Australia is living up to its nickname and turning out to be a ”lucky country” for South African investors, according to Stanlib.
The unit-trust company reports that its equity-focused Offshore Australia Fund continues to achieve strong returns on the back of commodity-driven economic growth and a year of consistent gains by the Australian dollar.
Paul Hansen, fund manager and Stanlib’s director of retail investing, comments: ”Precisely a year ago, the Australian unit was at R4,40 to the rand. It is now above R5,90, contributing to rand-denominated gains by local investors who have chosen this avenue for international diversification.”
The Stanlib Offshore Australia Fund recently won the Raging Bull award in the category for offshore Far Eastern equity general funds after clocking up three-year gains of 96,6% and a one-year return of 23,7%.
Since the end of 2006, the pattern of consistent gains has continued — good news for investors who have channelled their foreign investment allocations into this fund or transferred existing offshore assets into this vehicle.
Hansen notes: ”Some astute South Africans have spotted the fact that Australia is geographically well placed to benefit from the growth of the Chinese and Indian economies and their appetite for commodities.
”Experience these past three years confirms that Australia is a potential beneficiary of South-East Asia developments while offering a relatively stable environment, with somewhat lower levels of inflation and interest rates than those prevailing in South Africa.
”In other cases, fund inflows are driven by less strategic considerations. Some South Africans choose the vehicle because Australia is a place they want to visit or may emigrate to at a later stage or because some family members are already over there.”
By the end of February, the fund’s year-on-year return in rand terms had topped the 50% mark.
Says Hansen: ”Whatever the motivation for fund selection, recent performance indicates that Australia really can be a lucky country. But it is wrong to focus solely on one-year gains. Some long-term indicators also are also positive.
”For example, approximately 80% of foreign-capital inflows are long-term capital investments, while more volatile stock market inflows account for just 20%. South African FDI is the exact opposite, with our stock market attracting 80%.
”Our unit-trust investors are therefore diversifying into a market which may exhibit lower levels of volatility while benefiting from the Sino-Indian connection and a currency that for the last six years has maintained its value against the euro. These are good, solid reasons for supporting Australian equities — perhaps our investors are making their own luck.”