HOW TO IN­VEST DUR­ING A BEAR MAR­KET

An an­gry bear mar­ket can cre­ate con­sid­er­able in­vest­ment op­por­tu­ni­ties

Finweek English Edition - - FRONT PAGE - Leon Kok LEON KOK

The latest stock mar­ket volatil­ity once again drove home the im­por­tance of be­ing in­vested in top-rate funds. Not only have they done well over the long term, but they have proved ex­tremely re­silient over the past three months.

Most lead­ing as­set man­agers would prob­a­bly agree that global in­vestors are sim­ply repric­ing stocks to ref lect a more hon­est pic­ture of earn­ings, op­tions and the fu­ture. It’s not the end of the world.

In ad­di­tion, top man­agers of­fer a wea lt h of i nvest ment opt i ons, in­clud­ing the pro­vi­sion of pro­fes­sional man­age­ment at an af­ford­able price. In­deed, t hey make small i nvestors ben­e­fi­cia­ries of global ex­per­tise rather than be­ing de­pen­dent on the prover­bial ‘around the cor­ner know-alls’.

In this edi­tion we high­light some of these. Two in­cluded in the Old Mu­tual of­fer­ing are Peter Lin­ley’s R14bn In­vestors Fund, one of the big­gest and old­est in the in­dus­try; and Peter Brooke’s Edge 28 Life Fund, which has turned in a phe­nom­e­nal an­nu­alised re­turn of 17.8% in its f irst three years.

Coro­na­tion founder mem­ber and for­mer CIO, Louis Stassen, gives us an in­sight into his re­cently launched Global Eq­uity Se­lect Fund, the re­sult of sev­eral years of prepa­ra­tion. It has a strong de­vel­oped mar­ket bias but is f lex­i­ble enough to in­clude some ex­po­sure to the ex­cep­tional growth po­ten­tial of­fered by emerg­ing mar­kets.

We a l so i nter v iewed i mpres­sive i ndus­try play­ers, Allan Gray’s new chair­man, Ian Liddle, and deputy CIO, An­drew Lap­ping. They pro­vided some un­usual in­sights into their op­er­a­tion. Per­haps pre­dictably, they in­sisted that they’ll con­tinue to do things right, and set ex­tremely de­mand­ing stan­dards for them­selves.

In the on­go­ing ac­tive man­age­ment­pas­sive man­age­ment de­bate, Pru­den­tial CEO Bernard Fick presents ex­cel­lent ar­gu­ments for se­lect ac­tive man­age­ment in SA. His house, in the ac­tive man­age­ment camp, has con­sis­tently out­per­formed mar­ket in­dices over long pe­ri­ods of time, net of fees. This, of course, has been made pos­si­ble by, among other fac­tors, ex­ploit­ing short-term mis­pric­ing of as­sets.

We have con­sis­tently given cov­er­age over the years to al­ter­na­tive as­sets, and were de­lighted to re­ceive an ar­ti­cle from Stan­lib Thought Lead­er­ship head, Gil­lian Jones. Greg Babaya, the house’s in­fra­struc­ture fran­chise head, co-au­thored it. Stan­lib’s in­fra­struc­ture funds are ideal for large in­sti­tu­tional funds, seek­ing pre­dictable risk-re­turn pro­files.

The Stan­lib In­fra­struc­ture Yield Fund, for in­stance, has a low cor­re­la­tion to the busi­ness cy­cle, of­fers diver­si­fi­ca­tion to an in­vest­ment port­fo­lio and is a good inf la­tion-hedge, as the in­come streams are usu­ally in­fla­tion linked.

As a part­ing re­mark, I urge you not to get swept away by the present mar­ket hype. If you make a long-term com­mit­ment to in­vest, you should stick with it for the long-term, and not al­low emo­tional nightly TV view­ing and/or gos­sip to push you out of the mar­ket. Pa­tience is re­warded.

Although unit trusts can pro­vide at­trac­tive re­turns over long pe­ri­ods of time, they don’t nec­es­sar­ily pro­vide them each and ev­ery year. And you can’t pre­dict in which years they will or will not per­form.

En­joy the read.

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