Retail investors giving up on smart timing

Retail investors are getting wise and giving up on the challenge of smart timing of market entry and exit.

The trend has been identified by STANLIB, the country's largest unit trust company and an innovator responsible for developing a new generation of flexible asset allocation investment products that delegate the job of market timing.

Instead, fund management professionals get carte blanche on the assets to switch and when to do it.

"We welcome the trend," says Kim Zietsman, STANLIB's head of single manager unit trusts. "International and local experience over many years indicates that no one can successfully second-guess the market all of the time, but the average retail investor is especially prone to market mis-timing, selling low and buying high.

"By delegating responsibility to the professionals, the chance of improved returns is much improved.

"In the last two quarters this message appears to have been taken to heart by more and more retail investors."

It is no accident that this very period has witnessed increased equity volatility, bond market pressures caused by higher rates and some substantial listed property losses. In May, 22% was wiped off the value of listed property.

Recent months have also seen continuing inflows into STANLIB's Aggressive Income Fund, with total inflows of R1 billion for the year to date. The fund provides investors with a solution for managing their exposure across the fixed interest and property markets, giving them access to a mixture of rental income and fixed-interest income.

The product is closely monitored by STANLIB marketers because of its unique structure. In contrast to most traditional income or property funds, the mandate gives fund managers TOTAL discretion to decide on the appropriate asset allocation between the cash, bond and property markets. Normally, minimum and maximum tolerances are prescribed.

Zietsman notes: "Consumer support rose at a time when investors faced the conundrum of asset class convergence - that period in the market cycle when returns from one type of asset begin to resemble expected returns from another. Precise measurement of risk relative to return becomes crucial."

The STANLIB Aggressive Income Fund is so named, as property and bonds as asset classes may experience capital volatility and therefore this portfolio is more aggressive than the typical income portfolio.

For the year to date, it has allowed investors to achieve total returns in excess of traditional fixed interest products.

Zietsman adds: The listed property sell-off was overdone. Some investors timed their exit poorly and lost capital. We also fear that long-term supporters of bonds have had some disappointing experiences of late after 10 years of stellar performance.

"Many investors in both the property and bond categories are risk averse and over several years have grown to expect superior returns with some capital appreciation as a bonus. Suddenly, the old pattern changes and uncertainty sets in.

"As a result, some of these investors have handed the worry of market appraisal and asset allocation to the professionals. Results to date suggest they are very glad they did.'

* The STANLIB Aggressive Management Fund is jointly managed by Henk Viljoen (STANLIB's head of fixed-interest investment) and Mariette Warner (head of property funds).