International News in Brief: Pension funds growing too big for Australian market

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Australian’s pension funds are heading towards an allocation of 60% of their equities to foreign markets within 10 years, overturning a long-standing bias of local equities.

But the Australian market can only absorb so much, and already some funds have grown too big for it, reported Bloomberg. Currently, the market has a 48% allocation of foreign equity investments.

According to the statistics bureau, for the first time ever the value of Australian investments in foreign equities was higher than foreigners’ holdings of the nation’s stocks, the report said. Google and Walt Disney were two of the most popular stocks.

Nader Naeimi, the head of dynamic asset allocation at AMP Capital, told Bloomsberg that the trend in favour of international assets is becoming more and more prominent. He advises having 80% of funds invested abroad.

“Australia is a very small pool, with very few opportunities compared to globally,” he said.
The UK’s Financial Conduct Authority (FCA) has blasted the financial service industry for what it calls widespread failings in the way advisory firms are disclosing information about costs.

Although an official ban on commissions paid to financial advisers came into force at the end of 2012, after a far-reaching survey the FCA has found that “too many” wealth management firms weren’t being clear enough about fees, reported The Guardian.

Of 113 firms surveyed, 73% failed to provide the required information on the cost of advice. Two unnamed companies will also potentially be referred to the financial crime division and face major punishment.

This comes after Santander was fined £12.4m by the FCA last month for serious failings in the way that it sold thousands of customers’ investment products.

One of the major backlashes of the change from conflicted remuneration to fee for service in the UK has been the exit, either partially or fully, of many banks from the market. This has created what has been dubbed at an “advice gap” for mainstream consumers, the report said.
The International Monetary Fund (IMF) has warned that the Eurozone’s pressured banking system poses a major threat to global financial stability.

Six years after the start of the global financial crisis and the IMF has reported that the stock of non-performing loans has doubled from 2009, now standing at €800 billion, the majority of which is corporate debt, according to The Guardian.

The IMF is now pleading the Eurozone to repair the banks’ balance sheets before it’s too late, reports said.

But the problem is already getting worse: "Deleveraging has been accelerating in recent months as institutions have shored up their balance sheets ahead of the ECA (the regulator's stress test)," the IMF report said.

Head of the IMF, Christine Lagarde, emphasised this is in her recent warning to world leaders that they need to do more to deal with huge government and bank debts.

"In the euro area, a common fiscal backstop remains missing,” she said.