Russell Investments/ASX 2017 long-term investing report: Australian investors face five key threats to wealth creation
- Residential property was top performing asset class, but now carries significant risk.
- Annual report reveals value in a globally diversified, multi-asset investment approach.
SYDNEY, 28 July 2017 – The 2017 Russell Investments/ASX long-term investing report shows the risk for Australian investors who steadfastly rely on a singular asset class to achieve their long-term investment goals. The 19th edition of this annual report, which offers a comprehensive comparison between the long-term returns of key domestic and global asset classes, finds Australian shares underperformed residential investment property, global bonds (hedged), Australian bonds and global shares (hedged) per annum for the 10-year period through December 2016. However, revealing the changing fortunes of asset classes over time, the 20-year period through the same end date shows Australian shares outperformed both global shares and bonds.
“The report’s findings show why more savvy investors are considering diversified multi-asset strategies—designed to efficiently capture new sources of return opportunities—to help build their long-term wealth,” said Pete Gunning, chief executive, Asia-Pacific, Russell Investments. “These performance trends of key asset classes, particularly when combined with our strategists’ view that many markets globally are overvalued, should give investors ample reason to revisit their retirement portfolio exposures.”
The firm’s analysis of the findings identifies five current threats to wealth creation for Australian investors, particularly those who rely on a singular asset class such as Australian shares: 1) Rear-view mirror investing, 2) lack of portfolio diversification, 3) reliance on residential property, 4) investing in over-priced traditional assets and 5) ‘setting and forgetting’ an investment portfolio.
Key findings in the annual report for the 10-year period through December 2016 include:
- Only residential property, global bonds and Australian bonds exceeded a typical balanced fund target.
- Many growth assets disappointed, including Australian shares and hedged global shares. Both fell further away from the leading asset classes for the period: residential investment property, global bonds (hedged) and Australian bonds.
- While Australian property was once again the top performer, this asset class showed a slight decline from last year’s report with dwelling approvals declining. In Russell Investments strategists’ view, the residential property market is overheated and carries significant stock-specific risk with wide variation between regions, dwelling types and suburbs.
Considering long-term trends identified by this annual report, Gunning added it is long past time for local investors to consider diversifying domestic exposures with global asset classes as well as alternative assets and strategies.
Commenting on the findings for ASX, Andrew Campion, Senior Manager, Investment Products, said, “The most recent update of the long-term investing report highlights the need for Australian investors to diversify their investments, as well as consider the impact of costs such as fees and taxes on their ability to obtain their long-term investment goals. ASX provides an avenue for investors to achieve these goals, by offering an ‘investment supermarket’ of products such as ETFs and mFunds, which enables exposure to a broad range of asset classes and geographies.”
Similarly, Tim Cook, director, Consulting, at Russell Investments, said, “In an investing environment facing lower returns, slower growth and overvalued markets, we believe investors need access to a wider and deeper set of alternative investment strategies to reduce their reliance on traditional return drivers. Otherwise, many will be unable to grow their assets sufficiently to meet their retirement or wealth-oriented goals.”
Mr Cook added that 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.
The Russell Investments/ASX Long-Term Investing Report is available upon request at https://russellinvestments.com/au/insights/russell-asx-long-term-investing-report
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. 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
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, offers multi-asset portfolios and services which 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. The firm has more than USD $258 billion in assets under management, with USD$123.7 billion in multi-asset solutions (as of 12/31/2016).
Headquartered in Seattle, Washington, Russell Investments operates globally with 21 offices, providing investment services in the world’s major financial centers such as London, Paris, Amsterdam, Sydney, Tokyo, Shanghai, Toronto and New York. For more information about how Russell Investments helps to improve financial security for people, visit https://russellinvestments.com/au/
Issued by Russell Investment Management Ltd ABN 53 068 338 974, AFS Licence 247185 (RIM). This document provides general information only and has not been prepared having regard to your objectives, financial situation or needs. Before making an investment decision, you need to consider whether this information is appropriate to your objectives, financial situation or needs. This information has been compiled from sources considered to be reliable, but is not guaranteed. This document is not intended to be a complete statement or summary. Copyright © 2017 Russell Investments. All rights reserved. This material is proprietary and may not be reproduced, transferred, or distributed in any form without prior written permission from Russell Investments.
First Used: July 2017.