Commentary on Balanced Fund Performance

The recent political events in South Africa has had a profound impact on the market climate. SA relies on foreign capital flows to fund its deficits, and with recent and increasingly likely further downgrades of its sovereign debt looming, further volatility can be expected.

It is this volatility that sees investors seeking more comments and opinions from us, of late.

With a sizeable chunk of investments exposed to Balanced funds, we are often asked numerous questions on these funds:

How has my investment performed during these recent times?

What are the fund managers doing with my money?

Whilst it is always difficult to comment on short-term returns (as we advocate a long-term view as an investor in any Balanced fund), we are able to offer some comfort, reminding investors that our preferred Fund managers (be it Coronation, Prudential or Allan Gray) build robust investment portfolios and avoid highly concentrated or correlated bets – and by default remain cautiously positioned. With most Balanced funds holding underlying instruments which have been impacted severely by recent developments, and certain counterbalancing hedge instruments we are extremely comfortable with the robustness of these portfolios.

This is a good time to remind yourself of a Balanced fund’s investment objective. When sentiment is really poor, Fund managers tend to get opportunities to buy quality businesses at significant discounts to their intrinsic value. This goes a long way to achieving the investment objective.  However, this does require a long-term view.