For AMMA Private Equity it became quickly obvious from inception that focusing entirely on raising capital for start-up companies found within the technology sector was an untapped market within Australia. This has positioned AMMA as a strong player in the Venture Capital space within Australia.
Venture Capital focuses on raising funds for companies at ground floor level whose vision is to make a big impact in their industry and grow on such a large scale that they deliver high monetary returns to their investors.
Although largely unheard of and often misunderstood in Australia, Venture Capital is accepted as the norm in the United States and was used to fund successful companies such as Facebook, Instagram, Google, FedEX and more. Many of these companies grow to list on a stock exchange such as the NASDAQ in the United States.
The technology sector is a slow burner on the Australian ASX, even though there can be huge gains made a monetary investment in the ‘next big thing’ - as seen in the histories of the companies mentioned above.
An understanding of what the markets look like globally is important if you are willing to think outside the box and want to find the best way to invest your money in the industries and markets where wealth creation is occurring.
Australian Listed Shares are expected to hold steady
Australian ASX200 is tied in a cycle between 4800 points to 5400 points going back as far as August 2015. The underperformance of the Australian stock market is largely due to the negative performance of the energy and resource sector which have been affected by the decline of Iron Ore and Oil in the global commodities market.
As previously highlighted in a recent daily update on our website the ASX200 is currently composed of only 1% listed technology equity, which incidentally is where significant wealth creation has occurred in American markets.
The Malcolm Turnbull Government has committed one billon AUD to promote technology and researched based business within Australia. This is in the form of the National Science and Innovation Agenda, and while well intentioned this does not seem to be adequate to create a real push of the Australian technology sector. For comparison purposes, the Saudi government has committed 1 trillion US Dollars to transition away from their dependency on Oil.
Dovish fiscal policy is likely to prop the market higher on the base of investors fleeing less risky assets and chasing gains in riskier assets, but this increase is likely to be due to low-interest rates instead of solid business fundamental gains across the economy.
American Listed Shares are expected to rise
The American equity market is expected to keep moving forward. In a global scenario where most currencies are dropping compared to the USD, this makes a compelling case to purchase equity with unhedged currency risk. This alone can create a return for international investors even if the equity stays neutral.
The hawkish trend for the US Federal Reserve is being carried out very slowly and will not likely stun the economic performance of the US. Large established technology businesses like Google, Amazon, Facebook and others are creating a great opportunity for Technology exposure to international investors such as Australians.
EU Listed Shares are expected to hold steady and possibly rise
Before BREXIT, the EU markets were moving favourably due to dropping interest rates and aggressive Quantitative Easing in place. The Business fundamentals behind the growth of the market were largely due to fiscal policy but for Australian Investors, it remains attractive as both the AUD and the EUR decline. Most of the foreign exchange risk is mitigated while still having access to quality shares in Euros STOXX 50 Index.
This 5-year graph shows continued strong performance of the S&P500, as compared to the ASX200. Using this data combined with the information provided* a conclusion could be made that the strong US stock markets may continue to outperform the Australian stock market, partially due to the continued growth of the US tech sector. Disappointingly, Australia still has very little stock market exposure to technology companies, which may be contributing to the continual under-performance of the ASX200.
*Please note that nothing in this article should be construed as constituting financial advice. Professional advice (legal, financial, industry or any other relevant professional advice whatsoever) should be obtained before applying, using, adopting or relying upon the information or content contained in this article. The information or content is not intended to be nor should it be relied upon as a substitute for legal or other professional advice. Please seek professional advice before acting or relying on any of the content.