Don't panic over investments

By Staff Writer

Active managers are underperforming but now is not the right time to sell out, believes Nina Saad, head of portfolio management, Investment Solutions. She argues that bailing now will only realise, or lock in, current underperformance. In the worst case scenario active managers will continue to perform poorly for some time to come. However, she reminds investors that the market will turn. “The trick is not to panic and lock in current losses, but rather to keep the faith despite tough times,” she said.


Active fund managers regularly restructure funds to take advantage of volatility and inefficient pricing in the market, while versus passive managers simply track an index that is representative of available investments.


So what went wrong?


Saad explained that active managers had gone overweight resources, perhaps too early. However, due to their attractive valuation underpin, macros continue to work against this position as resources become even cheaper. Looked at over the last ten years, however, South African fund managers, en masse, going overweight resources is an extremely rare event. This means that “active fund managers need to stick to their current positions until the macros change and performance returns” adds Saad.


When will the macros change?


Saad believes one of the catalysts will be when foreign active fund managers, who have bought heavily into the emerging market consumer theme, start abandoning their retail positions. When this happens, “a lot of the alpha pent up in current active portfolios will be unlocked,” predicts Saad.


The immediate risk in maintaining current positions is poor relative performance in the short term. This may well prove difficult for the smaller asset management businesses, if investors bail too early. “The larger houses – or businesses that don’t have concentrated client lists dominated by one or two very large clients, however – will do well to weather the storm and stay the course,” says Saad. 

Recent Articles

Featured When to trade in your old car for a new one

You may have noticed that your car isn’t running as smoothly as it used to. This is particularly concerning if you’re hoping to sell it at a reasonable price, and buy yourself a modern alternative.

3 facts to consider when cancelling your contract

If you’ve ever had a relationship end in a bit of a mess, you’ll know that some people are more difficult to break up with than others. The pain, the push back, the back and forth – it can be a difficult process.

How long does debt reflect on your credit score?

If you’ve ever had debt that you didn’t manage well, you may have wondered how long the debt would remain, or be retained, on your credit score. This is known as a “retention period” and it is governed by the law.

Deals

Full Body Massage at Dembalicious Spa

Price: R99
When: Mondays to Sundays
Where: Johannesburg

Two-Course Asian Dining for Two

Price: R269
When: Mondays to Sundays
Where: Cape Town

One-Hour Yacht Cruise with Waterfront Charters

Price: R99
When: Mondays to Sundays
Where: Cape Town


Latest Guide

Guide to debt rehabilitation solutions