To­wards a ro­bust, di­ver­si­fied port­fo­lio

This fund aims to achieve long-term growth that con­sis­tently beats in­fla­tion.

Finweek English Edition - - MARKET PLACE - Ed­i­to­rial@fin­ By Niel Jou­bert

Fund manager’s in­sights:

Re­cent political and economic de­vel­op­ments, espe­cially Brexit and Don­ald Trump win­ning the Amer­i­can pres­i­den­tial elec­tion, at­test to the need for a ro­bust and di­ver­si­fied port­fo­lio, says Gra­ham Tucker, fund manager of the Old Mutual In­vest­ment Group Bal­anced Fund.

“The Brexit vote and a Trump vic­tory in the US elec­tions were pos­si­ble but largely un­ex­pected events,” he says. “Po­si­tion­ing sharply for the ex­pected out­come and ig­nor­ing the risk of the ac­tual out­come could have had a detri­men­tal ef­fect on the value of a port­fo­lio.”

Tucker explains that their view is that these events are a delayed impact of the global fi­nan­cial cri­sis, which has re­sulted in very slug­gish global growth and ris­ing in­equal­ity as cen­tral bank stim­u­lus has helped the rich.

He ex­pects this trend to con­tinue into next year with sev­eral Euro­pean elec­tions on the hori­zon, and with volatil­ity in mar­kets to re­main a fea­ture. This fur­ther presents the ar­gu­ment for a well-di­ver­si­fied port­fo­lio, says Tucker.

Ac­cord­ing to Tucker, the out­look for South Africa should im­prove into next year and Old Mutual sees value in lo­cal bonds, as well as lo­cal prop­erty shares. “Lo­cal prop­erty of­fers both an at­trac­tive yield and a growth op­tion. The fund has been se­lec­tively gain­ing ex­po­sure in this area more re­cently.”

In terms of “as­sess­ing the in­vest­ment uni­verse”, Tucker and his team con­sider the price of the as­set that is be­ing bought or sold. An equally im­por­tant con­sid­er­a­tion is how the macroe­co­nomic en­vi­ron­ment is likely to af­fect that in­vest­ment in future.

“Weigh­ing these two fac­tors al­lows us to de­ter­mine which in­vest­ments should be con­sid­ered for in­clu­sion in the port­fo­lio. We then need to con­sider the over­all risk to the port­fo­lio of in­clud­ing the var­i­ous as­sets,” says Tucker.

“While we take po­si­tions where we have a high de­gree of con­fi­dence in our view, we must also recog­nise that the future is un­know­able. As such, we aim to build a ro­bust, di­ver­si­fied port­fo­lio that will de­liver the re­quired re­turns with­out tak­ing on ex­ces­sive risk.”

He says a di­ver­si­fied fund com­bines var­i­ous as­sets in a man­ner “that would be ex­pected to achieve the re­quired re­turn while en­sur­ing that the in­vestor is saved from the roller-coaster ups and downs that come with in­vest­ing in a sin­gle risky as­set or sev­eral highly cor­re­lated as­sets”.

Why fin­week would con­sider adding it:

One of the main ben­e­fits of a bal­anced fund such as the Old Mutual Bal­anced Fund is the di­ver­si­fi­ca­tion across as­set classes.

The Old Mutual Bal­anced Fund is ideal for in­vestors looking for a solution that aims to con­sis­tently de­liver a mod­er­ate level of real growth (i.e. growth in ex­cess of in­fla­tion) over the medium to long term by bring­ing to­gether var­i­ous as­set classes from across the world.

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