Old Mutual\u2019s Smoothed Bonus Portfolios level off the extreme ups and downs of a volatile market with built-in smoothing and further guarantees to protect investors from massive market shocks.<\/p>\n
That\u2019s the promise. Do they deliver?<\/p>\n
For investors seeking reassurance, the current economy is a perfect test track.<\/p>\n
\u2018If ever we needed a test case to prove what a smoothed bonus portfolio can do, it\u2019s been the pandemic period of 2020 to 2022,\u2019 says Marvin Nair, Old Mutual\u2019s Head of Smoothed Bonus Products.<\/p>\n
Consider the bumps investors have experienced: lockdown, negative West Texas Intermediate (WTI) crude oil prices, growth, recession\u2026<\/p>\n
The smoothing philosophy, Nair explains, offers greater certainty in such uncertain times.<\/p>\n
\u2018Markets are in disarray,\u2019 he says, \u2018but at the same time, smoothing provides protection against volatility, as well as an ultimate limit on losses through underpinned guarantees.\u2019<\/p>\n
The proof, however, will always be in the numbers.<\/p>\n
From a returns point of view, Nair says a good comparison is between the return achieved by Old Mutual\u2019s flagship Absolute Growth Portfolios<\/strong><\/a> (AGP) and the median return in the 2022 Alexander Forbes Manager Watch Survey.<\/p>\n \u2018This annual survey compares the performance of large institutional fund managers in South Africa.’<\/p>\n ‘They found that the median fund return as at the end of June 2022 (YTD) was -3.4% \u2013 and that it was delivered with multiple ups and downs along the way.’<\/p>\n ‘In contrast, AGP Smooth was able to deliver 5.9% over the same period without a single month of negative returns being passed on to investors.\u2019<\/p>\n Another way to look at volatility is in terms of standard deviation, that is, the deviation of the return away from the average over a given period.<\/p>\n During the same period, Old Mutual Absolute Smooth Growth Portfolio\u2019s standard deviation was 0.09%.<\/p>\n In stark contrast, the median fund return deviation in the Alexander Forbes survey was 2.11%.<\/p>\n \u2018Having said that, we do caution against a short-term focus,\u2019 says Nair.<\/p>\n \u2018If you\u2019re investing for the long-term, you need to focus on long-term outcomes.’<\/p>\n ‘From that perspective AGP Smooth<\/strong><\/a> produced a 10-year return of 11% p.a. on an annualised basis, compared to the median of 10% p.a. indicated in the survey.’<\/p>\n ‘From a numbers point of view, Old Mutual\u2019s Smoothed Bonus Portfolios are certainly doing the job we expect them to.\u2019<\/p>\n \u2018Let\u2019s say we\u2019re driving from Johannesburg to Cape Town,\u2019 Nair says.<\/p>\n \u2018You and I will both get to the same destination, but with your market-linked balanced fund you\u2019ll traverse the ups and downs of the Karoo koppies, while I\u2019ll have a much smoother investment journey with my smoothed bonus portfolios<\/strong><\/a> on the N1.’<\/p>\n ‘The smoothing mechanism is like a shock absorber protecting me from the bumps in the road.\u2019<\/p>\n When the bumps become too much for your proverbial \u2018investment car\u2019 to handle, AGP offers an additional layer of protection or insurance in the form of guarantees to limit the losses investors experience during this phase.<\/p>\n Additional protection against those bumps is important, because if you leave the fund at the wrong time \u2013 say, if the market hits a big pothole or the wheels well and truly come off \u2013 you\u2019ll still have a portion of your investment guaranteed at that point in time.<\/p>\n Maybe you\u2019re retiring, maybe you\u2019re resigning, or maybe you\u2019ve been retrenched. Either way, the timing is everything.<\/p>\n \u2018The question is: do you want to be like the person who retired at the end of March 2020, when the bottom fell out of the market?\u2019 Nair asks.<\/p>\n \u2018If you\u2019re invested in a market-linked balanced fund the answer is a resounding no.’<\/p>\n ‘If you\u2019re in a smoothed bonus fund, it matters less because you have layers of protection.\u2019<\/p>\n Find out more about Old Mutual\u2019s smoothed bonus funds here.<\/strong><\/a><\/p>\n For more information on this and other useful topics, click here.<\/strong><\/a><\/p>\nHow smoothed funds make investors\u2019 journey easier<\/h3>\n