Our Investor Insights report found that Aussie investors are taking on more risk in their search for growth, increasing their exposure to global equities in lieu of Aussie equities. The report analyses data from the Equity Preference Index (EPI) - a proprietary measure of investor sentiment by age and gender developed by CFSGAM and the University of Western Australia Business School. Report author, CFSGAM Senior Analyst, Economics and Market Research, Belinda Allen, said; “With preference for Australian equities falling, there's been a clear and consistent uptick in applications for global equities, across all age groups. Even investors in the over 59 yr old bracket, typically in, or close to retirement, have also been investing additional funds into global equities. This is a big change from the past, when Aussie investors showed a significant ‘home bias’ to the Australian share market. Data suggests this preference for local shares has waned with the fall of the $AU dollar, and with good returns and diversification offered from global equities, a greater move to invest offshore is likely. Click (VIEW LINK) for the report.
I'm not sure if it's the intention of the author, but the first sentence seems to imply that overseas equities are riskier than Australian equities. This seems an odd view as it disagrees with the idea that diversification reduces non-systemic risk.
Patrick, thank you for your comment. Our intention was to note the change in pattern for Australian investors, who do appear to be looking at diversifying their exposure away from Australian equities. As the report shows, increased allocation to global equities, as well as a move to investment property hint at two ways investors are looking at bringing higher growth and diversification in to their investment and superannuation portfolios. These changes must be seen in the context of the historic home bias Australian investors have shown and that the investors in this report do not have a financial adviser. This risk we speak about is due to changing investment allocation, especially as well as some of these moves appear to be currency related given the universal allocation to global equities when the Australian dollar moved below parity against the US dollar.