2009-10-31
DUBLIN – The Hewitt Managed Fund Index returned +2.5% for the month of September, consolidating another strong performance for the third quarter of 2009. This brings the three month return to +11.7% and the year to date return to +17.6%. In terms of which individual funds fared the best, The Hewitt Managed Fund Survey shows that the Acorn Life Managed Fund was the best performing fund for the month of September with a return of +3.8%. Merrion's Managed Fund is the best performing Managed Fund compared to its peers over a one year period while the Eagle Star Balanced Fund is the highest rated fund over the three year and five year time horizons. Merrion Investment Managers retain their number 1 position over 10 years returning +8.9% per annum. Despite strong returns in the last 6 months, the average return on Irish Managed Funds for the last twelve months still remains marginally negative at -0.7%.
Recent volatility might have caused some investors to question the appropriateness of investment strategies with high equity weights for pension fund investors. However, over the long term, equity based investment has paid off. The chart on the left shows the cumulative performance of €100 invested in the average Irish Managed Fund 20 years ago. In spite of the recent turmoil, your €100 investment would now be worth €385. Effectively, your investment would have almost quadrupled in 20 years, in spite of recent market turmoil. Notably, this masks the fact that at the height of the market (June 2007) your €100 would have been worth €545.
Over shorter time periods, however, the result is quite different. The chart on the right shows that €100 invested in the average Irish Managed Fund 10 years ago would now be worth only €113. This highlights the fact that time horizon is critical in determining an investment strategy.
In terms of the shorter term, it is indisputable that equity markets have consolidated significantly since the lows of 2008 and 2009, however it remains uncertain if we have reached the top of the rally and whether there will be any further increases in equity markets. Investors will now require firm evidence of improving economic fundamentals in order to support the recent rally and sustain any advance from here.
Indeed, investors who have participated in the recent market advance might consider using this opportunity to reduce overweight positions in equities and increase exposure to other real asset investments, diversified alternatives that will reduce portfolio risk and protect investors from the rising inflationary trends that we expect in the years ahead.
