Danish investors continue to buy more foreign securities

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Data from Finance Denmark suggests that Danish retail investors are continuing to shift away from a domestic bias in their equity and fixed income holdings, with a trend begun in the past five years to increase foreign exposure looking like it will continue.

Globally, the 'home bias' is seen as a long term challenge. But, argues Finance Denmark, most retail investors can achieve a better balance between return and risk if a larger share of their wealth is placed in foreign securities.

Its data suggests that in the 2014-18 period, local retail investors have been net buyers of investment funds, but the ratio of net buying of foreign equities through funds has been some 10x the amount bought in local equity, some DKK76bn versus DKK7bn (€10.2bn vs €937m).

The first five months of 2019 have seen Danish investors become net sellers of Danish equity funds (DKK-1.3bn), while remaining net buyers of foreign equity funds (DKK4bn).

Birgitte Søgaard Holm, head of Investments & Savings at Finance Denmark, said: "The share of Danish retail investors' wealth that is placed in investment funds is becoming increasingly internationally orientated. This offers clear benefits in regards to spreading risk, and we believe that this development will continue in future, as more and more see the advantages of looking out across the world."

However, Finance Denmark also notes that it is not an even approach to different parts of the international equity spectrum: funds with a broader global investment objective have been more successful than those with more a more specialised focus, such as emerging markets or North America.

Additionally, over the 2014-18 period, some DKK80bn (€10.7bn) was invested in balanced funds, which typically are mandated to invest in foreign securities, both equities and bonds. This trend has also been continuing over the first five months of this year.

On the bond side, the trend has up until 2018 been the reverse, with investments focused on Danish bonds. This trend has reversed in the firest five months of 2019, as net sales of foreign bond funds hit some DKK8.7bn (€1.16bn).