INFLATION energy prices, interest rates, and now war in Europe: at times it feels like there is nowhere for investors to hide.
Yet coping with volatility and uncertainty is situation normal for experienced investors, who can turn to a few tried and trusted tips to get them through the downturn, says Pendal’s Samir Mehta.
“There are periods of time a portfolio will struggle,” says Mehta, who manages Pendal Asian Shares Fund.
“The cause of volatility and sell-off is global in nature — no geography and very few sectors have been spared.”
Investors can turn to three timeworn strategies when seeking to cope with market uncertainty, Mehta says.
First, he says check that your portfolio is appropriately diversified. Even in times of market dislocation, different assets perform differently.
Past few months, the best performers were in the energy sector (oil, gas and coal producers) and miners. A properly diversified portfolio has exposure to these sectors.
This will test ideological convictions, says Mehta.
“But the goal is to identify a few of these areas of strength and have a bit of exposure — even if they are areas where normally you don’t want to participate.”
Find out about
Pendal Asian Share Fund
Diversification includes holding an allocation to cash through the turmoil.
“You need to try to preserve as much capital as possible,” he says.
Second, Mehta says investors should bunker down and wait out the volatility.
“Sometimes you have to just live through these painful periods of underperformance,” he says.
And finally, he says it is a good time to look for opportunities to change the portfolio as the price of companies becomes divorced from their fundamentals.
“Sometimes, the selling is indiscriminate,” says Mehta.
Mehta says broad-based market sell offs often throw up opportunities to buy companies at attractive prices.
“To navigate through this, I try to identify companies that will come through this in a much better state than they are today.”
He uses the example of a company in his portfolio, China’s food delivery giant Meituan.
Meituan has been sold off amid concern it could suffer from Beijing’s regulatory actions aimed at improving equality and alleviating cost of living pressures for Chinese families.
“But they are a business that in my view benefits the community – they provide a lot of employment. Their fees for restaurants are among the lowest in the world. And they are very profitable,” he says.
Mehta’s advice: “Be careful not to the use the price of a company to judge its value.”
“These are the decisions that investors have to make with the kind of confluence of events that are taking place.
“Whether it’s geopolitics, Federal Reserve action, Chinese regulatory issues or inflationary pressures — we have to look through this fog and try to understand which are the businesses that genuinely will come through these problems.”
“The unintended consequences of actions in this war will play out over a long while to come. War teaches us why geography matters and why history can’t be ignored.
“No one felt the weight of his actions than the so-called father of the atomic bomb, J. Robert Oppenheimer (as you can see in this video below).
It’s a sober realism worth listening to.
Samir manages Penda’s Asian Share Fund, an actively managed portfolio of Asian shares excluding Japan and Australia. Samir is a senior fund manager at UK-based J O Hambro, which is part of Pendal Group.
Pendal Asian Share Fund aims to provide a return (before fees, costs and taxes) that exceeds the MSCI AC Asia ex Japan (Standard) Index (Net Dividends) in AUD over the medium-to-long term.
Find out about Pendal Asian Share Fund
Pendal is an independent, global investment management business focused on delivering superior investment returns for our clients through active management.
This information has been prepared by Pendal Fund Services Limited (PFSL) ABN 13 161 249 332, AFSL No 431426 and is current as at March 3, 2022.
PFSL is the responsible entity and issuer of units in the Pendal Asian Share Fund (Fund) ARSN: 087 593 468. A product disclosure statement (PDS) is available for the Fund and can be obtained by calling 1300 346 821 or visiting www.pendalgroup.com. The Target Market Determination (TMD) for the Fund and Trust are available at www.pendalgroup.com/ddo. You should obtain and consider the PDS and the TMD before deciding whether to acquire, continue to hold or dispose of units in the Fund.
An investment in the Fund or Trust or any of the funds referred to in this web page is subject to investment risk, including possible delays in repayment of withdrawal proceeds and loss of income and principal invested.
This information is for general purposes only, should not be considered as a comprehensive statement on any matter and should not be relied upon as such. It has been prepared without taking into account any recipient’s personal objectives, financial situation or needs. Because of this, recipients should, before acting on this information, consider its appropriateness having regard to their individual objectives, financial situation and needs. This information is not to be regarded as a securities recommendation.
The information may contain material provided by third parties, is given in good faith and has been derived from sources believed to be accurate as at its issue date. While such material is published with necessary permission, and while all reasonable care has been taken to ensure that the information is complete and correct, to the maximum extent permitted by law neither PFSL nor any company in the Pendal group accepts any responsibility or liability for the accuracy or completeness of this information.
Performance figures are calculated in accordance with the Financial Services Council (FSC) standards. Performance data (post-fee) assumes reinvestment of distributions and is calculated using exit prices, net of management costs. Performance data (pre-fee) is calculated by adding back management costs to the post-fee performance. Past performance is not a reliable indicator of future performance.
Any projections are predictive only and should not be relied upon when making an investment decision or recommendation. Whilst we have used every effort to ensure that the assumptions on which the projections are based are reasonable, the projections may be based on incorrect assumptions or may not take into account known or unknown risks and uncertainties. The actual results may differ materially from these projections.
For more information, please call Customer Relations on 1300 346 821 8am to 6pm (Sydney time) or visit our website www.pendalgroup.com