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May 30th, 2013

The benefits of global investing

 

Events over the past few years have left little doubt in all our minds: The world is becoming very small.  Our portfolios are increasingly embedded in the very fabric of the modern world.  Investors now share risk on an unprecedented global scale.

Global events can have a ripple effect on global financial markets, and ultimately investors.    The rate-rigging scandal that engulfed global banks, the disastrous fire in Bangladesh, the global mobile phone wars and the emergence of the developing countries as investment powerhouses can impact investors’ risk appetite and asset allocation mix.

The largest downside risks have arguably shrunk over the past year: the intensity of Europe’s crisis has eased, China has engineered a soft landing and U.S. political dysfunction has diminished. Headwinds remain and there are still many hurdles to overcome before the global economy is fully stabilized.  It is clear, however, that investor sentiment globally is changing and what is emerging is a picture of growing investor confidence. As we move through the second quarter of 2013, there is a growing consensus that the global recovery is gathering pace.

In scanning the horizon, some pertinent questions arise: Do I continue to explore investment opportunities?  How can I capitalize on an environment where global investor confidence is growing?  What are my options?

Global investing, which combines a mix of securities, primarily in equity and fixed income in a single portfolio, can open the door to investment opportunities worldwide.  The key to global investing is to ensure that your portfolio is well diversified and can be done through a mutual fund, which typically involves building a diversified portfolio of stocks, bonds and cash or short term deposits. 

Such asset class diversification allows investors to limit their risks by reducing the effect of a possible decline in the value of any asset class or security, so if one asset class or security underperforms the others can offset the impact. This allows you to diversify your investment without the hassle of buying directly into a particular stock or bond. UTC’s asset management experts can assist investors by mitigating risk and allocating assets in line with the level of risk they are willing to take.

Diversification involves not only investing in equities but also fixed income instruments: Treasury Bills (T-Bills) and high-quality bonds via bond or income mutual funds, such as the UTC’s Global Bond Fund and UTC’s US$ Income Fund. The Global Bond Fund, which invests in fixed income securities issued by corporations and government, can generate income and is an effective means of achieving global reach for an investment portfolio.  On the other hand, UTC’s US$ Income Fund, a short-term investment vehicle that seeks to achieve its objective by investing in a diversified range of moderate and quality fixed income securities, offers capital preservation as well as current income.

The mix of fixed income and stocks, however, depends on how much risk the investor is comfortable with. Those with a higher risk tolerance generally tend to allocate a greater portion of investment portfolio to stocks. From an investment standpoint, nonetheless, having some cash readily available allows the investor the opportunity to ride out volatility in the financial markets or take advantage of buying opportunities as they occur. 

Investors with an appetite for global investing should consider UTC International Suite of Funds, which includes the European Fund, Latin American Fund and Asia Pacific Fund  which are invested in equity and fixed income securities issued or guaranteed by sovereigns and corporations operating in the geographic regions identified.  These are designed to provide diversification to an investor’s portfolio and offer potential for long-term capital growth.   UTC’s North American Fund (NAF) also offers investors the opportunity to invest in shares in companies across North America, while at the same time balancing any potential for downside in the stock markets through its holding of bonds. 

A global approach not only gives investors the flexibility to pursue investment opportunities across the globe, but also provides an important source of portfolio diversification in the process. The objective of our portfolio managers is to help investors enhance the performance of their investment portfolios and to identify ways in which they can continue to save effectively and generate wealth.