Presented by Coronation

5 Benefits of Balanced Funds with investment specialist Amika Pillay 

If you want to invest for retirement or grow your savings over a decade or more, consider investing in a Balanced Fund.

Balanced Funds make the most important pre-retirement investment decisions on investors’ behalf. It is also clear that allowing a skilled fund manager to actively manage your portfolio in response to dynamic market environments can add significant value to your investment over time.

Learn more by watching the full video here, where we unpack the five key benefits of these funds and what makes them the most popular category in the industry.

A balanced fund is characterised by its diversification across asset classes, giving it the potential to reduce overall risk through exposure to different asset classes and enhance returns by broadening exposure to a more significant opportunity set.

Because the rand is a volatile currency that strengthens or weakens meaningfully over relatively short periods, balanced funds benefit long-term investors because they give access to international markets through a blended portfolio of local and offshore assets.

The international exposure also offers investors access to opportunities in industries that may not have a strong presence in the local market as well as to a much wider set of quality businesses with attractive earnings prospects within those industries.

What’s more, quantitative research shows that the optimal level of offshore exposure is around 40%, and with balanced funds, investors can outsource the responsibility to maintain appropriate levels of offshore exposure to the portfolio managers on their behalf.

Balanced funds also allow portfolio managers to increase and decrease exposure to the various asset classes in response to their relative attractiveness. The value our skilled fund managers add to your investment over time makes this one of the most compelling reasons to choose Coronation as your investment partner.

The following example of the total equity weighting over time within Coronation Balanced Plus Fund best demonstrates this benefit. From 2013 – 2015, Coronation believed SA equities were expensive and offered limited upside. As such, the fund held just over 30% in SA equity, with a total equity exposure of approximately 55% (see Figure 1).

Figure 1: Adjusting the total equity exposure on your behalf in Coronation Balanced Plus Fund 2013 – 2015 focus.

Conversely, when prices are low and upside is high, the fund holds a much higher exposure to equities. At the end of 2022 (see Figure 2), the fund had the maximum allocation to equities, which is 75%.

Figure 2: Adjusting the total equity exposure on your behalf in Coronation Balanced Plus Fund 2022 focus.

Another benefit is asset allocation, which is the balanced fund’s ability to allow for optimally blending higher-risk growth assets with lower-risk assets, balancing risk and reward for investors, and, if done successfully, is a substantial contributor to fund performance over time.

Watch the video now to see how if you invested R100 000 in the fund at inception just over 25 years ago, your money would have grown to just under R3 million.

Coronation is an authorised financial services provider.


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