Escaping the shackles of a benchmark
Most Australian investors benchmark their global equity portfolios to the MSCI World ex Australia index which in turn has encouraged fund managers to use this index as the starting point for building their portfolios, particularly in terms of setting risk controls for individual stocks or sectors and region limits. In contrast, we are firmly of the belief that investors who slavishly follow market-cap weighted indices are actually restricting the future potential returns of their portfolios, effectively leaving money on the table. In this short article, we outline our view on what investors should do to generate higher returns in global equities.
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