Investing

The share market is still fraught with uncertainty as Europe battles to keep a lid on spiralling debt, China winds back its horse-powered growth and the US staves off creeping recession. Because of this investors have shied away from investing their hard earned in financial markets.

The fact Australia’s biggest online stockbroker, Commsec, is sitting on more than $5 billion of client cash illustrates current mum and dad investor sentiment. This figure has swelled over 20 per cent in the past year as investors have fled shares for the safety of deposit accounts.

Conversely, Australian Self Managed Super Funds (SMSF’s) are arguably over exposed to equities and perceived as taking on too much risk. According to the Organisation for Economic Co-operation and Development, Australia’s super funds have the highest allocation to equities in the world, about 60 per cent. These same super funds also have the lowest allocation to bonds.

An alternative for both these groups, investors sitting on low yielding cash deposits and SMSF’s carrying too much equity exposure, is investing in corporate debt.

Over the past month an influx of $5 billion of corporate debt issues to the market has seen some existing bonds and hybrid issues (securities that combine elements of debt and equity) become pretty attractive propositions.