For the best performing asset allocation funds over three years in the worst markets ever! If there was such an award, Southern Charter would win it hands down!

The inconvenient truth is that “Asset Allocation drives Everything”. The recent market turmoil clearly re-established the key role of asset allocation in generating returns and protecting the downside. Given the high levels of volatility in this period, which are expected to continue, asset allocation is expected to play an even bigger role in explaining investment returns.

Southern Charter’s initial investment objective in 2007 was to manage risk in retirement fund portfolios, and their success over this period can be largely attributed to their focus on risk rather than returns, which saw their retirement fund investors funds being well protected over the period.

Southern Charter’s assertion that “Asset Allocation drives Everything” was based on a research paper done by Brinson, Singer and Beebower, in which their research indicated that asset allocation produced 90% of the return, 4% came from market timing and 6% from stock picking. In simple terms, the amount of alpha produced by an asset manager is much smaller than the magnitude of returns that can be ascribed to market swings.

In the past, monkeys beat the market! In 2008 we had a major wake up call. Having a well diversified investment strategy which includes macro views and the use of probability and scenario planning, plays a much more significant part of portfolio construction at Southern Charter today.

At the heart of Southern Charter’s portfolio construction is the Nobel prize-winning economist, Harry Markowitz’s theory of diversification – the ability to manage risk based on the expected correlation between assets, where portfolios are constructed with desirable standard deviations and expected return profiles. In simple terms, by mixing different classes of assets with different risk return relationships, we were able to increase the return and reduce the risk. The only “free lunch” in economics.

Investment risk is further mitigated by the selection of fund managers who include a top down macro strategy in their process and who follow a value fund style of investment management, classically characterised by Warren Buffet’s approach i.e. where the underlying business is clearly understood, delivers a regularly strong dividend stream, and can be described as being largely bricks and mortar companies, where the current market price is less than the intrinsic  value and likely to realise over the long term in the future.

We humbly attribute the extraordinary performance achieved over this volatile three year period, to the people at Southern Charter who believed in, implemented and managed this value-based, well diversified investment strategy.

Southern Charter’s Growth Fund of funds achieved 1^st place with a return of 37.37% (Annualised 11.16% p.a.) over the last three years in the Prudential High Equity category, the Balanced fund 3^rd place with 34.78% (Annualised 10.46% p.a.) in the Prudential Medium Equity category and the Defensive fund came in 6th with 32.85% or (Annualised 9.93% p.a.) in the Prudential Low Equity category – Source Money Mate / Please refer to the tables below (click on the thumbnails).

 “Our well diversified asset allocation strategy delivers more certainty in an uncertain world.” Mark Thompson CEO Southern Charter.

To see the latest Southern Charter Fund Fact Sheets, click here.