Australian investors are advised to take a global view and should not be afraid of buying stocks of the European companies, despite the geo-political and economic concerns the region is facing, according to State Street Global Advisors (SSGA).
The investors were encouraged to focus on Europe despite Brexit and the region’s political and financial mess.
According to SSGA head of active quantitative equity, Asia Pacific, Olivia Engel, said that geo-political concerns should not keep Australian investors at home, although they should stay cautious while travelling.
“We should remember we are buying shares in companies, not countries. You may think the Eurozone is structurally flawed, but that doesn’t mean you can’t find great investments there,” Engel said.
Although she stressed that on average SSGA’s view of European stocks was for lower expected returns and higher expected risk, but there were still many attractive individual companies across the region.
“To reduce total volatility, we should look to construct a portfolio that explicitly aims to reduce total volatility, not tracking error against a cap-weighted benchmark,” she said.
According to SSGA, investors also were often anxious about their exposure to currencies but these risks could be reduced through hedging currency exposures.
“We believe that geo-political and economic concerns should not keep us at home. But we should be careful how we travel,” she said.
