When markets get pricey,go for quality, says Absa

When markets look expensive, pick quality that you can trust to last.

That’s the investment advice from Absa Asset Management as the unit trust industry’s Raging Bull Awards put the annual spotlight on what it takes to be a winning unit trust fund.

Results showcased the enduring relevance of corporate quality over investment fads and long-term strategy over short-term tactics, said Errol Shear, Absa Asset Management’s Chief Investment Officer.

He’s also manager of the Absa Select Equity Fund, a general equity fund with a value bias and a multiple award-winner.

“The year overall and the subsequent awards send an important message to investors,” said Shear, “and that is that quality companies, accurate stock selection and long-term commitment to the market can grow wealth even in a market that looks expensive and in an environment that remains uncertain.”

Absa Select realised an annualised five-year return of 18.5% and a one-year return of 23.2%. Yet the first quarter of 2010 had seen the JSE at a low ebb. A gradual, sometimes hesitant recovery ultimately resulted in a net All Share gain of 19.0% by year-end.

By the beginning of the new year, JSE valuations were riding high at a multiple of 17 times trailing corporate earnings – expensive territory for the South African market.

“A year ago, strong research credentials were essential to the identification of the right mix of asset classes and the right counters on the JSE,” noted Shear. “In a more expensive market, stock-picking skills are even more important if value is to be found and gains secured.

“Quality contributes to portfolio resilience when markets turn while ensuring an early upward bounce from a higher base when the correction ends.

“The responsible saver and the average pension fund member are looking for sound strategy, not short-term fads. Strategists with an eye to long-term value won in 2010 and I expect them to do the same in 2011.”

§ Raging Bull awards were conferred on top fund performers at a gala awards evening last night, Wednesday, January 26. The Absa Select Equity Fund won the Raging Bull in the Best Domestic General Equity Fund on a Risk-adjusted category. In addition, their Balanced Fund was awarded a certificate in Best Domestic Asset Allocation Prudential Medium Equity Fund category.