Best advice is provided by Nick Brummer and Rod Lowe, directors of Investonline.co.za
Nick has been a leading stock market analyst for the last 15 years. Over this period of time Nick has built up an in-depth knowledge of the major investment houses in the unit trust industry and is well acquainted with their various investment processes and methodologies.
Rod is a Certified Financial Planner (CFP) who has advised high net worth individuals on investing in unit trusts for the past 20 years. His role entailed the appraisal of each individual’s investment needs and the suitable structuring of unit trust portfolios that considered inherent market and institutional risk.
Introduction
Investing in the right portfolio of unit trusts is the best way to save over the long-term, which requires:
- diversifying your risk into a portfolio of unit trusts
- investing in a portfolio of unit trusts that suits your risk profile
- investing in unit trusts that are more likely to outperform the majority of their peers.
Our methodology enables us to recommend the right underlying unit trust funds for you to choose a structured portfolio that best suits your risk profile.
Background
We strongly believe unit trusts are the best form of long-term saving as they provide you with a direct channel into the share market, which has yielded an average annual return of 17% p.a. over the last 40 years. This is 7% above inflation.
However, unit trusts in aggregate, have under-performed the JSE All Share Index over the last five years by an average of 2.3% per annum. This may be partly due to the huge increase in the number of unit trusts from 550 in 2005 to 904 in 2010. Many of the new entrants have untested investment processes or limited experience, which has dragged down the overall unit trust performance.
Given this we believe some unit trust managers have a competitive advantage over others, and therefore selecting the right unit trusts is key to obtaining good long-term returns over time.
Investonline.co.za has chosen Allan Gray’s investment platform as our underlying investment administrator which allows you to access the foremost 45 investment managers with proven track records, in terms of performance, consistency, and over various measurable periods. We have also added Flagship Asset Management’s unique Worldwide Flexible Fund.
This investment platform allows free switching between funds when necessary and has an average annual administrative cost of 0.10% p.a. for accessing diversified and risk profiled unit trust portfolios.
Methodology
Our portfolio of funds selected per risk profile category is based partly on historical performance, but mostly on selecting the best quality fund management companies and individuals who we believe should outperform their peers in the long-term.
We have a neutral investment style bias, which means we believe in a flexible approach that appreciates both value and growth.
Our selections are marginally influenced by our view of the stock market’s performance over the next year. Currently, we believe there is a higher chance of the stock market
underperforming inflation over the next year, which leads us to a more defensive stance in our current selections.
Historical performance
We rank the consistency of investment performance over the last five years on a risk-adjusted basis, which takes into account relative volatility. Performance and volatility figures are supplied by Morningstar, an independent global information provider.
Qualitative review
Our view is that above average performance is the result of a recipe that successfully combines science and art and is consistently applied. A disciplined science is applied to fundamental research and overlaid with the art of many years of experience. We research the funds and scrutinize the management processes enabling us to pick the best quality firms and individuals.
The key attributes we look for:
Firms that brand their process above individuals Firms that have responsible staff incentive schemes in place. Teams that have strong fundamental research backgrounds Unwavering discipline in following process Unemotional decision making Individuals who are passionate about financial markets
Conclusion
We believe that our best advice methodology of selecting a portfolio of three to four unit trust funds from a nucleus of 45 funds ensures that Investonline.co.za clients have a competitive advantage over the alternative investment routes available. Furthermore, we are confident that the nature of our advice is independent.
We look forward to a long and prosperous investment relationship via Investonline.co.za.
