Report reveals asset classes flip from top to bottom spots quickly, cautions investors who chase previous ‘winners’ to stay diversified

  • Analysis of returns reveals why balanced & growth funds fared relatively well in 2017
  • Annual report’s 20-years of hindsight supports value in diversification across asset classes

SYDNEY, 4 July 2018 — The 2018 Russell Investments/ASX long-term investing report flashes a caution to Australian investors who rely on a singular asset class to achieve their long-term investment goals. The 20th edition of this annual report—which offers a comprehensive comparison between the long-term returns of key domestic and global asset classes—finds Australian residential investment property clearly outperformed all other asset classed tracked and measured for both the 10-year and 20-year period. However, global shares (both hedged and unhedged) as well as global listed property fared better for the 10-year period to December 2017 than results for the previous year. Further, while showing a gain for the 10 years to December 2017, residential property returned 0.8% less for that 10-year period compared to last year’s results to December 2016.

“Looking deeper than today’s headlines on asset-class returns shows considerably more variation year on year, and our annual report offers investors greater insights that could benefit their investment-strategy choices and increase the likelihood of achieving desired outcomes,” said Scott Fletcher, client portfolio manager at Russell Investments in Sydney.

Fletcher added that the best and weakest performer among the asset classes measured changed significantly through the 20-year period. Residential property and global shares, for example, each flipped from the best-performing asset class in the group for a particular year only to rank in a subsequent year as the worst. Meanwhile, the multi-asset portfolio measure experienced a more consistently positive, smoother journey throughout the two decades.

The firm’s analysis of these annual returns concludes that an Australian investor who switched to follow the previous year’s ‘winner’ each year would have a portfolio 29% worse off compared to staying invested in a sample balanced fund throughout the 20-year period.

Other key findings in the annual report for the 10-year and 20-year periods include:

  • The rankings for each asset class change slightly on a net of fees and tax basis, but the overall picture is similar for the 10 and 20 years respectively.
  • Similarly, the gearing analysis shows Australian residential property outperforming Australian shares, with 50% leverage enlarging the differentials for both the lowest and highest marginal tax rates. For the 10-year period, gearing caused the levered returns from Australian shares to become negative for both tax rates due to the weak returns from Australian shares for the last decade.

The Russell Investments/ASX long-term investing report is available here.

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

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

With more than 80 years of experience, Russell Investments is a global investment manager, dedicated to helping investors reach their long-term goals. Russell Investments offers investment solutions in 31 countries, manages A$389.4 billion in assets (as of March 31, 2018). Russell Investments specializes in multi-asset solutions, scouring the globe to deliver the best investment strategies, managers and asset classes to its clients around the world.

Headquartered in Seattle, Washington, Russell Investments operates globally with 21 offices, providing investment services in the world’s major financial centers such as New York, London, Tokyo and Shanghai. For more information about how Russell Investments helps improve people’s financial security, visit www.russellinvestments.com/au.

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