Asset Allocation is Everything!
Ongoing investment research by Brinson, indicates that 92% of performance comes from asset allocation, 6% from stock selection and 2% from market timing.
(Pie Chart)
Growth Fund
Our Asset Allocation driven investment process continues to deliver awesome performance!
Our funds performed well over the last year as we stuck to our long term strategic asset allocation benchmarks, and by using tactical asset allocation strategies we took advantage of valuation opportunities as they arose to further enhance our funds performance.
The tactical advantage we gained by being underweight equities, overweight cash during the collapse in the last quarter of 2008, protected our funds. This overweight cash position left us with cash to take maximum advantage of the low equity prices in 2009 and by moving back to an overweight equities position our investors participated fully in this years bull run.
We have recently taken our equity holdings back to a neutral position as valuations have become less favourable. {Neutral being the strategic asset allocation or benchmark holding}. The profits from the sale of those local equities were invested offshore, taking advantage of the currency at the time and invested in offshore bonds. This position we intend to rotate into offshore equity at the appropriate value.
Looking forward, we do not believe that the current market prices are sustainable unless economic fundamentals continue to improve and we urge a cautious approach to those investors considering entering the market at this time.
It is our view that we now face a long hard road to recovery in the banking and shadow banking sectors.
Our concerns are:
Credit markets worldwide are not working efficiently, as funding is still not getting through to consumers and the corporate sector.
Consumers are paying off debt and starting to save for the first time in a long time!
The availability of credit is the major head wind for company earnings in the developed world.
To our valued clients,
We, at Southern Charter value your support and we look forward to being of service to you in the future. Should you wish to discuss the issues raised in this document further or your investments, please do not hesitate to contact us.
We are with you for the long haul!
Mark Thompson
Definitions
Asset Allocation - The process of selecting different asset classes to achieve a diversified investment portfolio and an optimal investment return
Strategic Asset Allocation - The long term allocation by asset class established statistically by adding different classes of assets together trading off the different risk and return characteristics of each asset class to achieve the optimal asset allocation for a certain level of risk. Also called the benchmark allocation.
Tactical Asset Allocation - the process of going under or over the strategic or benchmark weighting of an asset class to take advantage of mis-pricing either over or under in a particular asset class.
