The argument for investing in Australian companies, and particularly smaller companies, is strengthening as they are expected to deliver strong returns as interest rates fall, according to fund managers.
Auscap Asset Management founder and Chief Investment Officer Tim Carleton said the Australia had outperformed the share markets of other developed nations over the last 100 years to produce annual returns of 11-12%.
“And really, if anything, we see the case for Australia strengthening it on a going forward,” Carleton said on an investment webinar.
“What I am very confident in saying is that, over our lifetimes, investing in Australian Equities will be a very fruitful endeavour.”
He said Australia was in an unusual and fortunate position with strong population growth, stable government, proximity to about three billion people emerging from poverty, a huge resource and land bank, private operation and the rule of law.
“All of these things really matter to business creation and the generation of long term return,” he said on a webinar about the Australian reporting season, the role of Australian equities in 2025 and philanthropy and investment management.
“So there may be hiccups, there may be periods where resources are weak or where the banks are struggling, but in the long run, there will be plenty of opportunities for companies that are based in Australia to deliver great returns for investors.”
Chris Stott, founder and Chief Investment Officer of small capitalisation investment specialist 1851 Capital, said the last Australian reporting season had been one of the most volatile he could remember.
He cited the example of medical imaging company Integral diagnostics (ASX: IDX) whose shares plunged 35% on the day it announced results that were only 3-4% below expectations.
“So the moves we've seen in response to results are as vicious as we've ever seen,” Stott said.
He also said small capitalisation companies had returned only 4% a year compared with 10% over the previous 30 years, but he was positively disposed to them, particularly as many were in consumer discretionary sector, which benefits from looser monetary policy.
Auscap and 1851 Capital are among the fund managers used by the Third Link Growth Fund, which invests in Australian shares and whose manager donates fees received net of expenses to charities.
