Including a portfolio allocation to global franchise companies can complement the home bias and stock concentration exhibited by many SMSF investors, a specialist fund manager has said.
Lazard Asset Management portfolio manager and analyst Warryn Robertson told selfmanagedsuper most SMSF share portfolios predominantly consisted of the big four Australian banks and some local mining stocks, which made investing in global franchising businesses appealing.
Robertson said this was because global franchise investing, in particular Lazard’s approach to it, can offer SMSF members an additional dimension to their portfolios.
He pointed out the unpredictable nature of local bank and mining shares is one element that makes global franchising investing a compelling argument.
“We would argue that banks, insurers, miners and energy companies are not predictable, forecastable businesses,” he said.
“Insurance is one of the most competitive industries going around, banking is competitive in most countries, Australia has less competition, but it is still relatively competitive. And good luck predicting where the oil, iron ore and copper prices are going to be tomorrow, let alone in three years’ time.”
Given this assessment, he said Lazard’s approach to investing in global franchise companies provides a perfect foil for portfolios constructed in this manner.
“We will never own the four banks or any other bank. We will never own Rio Tinto or BHP or any other miner and while Telstra is a company we have liked at as a consistent performer, we haven’t included it in our portfolio,” he noted.
“So you’ll never have overlap and it’s a good complement from that perspective.”
He added the global nature of Lazard’s portfolio means the home country bias most SMSFs face can also be neutralised through global franchise investing.
“What our strategy does is dovetail very nicely to that home bias because we’re investing predominantly overseas,” he said.
The Lazard Global Equity Franchise Fund provides an opportunity for SMSF members to invest in businesses around the world with strong economic moats and business franchises that produce predictable operating performance.
The offering aims to deliver MSCI World Index-type performance with lower risk.
A key component of the fund is to provide better downside protection during bear markets.
