TIME TO FOCUS ON THE LONG TERM
Investors need to give their investments time to grow over decades, instead of worrying about daily noise.
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