Despite global economic fears and low growth, investors need to break away from home biases.
So says Vincent Lépine, vice-president of global economic strategy (asset allocation and currency management) at CIBC Asset Management. If domestic investors choose only Canadian securities, he adds, they’re not likely to meet their long-term return objectives.
This was especially the case last year, he adds. During that period, if an investor kept all of his money in a balanced fund that was only invested in Canada, for example, he would have had a return of close to 0%, “whereas by adding exposure to the U.S. market, [he] could have benefited from the weakness of the loonie and strength of the U.S. dollar.”
But, while the U.S. market was the best bet for Canadian investors last year, says Lépine, adding global exposure is now key. These days, “The euro and Japanese yen have more upside. So those would be countries where you [could] try to get more exposure.”
By diversifying, he adds, investors can “get the excess returns that are possible via currency moves. The global currency war is expected to intensify […] It’s up to investors here in Canada to exploit [such] moves.”
Plus, “A lot of emerging markets look very attractive,” he adds. Investors must choose where to add exposure carefully, he notes. But once oil prices bottom and consolidate, regions such as Russia will offer opportunities.