HOW LOCAL FUND MANAGERS HANDLE TOUGH TIMES
I’m sure you will probably agree that great uncertainty seems to be the driving force behind world markets at the moment. When the sun shines at its brightest on the markets, investors seem blinded by the light and unable to see actual fair value, while these very investors fail to see anything good when t he markets ar e at their darkest.
Every morning, while getting ready for work, I switch my television to one of the international financial channels to listen to the views of various well-known investment institutions. What I find very interesting is the fact that their views seem to change daily – especially these days. One morning we are told that the outlook seems positive and that we may be approaching the end of the markets’ decline. The next morning, after the release of one or two sets of negative data from China, we are made to feel that the end of the world as we know it is near. No wonder investors feel like a chameleon on a box of Smarties. locally and internationally) lowered from an average of 68.4% in September 2012 to 63.3% in September 2014. The decrease in equity exposure came mainly from local equities, and in part possibly due to the extreme weakening of the rand. Over the same period, these f ive funds also increased their average money market exposure from 16% to 19.5%, proving that even our local investment professionals weren’t all that comfortable with valuations and t he i nvestment play i ng f i eld i n which t hese valuations were to be found.
These funds have maintained their f ixed interest exposure at around 28%, while the money market was clearly used as an escape whenever market uncertainty became a major concern. Even Warren Buffett mentioned on several occasions that i nvestors shouldn’t be afraid to hide in cash investments when they feel uncertain and our top f und managers clearly share his view.
With t he most r ecent market movements, these funds have started to use market weakness over t he past two months to lower their f ixed interest exposure, while increasing their exposure to equities. The process remains slow however, as it is nowhere close to the levels seen three years ago.
In conclusion, I will reiterate the fact that investors shouldn’t be driven by emotions in current market conditions. If we were to compare investments to a cricket match, it should be seen as a f ive-day series, rather than a Pro20 or even a one-day match. Learn from the investment experts and rather use these conditions to sort out your weightings.