Listed investment firm Australian Foundation Investment Company (AFIC) expects uncertainty in Europe to continue to cause market volatility in the coming months.
AFIC, which has an investment portfolio worth $4.3 billion, reported its net profit fell seven per cent to $113.6 million in the six months to December 31 compared to the same period in 2010.
Returns on the company's portfolio were down 7.8 per cent.
"In our view there is likely to be further uncertainty in the coming months as the political and economic events continue to play out in Europe," AFIC said in a statement.
Investment in mining and energy was benefiting the Australian economy, but the remaining sectors were "wrestling with the impact of a strong Australian dollar, relatively high interest rates, hesitant consumers, rising input costs and unemployment", AFIC said.
But emerging economies were still growing, and the United States was showing some signs of improvement, it said.
"If this trend continues and there is a move towards a sustainable solution in Europe, investors may be inclined to take on more risk and markets should improve," AFIC said.
The company's largest acquisition in the six months to December was a $14.3 million stake in gloves and condoms maker Ansell.
It disposed of $35.2 million in Foster's stock due to its takeover by SABMiller, and a takeover also resulted in the sale of its $12.5 million stake in Eastern Star Gas.
With more than $220 million in funds raised by a recent note issue, AFIC said it had the funds available to add to its investments if it sees quality companies at low valuations.
AFIC shares were up two cents at $4.20 at 1511 AEDT.
