Keep things simple to stay the course

When multi-asset investing makes sense.

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Most investors who’ve decided to invest some of their savings internationally will find it easier to achieve their financial goals if they stay committed – and it’s easier to stay committed if you choose a multi-asset fund that invests across different asset classes. This approach provides the reassurance that the investor has tasked the fund manager with the responsibility to reposition the portfolio as circumstances change.

The more time you give your investment to grow, the more likely you are to do well thanks to both market outcomes and the value that can be added through active management.

However, many South African investors do not invest for long enough to experience the full benefit of staying the course in their long-term investment programme. The average unit trust investor holds their investment for less than the recommended five-year minimum investment period before withdrawing. This is largely due to our instinctive urge to “do something” in response to recent market or fund outcomes. Constantly selling the most recent losers and buying the most recent winners is a near certain way to achieve sub-optimal results.

It’s easier to remain committed with a multi-asset fund

Investors who make their own asset allocation decisions may find it difficult to make consistently good decisions over time. They may be tempted to switch into or out of an asset class at the wrong time for emotional reasons.

Good asset allocation often requires you to do the opposite as you tend to achieve better results when you sell after a period of above-average returns (as prices have gone up) and buy after a period of below-average returns (and prices have fallen). It is a skill that requires considerable experience and discipline, so it makes sense to leave it to professionals who spend every day focused on identifying the best long-term opportunities available in global markets.

By giving your fund manager a broader mandate by way of a multi-asset fund, they also have more tools at their disposal with which to achieve the investor’s desired result.

Good years and bad years cannot be predicted

Local and global risk assets performed poorly over calendar 2018 with local equities returning -8.5% in rands and global equities returning 5.0% in rands (-9.4% in US dollars). Conversely, 2019 has been a good year for risk assets, with local equities up 11.2% in rands and global equities up 21.5% in US dollars for the year to date at the time of writing. Yet many investors continued to invest conservatively, as though they were still experiencing 2018 returns, thereby missing out on the more recent strong returns from local and global risk assets.

But it isn’t advisable to try to time the markets or switch between asset classes to capture returns in the short term. The good news is that you don’t have to implement regular extreme portfolio movements to get the best results. When investing in a multi-asset fund, you may not capture all of the market upside in any given year, but over time, the highs and lows smooth, and you benefit from positive returns across asset classes while spreading the risk of possible underperformance in any one asset class. The smoother path makes it easier for investors to stay the course over the long term.

Meeting investors’ offshore needs

Coronation offers three rand-denominated multi-asset funds for investors who want more international exposure as part of their long-term investment programmes: Coronation Optimum Growth, Coronation Global Managed and Coronation Global Capital Plus. The funds have track records ranging between 10 and 20 years and allocate across all or most assets to interna­tional investments, while remaining easy to use and access, being established in South Africa.

Pieter Koekemoer, Head of Personal Investments

Coronation Optimum Growth has the longest track record and can invest in any of the listed asset classes anywhere in the world. The fund benefits from our wide research coverage across local, developed and emerging markets.

This makes it a sound multi-asset class solution for long-term investors who are not subject to retirement fund investment restrictions and are looking for larger exposure to offshore assets but still require their fund manager to decide on the allocation between domestic and foreign assets.

Since inception in March 1999, the fund has delivered a return of 14.4% p.a*. The benefit of wider diversification and judicious portfolio management is reflected in the outcome that this return was achieved at significantly less downside risk than both the local and global equity markets.

To find out more about our multi-asset funds visit Coronation Offshore.

www.coronation.com

The information contained in this article is not based on the individual financial needs of any specific investor. To find out more, speak to your financial adviser. *Returns are quoted as at end-October 2019. For more detail about this fund, please download its comprehensive factsheet from our website.