ONE of Australia's biggest listed investment companies, Djerriwarrh, has cautioned it may be some time before the sharemarket stages a significant recovery, with investors "extremely risk averse".
The blue-chip investment house, which has more than $686 billion in funds under management, said concern over deep division in Canberra, European debt woes and the outlook for Chinese growth were weighing on investor confidence.
Djerriwarrh managing director Ross Barker made these comments as the company posted a 22.4 per cent drop in full-year profit, reflecting the buffeting it took from choppy market conditions.
A fall in trading income along with the drying up of capital-return income from the previous year across the companies it invests in, caused Djerriwarrh's annual net profit to fall to $44.1 million, from $56.9 million in the previous corresponding period. Revenue for the year to the June 30 was $42.4 million, compared with $53.6 million in the previous corresponding period, a drop of 21 per cent.
The 30-year-old Djerriwarrh fund usually invests in stocks across the S&P/ASX200 Index, although the bulk of the holdings are tied up in the top 50 stocks.
While the fund lost the equivalent of 4.4 per cent over the year, this still outperformed the 6.7 per cent drop in the ASX 200 Index. On a three-year measure, Djerriwarrh has returned the 5.9 per cent, slightly outpacing the 5.7 per cent lift in the benchmark.
Even with some blue-chip stocks now emerging with hefty dividend yields, Mr Barker said few were willing to take advantage of downbeat prices, with the market likely to remain subdued for the medium term.
For all the concern over the economy, he believes corporate Australia remains in good shape. "We've been through a prolonged period through the GFC and since where companies have had their big issues to replenish their balance sheets, they've cut their cost to suit their new environment. They've done a lot of work that needed to be done."
Djerriwarrh's top holdings are skewed to the big four banks, Telstra and a range of top-tier miners. Its single largest investment was a $74.8 million stake in BHP Billiton.
Shares in Djerriwarrh ended the day 4? higher at $3.99.