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Do Traditional International Share Portfolios Solve the Problem of Sector Concentration Risk?

Sam Stobart, Head of Distribution

The prevailing advice for Australian investors looking for investment opportunities in recent years has been to look offshore. Home country bias is particularly prevalent in Australia; self-managed superannuation funds (SMSF’s), according to the ATO, hold over a third of their assets in Australian equities and less than 1% in direct international shares. Given the dominance of domestic banks and resources, this creates enormous sector concentration risk which the advice to diversify internationally should surely counteract; and yet the traditional approach may create as many problems as it solves.

The question arises then: not should Australian investors invest offshore, but how?

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