Russell Investments / ASX long-term investing report confirms ‘home bias’ hurting Australian investors

  • Report reveals value in global and alternative assets and strategies.
  • Amid shifting market fortunes, Russell Investments expands dynamic “real return” fund series. 

SYDNEY, 23 May 2016 — The 2016 Russell Investments/ASX long-term investing report underscores the danger of Australian investors relying on local asset classes to achieve their long-term investment goals. The analysis finds that domestic shares, bonds and cash yielded sub-3% returns in 2015 and Australian equities lagged overseas markets for the third successive year.

Other key findings in the annual report for the 10-year period through December 2015 include:

  • Most traditional asset classes have lost momentum due to the recent weak performance of core equity and bond assets.
  • Australian listed property and cash returned a meagre 1.7% and 3.1% respectively, compared to 7.3% from global fixed income and 6.2% from hedged global shares over the last 10 years.
  • Only residential property held its own at 8.0% per annum, making it the best performing asset class in 2015 over the 10-year period. However, in the fourth quarter of 2015, Australia as a whole posted a negative growth rate (-0.6%) in media property prices.
  • The typical real return objective of consumer price index plus 4% created a return objective of 6.6% per annum. Yet, a balanced managed fund, with a typical investment structure of 70% growth assets and 30% defensive assets would have only returned 5.7% per annum on a gross basis over the same timeframe.
“These findings, combined with local currency declines and interest rates reaching historic lows, provide overwhelming evidence that investors who continue to rely on the domestic ‘triple treat’ of Australian shares, currency and residential property are in for a shock,” said Pete Gunning, chief executive, Asia-Pacific, Russell Investments. “The factors that, for 20 years, drove above-market returns across the triple treat are no longer in play.”

In light of such trends, Gunning added it is time for local investors to consider diversifying domestic exposures with global asset classes as well as alternative assets and strategies.

“In a new era of lower returns, slower growth and higher volatility, investors need access to a wider and deeper set of alternative investment assets and strategies to reduce their reliance on traditional return drivers,” Gunning said. “Dynamically managed real return funds, for example, can help an investor gain exposure to both a more diversified investment opportunity set and quickly respond to changing market conditions.”

Commenting on the findings for ASX, Marcus Christoe, senior manager, Funds and Investment Products, said, “ASX is committed to helping Australian investors diversify their investment options by providing transparent and easy to access choices. Our ‘investment supermarket’ initiative offers exposure to a range of asset classes, both local and global, and helps investors achieve their long-term investment goals.”

Russell Investments expands “real return” fund series

While releasing the annual long-term investing report, Russell Investments also announced the extension of its suite of multi-asset offerings for Australian investors with the Russell Investments Dynamic Real Return Series. With a focus on outcome-oriented objectives, these funds provide investors with a means to achieve longer-term goals and maneuver with shorter-term agility through volatile markets, along with the added benefit of exposure to non-traditional investment opportunities.

“The 2016 long-term investing report highlights that unless investors take a radically different approach in today’s low-return, volatile market environment, many will be unable to grow their assets sufficiently to meet their retirement or wealth-oriented goals,” said Andrew Sneddon, senior multi-asset portfolio manager at Russell Investments. “While we’ve offered multi-asset solutions to Australian institutional investors for 30 years, our ‘next-generation’ dynamic real-return solutions available in London and New York have only recently become available to individual investors in Australia. The low-return, volatile investment environment that lies ahead makes dynamic, real return solutions critical to achieving retirement or wealth-oriented goals.”

Sneddon added that the firm’s dynamic, multi-asset approach in these real-return solutions provides Australian investors with access to traditional and non-traditional asset classes—including real assets, alternative yield sources and absolute return investment strategies—that are not otherwise accessible to the individual Australian investors.

