With the all ordinaries being so tilted toward banks, resources, supermarkets and telecoms it’s difficult to see much scope for outperformance in the medium term. Meanwhile strongly growing industries such as food processing, technology, payment services, branded consumer products and sophisticated financial services are hardly visible on the ASX. Sure we have Cochlear Limited (ASX: COH), CSL Limited (ASX: CSL), Macquarie Group Ltd (ASX: MQG) Computershare Limited (ASX: CPU), and Amcor Limited (ASX: AMC), however these are all standout businesses and not representative of their domestic industry sectors.
Of course this is partly due to the size of the Australian economy – however smaller economies such as Norway, Sweden, Denmark and Switzerland have managed to develop their own industrial signatures despite high standards of living and highly developed social security systems – they have concentrated on quality. Not to mention New Zealand with its successful inroads into the Asian food markets.
Domestic investors have a problem if they don’t find much value in some blue-chips – do they focus on some of the locally listed innovative smaller companies and invest directly into offshore heavyweights? Although purchasing offshore shares is a simple enough business, many investors find the lack of franked dividends an inhibition and simply don’t want the trouble anyway.
You can find a number of listed or unlisted offshore equity funds – and this is one solution for those seeking geographic diversification. Although there are a number of quality investment managers offering overseas diversification through their funds one stands out for its broad global exposure to equity, real estate and alternative assets.
Henderson Group plc (ASX: HGG) was created in 2003 following a demerger from AMP. Listed on both the London Stock Exchange and the ASX, Henderson is now one of Europe’s largest asset managers. Areas of expertise include European equities, global equities, fixed income and alternatives such as absolute return funds.
Over a three-year period 82% of funds have outperformed benchmarks, enhancing Henderson’s reputation as a superior manager. Funds under management are split approximately 50% retail, 50% institutional. Overall operating margin is a healthy 35.7%.
Growth strategies underway include greater emphasis on Asia with the transfer of the Asian equities management team to Singapore; further development of the American presence; joint venturing property interests with a large North American retirement fund and adding depth to alternative asset funds.
Henderson Group ($4.52) is selling at 17 times forward earnings and an unfranked yield of 3%. With Europe yet to get its house in order there is a degree of uncertainty with this stock. However it’s interesting to note that many European shares still offer significant value when compared to our own market.
Buying into the manager of assets rather than the assets themselves can be rewarding for investors as you are effectively sharing in the performance of a diversified portfolio without having to purchase the individual components. With risk management being an essential part of a proactive investment strategy, it’s now important to have an offshore bias in your portfolio. Shares such as Henderson Group are a good first step in achieving this.