POWERED BY MOMENTUM MEDIA
Mercer prefers global shares over bonds
Mercer has advocated that investors remain overweight position in global equity markets relative to overvalued bonds.
Head of Mercer’s Dynamic Asset Allocation team in Australia and New Zealand, David Stuart, said despite the shake-up caused by world events in the first quarter of the year, global equities had proved resilience. Mercer was advocating an overweight position in global shares relative to ‘overvalued’ bonds, he said
“With the exception of Japan, which has fallen nearly 10 per cent since our last report in January, major equity markets have delivered positive returns, led by the S&P500 rising 3.6 per cent. Given the backdrop of the Japanese earthquake, political turmoil in the Middle East and North Africa, resurgence of European debt worries and rising inflation pressures in major developing economies, this is a resilient performance and a promising sign for investors,” said Stuart.
He warned that the rally in the Australian dollar compared to a weak US dollar has left the Australian currency exposed. Mercer has therefore remained a medium term biased towards overseas currency-exposed assets which should remain overweight, he stated.
“With the Australian dollar at a post-float high against the US dollar close to US$1.10, we are currently experiencing a sweet spot of strong commodity prices and rising interest rate differentials. However, this strength will be hard to sustain once US interest rates begin to rise, and there are downside risks to commodity prices in the medium term,” said Stuart.
“This isn’t expected to happen until 2012, but if the US dollar turns, it could also impact commodity prices and put significant downward pressure on the Australian currency over the next one to three years. Therefore we have placed a very conservative valuation on currency, shifting from unattractive to very unattractive.”
AUTHOR
Caroline Munro
Recommended for you
Super funds had a “tremendous month” in November, according to new data.
Australia faces a decade of deficits, with the sum of deficits over the next four years expected to overshoot forecasts by $21.8 billion.
APRA has raised an alarm about gaps in how superannuation trustees are managing the risks associated with unlisted assets, after releasing the findings of its latest review.
Compared to how funds were allocated to March this year, industry super funds have slightly decreased their allocation to infrastructure in the six months to September – dropping from 11 per cent to 10.6 per cent, according to the latest APRA data.
TOP PERFORMING FUNDS
ACS FIXED INT - AUSTRALIA/GLOBAL BOND
Fund name
3y(%)pa
1
Spire Oaktree Opportunities XI Second Close
61.07 3 y p.a(%)
2
Spire Oaktree Opportunities XI First Close USD
59.21 3 y p.a(%)
3
DomaCom Lot 21 Chellaston Road Munno Para West SA 5115 Australia
31.73 3 y p.a(%)
4
Fidante Credit Suisse Global Private Equity
30.15 3 y p.a(%)
5
DomaCom 4/27 Crombie Avenue Bundall QLD 4217 Australia
26.71 3 y p.a(%)
