TIME TO FO­CUS ON THE LONG TERM

In­vestors need to give their in­vest­ments time to grow over decades, in­stead of wor­ry­ing about daily noise.

Finweek English Edition - - FRONT PAGE -

tofo or long, in­vestors have fo­cused on re­turns over the past quar­ter or year, when mar­ket and in­vest­ment cycles ac­tu­ally play out over a far longer time hori­zon. “Rather than chase af­ter this quar­ter’s dar­ling, we need to re­mem­ber that in­vest­ment is for life,” says John Green, head of the global client group at In­vestec As­set Man­age­ment.

“By be­ing fo­cused on the short term, in­vestors tend to lose faith and ei­ther switch or re­deem their in­vest­ments hastily, cost­ing them per­for­mance – and some­times even cap­i­tal. In con­trast, in­vestors that pur­sue their in­vest­ment goals with­out pay­ing at­ten­tion to the daily noise are re­warded for their pa­tience.”

He finds it an en­cour­ag­ing sign that the unit trust in­dus­try is start­ing to pay homage to long-term per­for­mance. At the re­cent Rag­ing Bull Awards, which recog­nise the top unit trust funds and man­agers in South Africa, two spe­cial awards were pre­sented for 21-year per­for­mance, to com­mem­o­rate the 21st an­niver­sary of the Rag­ing Bull Awards.

In­vestec As­set Man­age­ment was awarded both these prizes, with the In­vestec Eq­uity Fund re­ceiv­ing the award for the top out­right per­for­mance over 21 years by a South African gen­eral eq­uity fund and the In­vestec Man­aged Fund win­ning best risk-ad­justed per­for­mance over 21 years by a South African multi-as­set high-eq­uity fund.

WHAT DOES THIS MEAN FOR IN­VESTORS?

In the case of the In­vestec Eq­uity Fund, in­vestors en­joyed re­turns of 15.9% per an­num over the 21 years, ver­sus 14.3% from the mar­ket. Not only is this 1.6 per­cent­age points ahead of the mar­ket, it is also 9.5 per­cent­age points ahead of in­fla­tion over that pe­riod, which came in at 6.5%.

“By in­vest­ing with us, and re­main­ing in­vested, our clients saw their money grow 48% more than they would have had they cho­sen to in­vest pas­sively in the mar­ket. The rand ef­fect is sim­i­larly star­tling. An in­vest­ment of R1m in our fund would have grown to R22.5m by the end of that pe­riod, ver­sus R15.2m from an in­dex tracker,” Green points out.

In the case of the In­vestec Man­aged Fund, the fund de­liv­ered 13.8% per an­num, which is only 0.5 per­cent­age point less than the eq­uity mar­ket, and 7.3 per­cent­age points more than in­fla­tion per an­num. What is note­wor­thy, how­ever, is that this re­turn was de­liv­ered with less than twothirds of the volatil­ity (13.1% volatil­ity for the Man­aged Fund, ver­sus 21.2% for the Alsi). “This speaks to our abil­ity to man­age risk within multi-as­set port­fo­lios, de­liv­er­ing ex­cel­lent risk-ad­justed re­turns. In rand terms, a R1m in­vest­ment in the In­vestec Man­aged Fund 21 years ago would have grown to R15.2m, ver­sus R13.2m if you had in­vested in the av­er­age Multi-As­set-High-Eq­uity-Fund,” Green con­cludes.

John Green Head of the global client group at In­vestec As­set Man­age­ment

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