Retail investors have ‘missed the boat'

Sanlam Private Investments CEO Daniel Kriel said yesterday local retail investors, attracted by rising equity prices since March, were increasingly prepared to put some money into equities after “sitting on the sidelines” through the recent market volatility since the middle of last year.

“They're slowly becoming prepared to take a bite of the cherry again,” said Kriel, although he pointed out that “the full lump-sum type” investments were probably not advisable in the current market volatility and opportunities in equities had to be carefully selected because recent gains in share prices had not been broadly based.

He said investors dependent on their investments for their income were also finding that money market investments were not yielding enough in the lower interest rate environment and opportunities could be found in higher yielding stocks if the investor was prepared to stomach some volatility in the capital share value.

Novare Investments risk manager Melville du Plessis said investors in multimanager portfolios continued to allocate most of their funds to low-risk cash-biased portfolios in the first quarter, despite the extent of the fall in the market and subsequent improvement. “Investors remained hesitant to allocate money to higher risk mandates with the majority of discretionary flows having gone towards conservative, fixed-income and cash portfolios. As a result, they may have missed the boat,” he said.

Buying opportunities in equity markets did not often present themselves and, by not allocating capital to more risky assets, investors might have sacrificed long-term performance, he said.

In addition, the reinvestment risk in fixed income and cash was high.

Peter Brooke, head of macro strategic investment at Old Mutual SA, said retail investors remained mostly invested in cash-type investments, while institutions were more heavily invested in equities, although there did seem to be some growing appetite among retail investors for equities.

He did not expect interest rates to rise in the short term and “cash doesn't deliver a real investment in the long run”. The interest on cash investments was taxable, and this was not so on many other asset types. He said property, and even South African bonds, were yielding more than cash. He did not favour cash investments.

PSG Konsult investment manager Adriaan Pask said industry money market net inflows of roughly R14,4bn in the first quarter indicated many investors were still not aware of the better prospects of more diversified portfolios, even within the fixed interest space itself.

Equity markets were still somewhat volatile over the short term, but there was value in equities at current levels, and for conservative investors invested in cash, there might be better value in more flexible and diversified fixed-interest unit trusts.

For more aggressive investors, there was value in equities.

Du Plessis said South African multimanagers had held their own throughout last year while their international peers had experienced severe outflows. He said multimanagers were a cost-effective way of accessing professional portfolio management services, including manager due diligence, asset allocation, risk management and administration.

Source: Business Day

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