Shortage of Capital or Looking in the Wrong Place?
A shortage of capital is widely spoken of as a reason for poor investment returns within the resources sector. According to the Australian Bureau of Statistics, Australian households put aside $88.8 billion in net savings over the year to June 2015. As the chart shows, this amount of savings (indicated by the red line) remains near a record for Australian households. A low savings rate is not the cause of a sector funds shortage. Ample savings mean the industry’s returns are inadequate or it is not communicating its investment attributes effectively. My London Mines and Money presentation is suggesting both influences. Structural changes in savings flows over the last decade mean new investment gatekeepers. Meanwhile, the industry is still trying to talk to the people it was addressing 20 years ago. But guess what; they are all 20 years older with different investment priorities. Twenty years ago, brokers were keen to find interesting new companies. Nowadays, a financial adviser (who is gatekeeper for a rising share of savings) will be counselled by a compliance manager for doing the same.
John Robertson is Chief Investment Strategist for PortfolioDirect a provider of resource sector investment stock ratings and portfolio strategies for mining and oil and gas investors. He has worked as a policy economist, corporate business...
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