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Global allocation should be significant

In the context of investing in global opportunities, SMSF portfolios should have a greater proportion of their fund exposed to overseas assets, a chief economist has said.

In a new video for AMP Capital’s SMSF Community, AMP Capital chief economist and head of investment strategy Shane Oliver said: “At the end of the day, there’s no definitive answer because it depends on your circumstances and, of course, that requires some sort of debt consideration in terms of what sort of risk you want to take on and what assets you want to be in and how much you want to have overseas.

“But looking beyond that, if you go back say 30 years ago, a typical Australian investor via their superannuation had virtually zero exposure globally, and as time has gone by, the deregulation and the opening up of markets [meant that] we progressively [invested] more in global shares.

“If you were looking at this purely clinically, you’d probably have no more than 2 per cent of your assets in Australia.”

However, Oliver warned that would be an extreme outcome as it assumed 98 per cent should therefore be allocated offshore.

“By the same token though, we do live in Australia and that’s where our liabilities are; we get revenue from our investments and work to finance spending in Australian dollar terms so therefore it does bias us to have a bit more exposure to Australian assets than just 2 per cent,” he noted.

“So my feeling is that it does require debt consideration, but the exposure you should have overseas is probably not as high as 98 per cent, but it should probably be a relatively significant number.”

He said the reason SMSFs should have a significant proportion of overseas exposure was simple.

“And that is, don’t have all your eggs in one basket,” he said.

“Yes, have a bit of a bias towards Australian shares, it’s much easier to transact in Australian property and Australian bank deposits, but by the same token also make sure you have a decent exposure to global shares because that provides you with some diversification – and global assets generally, not just shares like listed real estate, infrastructure and other assets offshore.

“Have that exposure there because it gives you diversification if things go wrong in Australia.

“There’s no definitive answer in terms of a precise percentage amount, but I think by and large, Australians should generally have more in overseas assets than they currently have.”

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