As we all know, fashions in the equity markets come and go - previous "strong buys" include emerging markets in 1993, European shares in 1994, technology stocks in 1999 and hedge funds today.
Monday, September 6th 2004, 8:31AM
by The Landlord
Although investment fads get a lot of press, in practice the collateral damage is usually limited to a minority of investors who are either inveterate followers of fashion or had the bad luck to deal with a particularly excitable adviser.
But underlying the dalliances described above has been a concerted move during the past 20 years or so by institutional and retail investors to invest more of their equity funds overseas.
Until recently, an offshore bias was reinforced by an analysis of past returns - many local equity databases go back only until 1986 or so and, in the 10 years ended 1995, New Zealand shares returned 4 per cent per annum versus 11 per cent for the S&P 500.
But the bad press for local shares didn't stop there. Not only were they underperformers, they were also more risky - the NZ sharemarket's volatility was double that of the United States.
From the perspective of the fund manager in much of the 1990s, local shares offered the worst of both worlds - low returns and high risk.
