Financially Speaking February 2010

I love deadlines. I’m particularly fond of the whooshing sound they make as they go flying by.

Dear Client,

I had a conversation with a colleague the other day around the concept that I still see and hear spoken of where some folk want to or get advised to pay off all debt before saving for retirement and other things. The conversation originated from a story of a 55 year old having nothing ……. nil, zip, in place for retirement savings at this age, even though he’s been employed for the last 15 years.

I remain convinced that a person cannot do this and has to save from day one as well as pay off house debt etc. If the performance of the economy, which helps manipulates the performance of our investments, does not outperform the cost of money [borrowing money] in the long term, then we have bigger problems….

Plus many folk won’t begin saving properly, they re-leverage their bonds etc for ‘home improvements’ and ‘lifestyle assets’ and ‘experiences’, such as traveling. The performance figures in my topic below support this reasoning.

Investment issues – our three balanced funds hogging the top three spots over 5 years!!

Last month I was studying the unit trust performance figures listed in the independent fund data pages of Personal Finance magazine. It was good to see the three balanced unit trust funds that we predominantly use for all clients retirement annuities, moderate investment growth choices and even as an investment choice for members of the pension / provident funds my office helps administer, taking places one, two and three over a 5 year period, which is really the minimum length of time to view this over. The Foord Balanced Fund was 1st at an average of 17.97% per annum, followed by Coronation Balanced at 17.61% and Allan Gray Balanced at 3rd on 17.55% pa over 5 years. This is great and gives good support for the reasoning behind our fund choice strategies. One will never know what the returns will be going ahead, but our reasoning behind choice is proving fruitful and not without merit. The next fund was at 16.38% and then 5th was 15.0%. This is out of 30 funds.

Then I had another interesting comparison for a client, with whom I discussed it this past week. I facilitated a purchase of Satrix tracker unit trusts for the client 18 months ago. At the same time we fed some money into 3 other actively managed general equity funds. The Satrix funds grew by a total of 21.19% after costs, good over 18 months, while the average of the other three equity funds grew by a total of 24.58%, with two of the funds doing 26.5% (Allan Gray) and 27.7% (Foord). This proves the theory that good, active, single fund managers with sound house views, and are NOT multi-managers or Fund of Funds, can outperform the average of the market and passively managed funds. But I know that for every one that does, there are probably two that don’t. Strategies of choice come to the fore again.

Investment issues – asset manager presentations

This brings me to talking about all the fund manager presentations I am attending at present. Last week I had two sessions, one with Investec and the other I have already mentioned that was hosted by Allan Gray with Coronation and Prudential and Investec in attendance.

Then I am off to Cape Town on the 10TH of March. This is again a ‘Fund Feedback’ session hosted by Allan Gray and where I had to crack the nod to be invited. We are automatically invited if our investment book with them is large enough; over 50 Million. Mine is still about 20 short of that, so I have to pull strings and beg my local office to get me on the list, which they have done twice now. They fly us down and we stay in some hotel. We will listen to fund analysts from eight different local and international fund managers. I don’t use all of them presenting this time, but it’s still good to hear others in case there is a reason for looking at another fund house and to hear the different opinions of the economy and markets.

Until next time

Please note that all the views expressed in this publication are based on my opinion and no action or advice is implied or intended.