Go overseas, go unhedged: FT experts

By Vikram Barhat | July 22, 2010 | Last updated on July 22, 2010
2 min read

With the loonie at its strongest consistent place in the last two decades, now is a great time for Canadian investors to put it to some good use, preferably outside Canada, said experts at Franklin Templeton today at the Investment Outlook and Opportunities Forum 2010.

“The Canadian dollar in the last couple of years has been at a 20-year high,” said Bradley Radin, executive vice president, Templeton Global Equity Group. He was speaking at a special panel discussion where global investment experts discussed world economy in the context of unique engines of global growth. “Now is a great time to take some of this money off the table and put that high Canadian dollar at work by buying cheap stocks overseas.”

The steadily soaring loonie is prompting experts to suggest some bold measures. Forget currency hedging and dive right in seems to be the new investment mantra.

“Foreign currency exposure is only a tiny slice of (Canadian investors’) overall financial picture,” said Radin asking investors to go unhedged. “Additional diversification through being unhedged is actually good for most Canadians right now.”

Similar beliefs about global exposure are held by Don Reed, president and chief executive officer, Franklin Templeton. “Canadians agree: it’s time to invest and increase global exposure,” said Reed. “Among Canadians, the bulls outnumber the bears almost three to one. And more than twice as many investors see opportunity in markets outside Canada.”

Publicly listed global equities make up 78% of the Canada Pension Plan’s equity portfolio. Clearly, FT investment experts’ outlook finds credence in the global sentiment of Canada’s major institutional investors.

The investment portfolios of individual investors, however, continue to show significant home-country bias, according to the firm’s latest national research made public today at the forum.

The survey also found 70% of Canadians tended to act emotionally while making important investment decisions. Many investors find it hard to describe their feelings; they get caught up in market buzz, feel anxious or reluctant, and get easily swayed, said the report.

“Canadians’ investment personalities have been remarkably constant after the market meltdown of late 2008, and that’s why the recent drop in suspicion is significant,” said Reed. “They need independent, rational advice if they want to meet their investment objectives. Financial advice is the key to building long-term wealth and meeting investment goals.”

The professionally moderated panel of experts discussed unique opportunities and strategies that allow investors to benefit from world growth; from varying investment styles and market caps in stocks, to employing sovereign credit, interest rate and currency strategies in fixed income.


Vikram Barhat