Getting back into the market
Christine St Anne  |  27/11/2012Text size  Decrease  Increase  |  
Christine St Anne: 2012 was a rather volatile year for many investors and cash was seen as the safe asset class to be in. Today I am joined by Westpac's David Simon, to talk about whether it's time to get back into the market. David welcome.

David Simon: Thanks, Christine.

St Anne: David, are you finding that your clients are starting to move a portion of their cash into other asset classes?

Simon: Yeah, certainly. Our clients are starting to look at alternatives rather than cash. Even though, a recent survey confirmed that people between the ages of 50 and 64, 47 per cent of them were actually concerned about the market and hence hold an allocation in cash because of the fact that they felt there was uncertainty in the markets. Once you account the current interest rates being continuing to fall as well as inflation and tax, they're certainly behind the (eight-ball). So, we are finding clients starting to move away from that asset class albeit slowly into alternatives.

St Anne: Do investors have more of a preference to equities and perhaps domestic equities?

Simon: Look, it's interesting. Clients are very aware these days, so it's all about being I suppose uncorrelated. So, clients – and certainly led through by advisors and media agencies and what have you. Consumers have become much more aware and investors are becoming a lot more smart and indeed cautious. So, the theory around correlation is quite prevalent when we are having discussions.
So that means that if you're going to be investing in equities that you're investing in alternative asset class that may perform when equities are not, such as fixed income. So, we are finding that clients are certainly moving away from cash, but into a much more traditional stock portfolio encompassing asset classes that are not particularly correlated, hence really reducing volatility, significantly reducing risk and ensuring that returns are a little bit more smooth.

St Anne: David, what are the asset classes are investors looking to boost their investment in?

Simon: So, as oppose to the big ticket ones and the big staples are suddenly equities and property, but we're finding that clients are much more engaged around fixed traditional core focused and defensive fixed interest assets, as well as alternatives such as commodities, gold and even sometimes foreign currency.
So, really investing in a basket of assets that again are not particularly correlated, so when one asset class performs, and the other asset class may underperform, equally ensuring that you haven't got all your eggs in one basket and trying to sort of dilute that unpalatable volatility.

St Anne: David, with interest rates easing, do you think that cash will be the darling asset class for 2013?

Simon: Look, Data Stream did a recent survey, and of the last 20 years cash-only was the best performing asset class in one of them and that was quite recent in 2008. Look I mean, it's not just that historical performance, but certainly for people that were investors that need excess growth, they need returns beyond inflation and tax, cash isn't going to get them there.

So, certainly investors are looking at alternatives that are going to be able to generate returns that are necessary and adequate for them to achieve their objectives, indeed if its retirees or just what the cumulative is seeking financial independence. People are looking for alternatives. Certainly, if they've got the appropriate timeframe, so at least five years, and if they've got the appropriate risk profile and ideology around accepting and handling volatility. Well then absolutely, alternative asset classes such as equities are certainly a lot more attractive than those of cash, which is more of the sit on the fence short-term investment.

St Anne: David, thanks so much for your insights, today.

Simon: Thank you.

Video Archive...

5 big market themes
30/06/2015  Investors should watch the velocity of rate increases, keep Greece in perspective, and mind diversification in a world with very few good values.
Where are the new global opportunities?
29/06/2015  Global fund managers discuss emerging opportunities beyond the local market.
3 key risks for retirees
24/06/2015  Accurium SMSF technical services manager Melanie Dunn discusses three factors trustees should be aware of as they move from the accumulation to the retirement phase.
What the Greek crisis means for investors
22/06/2015  With most of the debt now being held by institutions, contagion is no longer a concern, says Morningstar's Bob Johnson.
5 questions for a top bond manager
17/06/2015  PIMCO’s Rob Mead discusses interest rates, the global economy and where the best opportunities are over the next 12 months.
4 keys to fixed-income investing
16/06/2015  Morningstar's John Likos scrutinises the risks that hybrids, bonds and other forms of credit carry and suggest ways in which investors can choose quality assets.
Grading the fund investor experience
09/06/2015  Morningstar’s Anthony Serhan takes a look at the experiences of fund investors around the world.
Understanding valuation risk
09/06/2015  Morningstar Investment Management's Chris Galloway discusses the important role annuities can play within a portfolio, as well as the key risk faced by all investors.
Big banks: As good as it gets?
--  Perpetual's Paul Skamvougeras maintains his view on being underweight the banks while favouring stocks with sound balance sheets and good management.
Uncovering quality undervalued stocks
03/06/2015  Companies with sustainable earnings can still be found despite an expensive market, according to Ausbil’s Paul Xiradis.
Seeking income and growth
29/05/2015  Cash generating stocks with a focus on creating shareholder value can be found across the global universe.
Where are the best global opportunities?
29/05/2015  Platinum’s Andrew Clifford discusses where he is finding well-priced opportunities in the global markets.
Good values are harder to find
28/05/2015  A run-up in European stocks has left the region moderately overvalued, while Asia market valuations are even more stretched; according to Morningstar's fair value metrics.
A stock with a unique growth opportunity
25/05/2015  The largest law firm in Australia provides a good investment opportunity for long-term investors.
Growth prospects in emerging markets
20/05/2015  Emerging market guru Mark Mobius talks about bull markets and viable growth opportunities at the recent Morningstar Investment Conference in the UK.
Be selective, exercise caution
18/05/2015  While value may not seem to be in abundance there are still opportunities to be found in the local market, as Morningstar's Peter Warnes explains.
A better deal for retail investors
14/05/2015  Enduring dividend imputation is not abolished and fairer capital raisings are among the items on the policy agenda for the Australian Shareholders’ Association.
The growth outlook for Wesfarmers
11/05/2015  Wesfarmers' Richard Goyder talks about managing a diverse business and the growing number of "serious players" in the supermarket sector.
Big bank earnings wrap
08/05/2015  Morningstar's David Ellis gives investors the lowdown on the half-year results from Westpac, ANZ and NAB, as well as his view on CBA's trading update.
Where Buffett sees value
06/05/2015  Morningstar's Matt Coffina discusses Buffett's view of stock valuations, cost-cutting, and more while attending the recent Berkshire Hathaway annual general meeting.