Market Commentary 12 Feb 2018
In today’s markets Diversification is the key to stable fund growth. Fund managers in the middle of 2017, who held strong off shore exposure, looked to be getting it right. Weighted themselves heavily in rand hedge stocks and maxed their off shore stock exposure.
Managers who stayed local and bucked the trend to look for off-shore growth lagged, but their patience paid off when the news of the ANC conference broke and the rand began a run against major currencies, hurting the rand hedge stocks and off shore stocks.
So the importance of diversifying fund managers is as important as diversifying across asset classes. Not only did we see this in the equity space but fixed interest and property sectors too, as off-shore positions hurt managers.
When one constructs a portfolio, balance is the key; diversifying fund managers by style becomes important as well as by their ability to stick to their investment style and mandate. Managers selected should have a low correlation to each other.
The weighting of the portfolio is based on a client to client bases, as no two clients have the same need or objective. The biggest drive of markets is fear and greed and these are driven by hype. We have seen this over the last 20 years as bubbles come and go.
What you need to look out for, are managers that don’t get caught up in the hype – chasing returns and ignoring investment styles. But rather those who follow their processes. This is the kind of manager that values client’s money over ratings and awards.