Comment on performance
Overseas equities have, over the long-term, generally offered similar returns to Australian equities. The Fund receives no franking credits from investments in overseas shares, but may receive some withholding tax credits.
Comment on risk
Sharemarkets go up and down, but generally trend upward over the long term. The risk associated with oversease equity investments is linked to international economic trends, interest rate movements, political change, consumer spending, employment levels, inflation, investor confidence - a complex mix of financial measures.
The long-term upward trend for sharemarkets is due to the growth in the capital value of companies. The risk, of course, is that some companies can shrink or disappear. That is why your share investments should diversify across a number of companies and industry sectors.The Diversified investment options and several Sector Specific options offer this diversification.
With overseas equities, there is the added potential for volatility caused by fluctuating currency exchange rates^. If you are investing in overseas markets in Australian Dollars, the value of your investment will decline if the Australian Dollar’s value increases substantially against other currencies. Of course, the opposite is true if our Dollar’s value declines.
To offset this risk, some super funds hedge against currency fluctuations. Generally, Equipsuper’s overseas shares investments are partially hedged, but from time to time this may change depending on our assessment of likely currency movements. This may mean you have substantial exposure to the Australian Dollar’s value on currency markets. A large proportion of Equipsuper’s overseas shares portfolio is invested in the world’s largest sharemarket, the US. However, in recent years, the Fund has invested a higher proportion in other markets, including so-called emerging markets in Asia and South America.
The long-term growth of shares makes some investment in overseas equities an important part of an investment strategy extending over five years or more. You may experience some years of zero or even negative returns in overseaes equities but, if you can invest over time, they will generally deliver a positive return.
