Domestic returns stronger for sixth consecutive year

With commentators once again pointing to a further upturn in international equities in 2006, Mercer Investment Consulting has come up with a sobering reminder of the ongoing strength of the Australian share market and the manner in which this has driven strong double digit returns.

The ‘Mercer Investment Consulting Sector Survey Analysis’ for 2005 released this week, points out that for the sixth year in succession overseas share markets have been unable to match returns from the Australian share market.

“An investment of $10,000 in the local share market in January 2000 will have now risen to over $19,000,” the Mercer data said. “A comparable investment in unhedged overseas shares would have dropped by $8,500.”

The data confirms that the Australian share market posted its third double digit calendar year return in succession growing by 22.5 per cent, allowing Australian shares managers to produce the highest three-year calendar year returns since 1993 when the median rolling three-year return was 26.9 per cent.

It said that, in total, all but seven managers produced a return of 20 per cent or more for the year and the 2005 return had boosted the five-year number to above 10 per cent a year.

The Mercer data listed the top five performing Australian share managers through 2005 as being Austock, Independent, Merrill Lynch High Conviction and Ausbil. Austock rewarded investors with a return of 32.9 per cent for the year.

Looking at international equities, the Mercer data said overseas share markets had performed strongly listed by high commodity prices and positive economic indicators.

It said that for the fourth year in succession hedging of some overseas shares exposure would have been beneficial with the Australian dollar appreciating against all major currencies except the US dollar. It said that as a result, the unhedged MSCI World Index, excluding Australia, returned 16.8 per cent while the hedged version returned 18.7 per cent.

The top 5 performing overseas shares managers were Orbis, Alliance Research, Alliance Large Cap, Alliance Style Blend, Nicholas Applegate Selection. Orbis rewarded investors with a return of 33.2 per cent.