Investment markets seem to be increasingly volatile and subject to news and events on the other side of the world. This can be put down to the speed of communication and social media, but also to the ease by which investors can buy or sell securities on any exchange in the world from the comfort of their homes.
For the speculator, rapid market moves are trading opportunities. But for the typical investor this volatility is not welcome, as it creates uncertainty and often leads to impulsive decisions, which undermine the achievement of long-term investment goals.
To solve this problem, a cornerstone of prudent investing is to ensure broad diversification in your portfolio. The reason behind this is that, consistently identifying the next asset or market sector that will perform well is nearly impossible. By creating a portfolio which holds a wide variety of shares and asset classes, the investor is likely to benefit from reduced volatility and enhanced long-term performance.
Food prices are going up worldwide. This is because large scale agriculture relies heavily on fossil fuels which are now so expensive. Much of the world’s arable land is given over to industrialised grain farming for both human requirements and animal feeds, and fertilisers, which are manufactured from natural gas, are vital to achieve high yields. Farming is also highly mechanised and therefore food prices rise when we have high oil prices.
Our portfolios offer exposure to contrasting views on the economic outlook, opposing ideas on individual shares and different manager investment styles.
We attended an investment conference recently with presentations by over 30 top international and South African fund managers. Listening to them all, it was fascinating how many different and often opposing views they held – all with very well researched arguments.
We think these diverse opinions are a great opportunity. Our model portfolios benefit from the synthesis of these different views and investment styles, giving our clients access to an extremely wide range of securities, asset classes and sectors.
One of the key benefits of our Rutherford multi-manager funds is the extra level of diversification they provide. Investors gain access to all the usual benefits of managed funds, such as their particular asset allocation expertise, with the added layer of multiple fund managers’ views. This is important because rarely will fund managers perform equally in all market conditions. By diversifying across fund managers, exposure to the performance of a single manager is reduced.
The underlying funds that comprise our portfolios are actively monitored to ensure that they are delivering the best possible outcomes for investors in varying market conditions. Exposure to each underlying fund manager in a multi-manager portfolio is increased, reduced or removed completely depending on how each manager is performing, and how complementary he is with the other managers in the portfolio.
In constructing our multi-manager funds, identifying great managers is an essential part of the process. Just as important however, is recognizing fund managers’ varying styles or approaches to how they invest, such as value, quality or momentum. Manager diversification offers optimal exposure to those different investment styles, which provides a more consistent return experience throughout a market cycle. Simply put, your portfolio is exposed to specific areas of the market so that you don’t miss out when one style happens to be performing better than another. This approach blends fund managers together in an efficient way to benefit client portfolios.
Rutherford model portfolios are a strategic blend of world class South African and international funds designed to achieve consistent inflation beating returns at the lowest risk.