State Turbulence In Global Sharemarkets
State Turbulence In Global Sharemarkets Highlights The Benefits Of Of A Truly Active Approach
Colonial First State Investment Managers (NZ) Ltd Chief Executive Bruce Abraham says current market events demonstrate why it's important for investment managers to take a truly active approach to managing clients' money.
A sharp decline in technology stocks late last week led to significant falls in the broader US sharemarket.
Mr Abraham says Colonial First State had been concerned about expensive share prices and the hype surrounding technology stocks in general for some time.
"The likelihood of a major correction in valuations has been facing us all. It was never a question of if, but when," says Mr Abraham.
Mr Abraham says Colonial First State, as a truly active investment manager, only invests in quality companies (at sensible prices) with sound earnings prospects - something that many technology stocks have been unable to demonstrate. Therefore Colonial First State's sharemarket funds are quite different from market or index portfolios. Although stock prices are likely to decline in times of turbulence, quality stocks will outperform.
"Our truly active investment style aims to deliver benefits to investors no matter what is happening in world markets. We invest only in those assets that we believe will create wealth or protect our clients' money in the event of a market downturn. That is just what we have done.
"Firstly, our balanced funds comprise more than 55% in global bonds and cash. Bonds tend to be less volatile than shares so, when investors get the jitters, bonds tend to look like a more attractive alternative than shares.
"Secondly, our global shares and Australasian shares portfolios only have a select exposure to technology.
"Thirdly, our global shares and Australasian shares portfolios include approximately 10% in cash."
While current market volatility was likely to cause investors anxiety in the short term, Mr Abraham said the impacts on the genuine long-term saver would be irrelevant.