However, investors are likely to take this in their stride, given the returns seen from the market there in the recent past. Over a ten year period, the MSCI Australia index outperformed the majority of developed markets, returning 190.87 per cent in the period to 14 September 2010, according to Financial Express data, and this looks set to continue.
Performance of MSCI Australia index over 10-yrs
Source: Financial Express Analytics
The strong performance helped the country avoided the global recession, possibly due to its exposure to emerging market countries and the demand from the likes of China for raw materials such as iron ore needed to supply infrasturcture projects. Over the last three years, the country has delivered positive returns, with the MSCI Australia index returning 21.32 per cent, compared to the likes of North America which returned 5.01 per cent, Japan which returned 0.10 per cent and Germany where the index registeres a loss of 5.93 per cent.
Performance of the MSCI indices over 3-yrs
Source: Financial Express Analytics
Even over a one year period, the MSCI Australia index has continued to power ahead.
Performance of MSCI Australia index over 1-yr
Source: Financial Express Analytics
For UK investors looking to gain exposure to Australia there are a number of IMA UT and OEIC defined funds available. Unsurprisingly, data from Financial Express shows there are 219 funds with at least some exposure to the country. Of these, six have an exposure greater than 50 per cent including: the Baring Australia fund, the Fidelity Pacific ex Japan fund, the Schroder Pacific Institutional fund, the SWIP Asian Pacific fund, SWIP Absolute Return Bond and the Thesis Australian Natural Resources fund.
Performance of funds over 1-yr
Source: Financial Express Analytics
Of these six, one is the clear winner in terms of total returns over the last 12 months. This is the Thesis Australian Natural Resources fund, which is managed by Myles Campion.
Campion has a comprehensive background in all technical and financial aspects of the resource sector specialising internationally in resource evaluation, debt capacity modelling, mergers and acquisitions, project assessment and equity / convertible capital raisings. This follows a ten year career as an exploration and mine site geologist in Australia covering base metals and gold. He now works within the fund management team at Oceanic Asset Management.
Since taking over the fund in June 2008, Campion has been tasked with changing its dynamic away from an exclusive Australian stock exchange small cap structure, with associated liquidity constraints, to a more diversified and liquid structure. He has achieved this by allocating further up the market cap curve, but focusing on larger mid cap companies as opposed to mega cap ones and maintaining a high risk/reward small cap kicker tail which accounts for over 50 per cent of the stock numbers in the portfolio.
As the name suggests the Thesis Australian Natural Resources fund is predominantly a natural resources fund. It aims to achieve capital appreciation by active investment in a diverse portfolio of securities involved in the mining, extraction and/or processing of natural resources and associated operations and infrastructure.
The fund has its highest weighting to Sphere Minerals, Magma Metals, Woodside Petroleum and Newcrest Mining. The fund also has exposure to mining giants BHP Billiton and Rio Tinto.
Since launching in July 2005, the fund has returned 73.68 per cent to investors. Over the last 12 months to 14 September, the fund returned 32.98 per cent, over five per cent more than the next best performing Australia focused fund.
The fund sits in the IMA Specialist sector, which houses funds that are not accommodated by the mainstream sectors. It is therefore diverse in terms of constituents, and comparing individual fund performances can often be viewed as inappropriate. However, by means of comparison the sector returned 16.55 per cent over the same one year period.
The sector comprises of 118 funds and the Thesis Australian Natural Resources fund sits in 13th place over that period. In terms of volatility however the fund has taken on the most risk out of the five other funds previously mentioned over the last year.
Source: Financial Express Analytics