I took out an RA with Liberty Life in 2006. The only reason I chose Liberty Life was because they were in the same office building as I was at the time. Four years later and I wonder if I did the right thing. I read a lot of good things about Allan Gray and others.
Does it matter which investment house manages your funds? Is Liberty Life well-known and stable? What are my options; would it be worth it to move funds or start a new one? What happens to your investments if your investment house goes bust?
All investment companies employ economists, investment analysts, asset and portfolio managers and various other investment focused staff to look after the funds that clients give them to manage on their behalf. Some of them do it very well and some of them never quite seem to get it right. In reality, every company has performing and non-performing funds within its selection of funds.
For example, over the last 12 months the Allan Gray Equity Fund delivered 13.3 percent and the Stanlib Property Income Fund delivered 24.38 percent (these were their respective top performing funds over this period). Had you invested in the Stanlib fund for that period you would be feeling pretty smug when compared to all of your colleagues invested in any Allan Gray fund.
For the same period, the Allan Gray Orbis Global Fund of Funds had a negative return of -12.59 percent and the Stanlib EURO Currency Fund of Funds had a negative return of -14.44 percent. This means that in holding "Allan Gray" you could have made up to 13.3 percent or lost as much as 12.59 percent depending on which fund you were in.
However, the exact same funds held over a three or five year period also has very different returns. To illustrate this, over three years the Allan Gray Equity Fund returned 13.97 percent compared to the Stanlib Equity Fund which lost 18.32 percent (although this year it returned 14.82 percent; better than Allan Gray’s 13.3 percent).
The point I am illustrating is that all investments are cyclical, and all investment company fund returns fluctuate too. There is no single investment company that continually outperforms the others all the time.
Make sure that the company you choose is not too expensive with regards to fees and that you are comfortable with the fund’s (or combination of funds) performance over the short, medium and long term. Please remember though that past performance may not continue into the future.
One of the most comprehensive websites used to compare funds is www.equinox.co.za.
If you are not a DIY investor, then speak to your financial planner. Certified financial planners are required to pass certain investment exams in addition to having experience in the investment market.
Article continues on page two: how to switch if your investment underperforms...