Skilfully managed balanced funds set to come into their own
Prolonged equity bull market flatters rewards, but investors should prepare for higher risk
After a rocky time in the bear markets of 2000-02 and 2008, global balanced or 60:40 funds have tended to produce good returns for investors at reasonable volatility, particularly when converted into a weaker rand. Both the asset classes that comprise the benchmark have delivered positive returns with low moderate volatility, and the equities bull market has proved to be a lot longer and more resilient than many expected given its traumatic birth in the depths of a credit crisis. Unlike many of their international peers, South African investors have largely stuck with benchmark-oriented funds, as opposed to the outcome-oriented funds that have grown in popularity internationally. The additional risk that they have accepted — in volatility terms most of the exposure of a 60:40 fund is equity related — has paid off with higher returns. So the key question is whether investors should expect more of the same or is the period ahead going to prove more challenging? Before we deal with tha...
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