Finding diversified exposure in a low return environment

SA’s top performing multi-asset low equity funds | Patrick Cairns

Over the past three years it has been very difficult to find any kind of return in the local equity market. South African stocks had been very depressed until the recent rally that started in mid-June.

At the same time, investors have been wary of high valuations in equity markets in general. For some time bearish commentators have been warning of the risk of a significant pull-back

In South Africa, this concern has been exacerbated by the levels of political and economic uncertainty in the country. Investors have been reluctant to take too much risk in this environment.

This is why many investors have preferred to adopt a more cautious approach, using lower risk multi asset strategies. Between the end of June 2014 and the start of July 2015, the amount of money invested in South African multi-asset low equity funds increased by over 25% from R179.0 billion to R225.1 billion.

These funds generally try to minimise any potential for capital losses, while still achieving inflation-beating returns. Over the longer term they will lag equity markets, but in shorter term cycles they can be a good place to protect money without going all the way into cash.

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