Global stocks will outperform their Australian counterparts over the next few years as local banks and mining giants deliver weaker returns, according to an investment strategist.
"The Australian market has had a great run on the back of banks and mining companies, it cannot last forever," MLC investment strategist Brian Parker said.
"Even though the China and India stories are very powerful, the world economy is slowing, led by a United States economy which is already in recession."
Over the longer term, commodity prices would soften as supply caught up with demand, hurting the profits of mining giants like BHP Billiton and Rio Tinto, he added.
Australian bank stocks would underperform as they make lower profits due to consumers cutting back on borrowing because of higher interest rates.
"The rates the typical borrower in their 20's and 30's are paying today are the highest rates we have seen since 2000," Parker said.
But Australians haven't had the pain of dealing with "18 per cent interest rates" unlike in the 1980's, he said.
However, he forecasted that the Reserve Bank of Australia's next move would be to reduce interest rates.
The three biggest Australian funds by funds under management (FUM) on financial adviser platforms have beaten Australian-managed global funds for the last five years.
Perpetual's Wholesale Industrial Fund, CFS Wholesale Imputation Fund and Ausbil Australian Active equity Fund have returned 13.76 per cent, 15.85 per cent and 22.02 per cent each year, respectively.
The biggest global funds including the Platinum International Share Fund, Axa Global Equity Value Fund and the Credit Suisse International Shares Fund have returned 9.15 per cent, 8.37 per cent, 5.83 per cent each year, respectively, in the same time.