The dynamic real return series includes:

  • Russell Investments Multi-Asset Income Strategy Fund: Aims to provide a return (after fees and costs) of 2% above inflation over the short-to-medium-term, with a focus on income and risk management.
  • Russell Investments Multi-Asset Growth Strategy Fund: Seeks to provide a return (after fees and costs) of 4% above inflation over the medium-to-long-term, with a focus on risk management.
  • Russell Investments Multi-Asset Growth Strategy Plus Fund: To provide a return (after fees and costs) of 5% above inflation over the long-term, with a focus on risk management.
These funds—diversified across a range of asset classes with an actively managed asset allocation policy—feature the following characteristics, all managed by the firm’s global multi-asset team:

  • Outcome-oriented.
  • Broad perspective from accessing enhanced best-of-class investment opportunities via the firm’s world-leading manager research process.
  • Dynamic asset allocation: Wide trading bands allow managers to change asset allocation quickly and significantly to seize opportunities and respond to market volatility.
  • Limited downside risk: A sophisticated toolkit minimises unnecessary investment risks and limits negative returns.
  • Global expertise.
“With the dynamic real return series, an investor can add a new level of investment sophistication to their portfolio for smoother return streams while limiting downside risk,” Sneddon said. “In a low return environment, no investor can afford to take risks that don’t deliver financial results or implement strategies inefficiently. We believe these funds will provide greater assurance to investors who require more stable returns.”

The historical Russell Investments/ASX Long-Term Investing Report is available upon request at
https://russellinvestments.com/au/insights/russell-asx-long-term-investing-report

For more information on the real return funds, please go to
www.russellinvestments.com/au/real-returns/overview

About the Russell Investments/ASX Long-Term Investing Report

The Russell Investments/ASX Long-Term Investing Report is the only widely available report that provides Australian investors with a comprehensive and factual comparison between the long-term returns of Australian residential investment property and key domestic and global asset classes - such as shares, fixed-interest investments and diversified managed funds. The report also takes into account the impact of tax and gearing as well as the benefits of investments held within the superannuation system.

About the ASX Group

ASX operates at the heart of Australia’s financial markets. It is one of the world's top 10 exchange groups and is a global leader in A$ and NZ$ financial markets. ASX is a fully integrated exchange across multiple asset classes, including equities, fixed income, derivatives and managed funds. It services retail, institutional and corporate customers directly and through Australian and international intermediaries; and offers services that allow its customers to invest, trade and manage risk, including listings, trading, post-trade services, technology, and information and data services. ASX operates and invests in the infrastructure that promotes the stability of Australia's financial markets, and which is critical for the efficient functioning and growth of the economy and position in the Asia-Pacific region. ASX advocates regulations that support end-investors and market integrity, and which strengthen Australia’s competitiveness. More information about ASX is available at www.asx.com.au.

About Russell Investments

Russell Investments, a global asset manager, is one of only a few firms that offers actively managed multi-asset portfolios and services that include advice, investments and implementation. Russell Investments stands with institutional investors, financial advisors and individuals working with their advisors—using the firm’s core capabilities that extend across capital market insights, manager research, asset allocation, portfolio implementation and factor exposures— to help each achieve their desired investment outcomes.

Russell Investments has AUS$321.5 billion in assets under management (as of 31/3/2016) and works with more than 2,500 institutional clients, independent distribution partners and individual investors globally. As a consultant to some of the largest pools of capital in the world, Russell Investments has $2.2 trillion in assets under advisement (as of 30/6/2015). The firm has four decades of experience researching and selecting investment managers and meets annually with more than 2,200 managers around the world. Russell Investments also traded more than $2 trillion in 2015 through its implementation services business.

Headquartered in Seattle, Washington, Russell Investments operates globally, including through its offices in Seattle, New York, London, Paris, Amsterdam, Milan, Dubai, Sydney, Melbourne, Auckland, Seoul, Tokyo, Shanghai, Beijing, Toronto, Chicago and Milwaukee. For more information about how Russell Investments helps to improve financial security for people, visit  https://russellinvestments.com/au/  or follow @Russell_News.



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First Used: May 2016
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