....And speaking of our wealth, what about global diversification?
Tom Burke - Jul 20, 2012
The following chart from STATSCAN shows what we own as Canadians in foreign assets. If you figure that our total net worth collectively is $6.3 trillion, and our total stock, bond, GIC, and mutual holdings at all levels is just over $3 trillion, then
THE $3 TRILLION QUESTION
The following chart from STATSCAN shows what we own as Canadians in foreign assets. If you figure that our total net worth collectively is $6.3 trillion, and our total stock, bond, GIC, and mutual holdings at all levels is just over $3 trillion, then it starts to become very evident that at about $800 billion, our foreign financial asset exposure is quite undernourished. While Canada's market capitalization is hovering around $2 trillion compared to a global market cap that is above $50 trillion, does that not imply that we would have just 4-5% of our financial liquid assets right here in Canada (after all, we're stuck with our domestic real estate)? And with globalization, rapidly expanding emerging markets, and much easier access to research and information, you would expect a more globally tuned in investor in this country.
OR SOME U.S. EXPOSURE?
And when it comes to the U.S., a market that gives us all the diversification we may need and the comfort of solid jurisdiction and good familiarity, our exposure is closer to $400 billion......$400 billion of a $3 trillion total? What a difference a decade makes. Back in the 1990's, RRSP investors could not get enough of their foreign/US content. There was an intense lobby to have the limits expanded to the point where foreign content could be 100% of the retirement account. Now it is an investment theme that your average investor could care less about. The investor's behavioral leaning towards the comfort food of familiarity is what rules in these nervous times.
FROM STATISTICS CANADA www.statscan.gc.ca
|Securities||Countries or regions3||2006||2007||2008||2009||2010|
|All securities||All countries||735,963||764,177||583,201||645,266||743,516|
|South and Central America||7,589||11,566||7,265||14,234||15,868|
|Asia and Oceania||92,575||99,227||70,455||83,895||105,660|
|South and Central America||5,404||9,047||5,270||12,747||13,904|
|Asia and Oceania||84,490||90,186||64,402||77,011||95,474|
|Debt Instruments2||All countries||153,722||161,014||145,918||142,765||165,001|
|South and Central America||2,185||2,519||1,995||1,488||1,964|
|Asia and Oceania||8,086||9,042||6,053||6,884||10,186|