Merrill Lynch.
The disproportionate composition of the ASX200 – comprising largely banks and resources companies – has investors facing a period of stifled earnings growth.
“Two-thirds of the Australian market is now suffering from structural impediments,” Matthew Sherwood, head of investment strategy at Perpetual, said.
“While the next way for interest rates to go is up, it’s the single-digit earnings growth plaguing the miners and the banks that will keep the ASX range bound in the near future.”
…Australia’s largest mining corporates have enjoyed investor support as iron ore – Australia’s largest export – hovered at surprisingly high levels, but in recent weeks the sheer amount of global supply and concerns over Chinese demand have seen high-grade ore slide back in price.
Global investors are wary of buying up ASX-listed stocks with greater exposure to a slumping iron ore price.
Too right. That’s why the MB Fund is allocated mostly offshore. Here are the three main fund’s unofficial returns since inception (0fficial returns will be delivered in due course). For international only shares (which are overweight US) we’ve slightly under-performed the MSCI World index (owing to the recent oil rally which we are underweight):
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For Australia only shares (which are weighted away from banks and resources) we are significantly out-performing the index return of 0.8%:
And the blended “growth” portfolio (which includes bonds and cash too) is well above benchmark:
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The AUD rose over the period but even so offshore equities are doing well (though our Aussie portfolio is out-performing thanks to avoiding banks and miners!).
We remain comfortable with the view that the Aussie dollar will fall a long way ahead as the great Australian adjustment grinds on, and on…and being offshore also provides a natural hedge against the local bubble or international trouble.
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