Investors sought safe haven in Cash and Global Fixed Interest funds largely at the expense of equities during 2011, suggesting that there is a wall of money waiting to be switched into equity funds as confidence returns, according to Skandia International’s analysis of its customers’ investment behaviour.
Cash and Global Fixed Interest funds accounted for half of all money invested* into Skandia International’s investment products on a global basis** during 2011. For those investors who chose to place their money in these two sectors, this decision may have paid off as the average performance of these asset classes remained positive last year, unlike any other asset class in the analysis.
These figures show a significant proportion of savings currently sitting in cash and fixed interest whilst investors wait for the ‘right’ signals from the markets in order to move into equities, or other asset classes, and participate in the rally when it happens.
In third and fourth positions of popularity during 2011 were Pacific Equity and Commodity funds respectively, which won a combined 25% of investors’ money, whilst Japanese Equities accounted for the smallest proportion of inflows, taking in a mere 0.09% of total net flows.
In terms of investment returns, the next best performing funds behind cash and fixed interest were North American Equity funds, although still falling by over 4%, followed by Property funds which dropped by over 8%. The worst performers with a loss of almost 31% were Emerging Europe funds which suffered to the greatest extent as a result of the Eurozone debt crisis.
Looking at withdrawals, Mixed Asset funds proved to be the least attractive last year, with almost a third of investors choosing to move their savings out of these funds. Almost 13% exited Aggressive / Global Equity funds, a decision which may have been influenced by the performance of global indices such as the MSCI World Index, which lost almost 7% in USD terms last year.
A further quarter of the money removed was from Latin America, Hong Kong & China and BRIC funds – not surprising, given that the average fund in these three sectors lost in excess of 20%; they also proved to be the most volatile sectors for investments last year. Perhaps the most disappointing investment last year was India, which saw both very high volatility and some of the worst investment returns.
Phil Oxenham (pictured), marketing manager at Skandia International, says: “Following a sustained period of unpredictable market movements, investors are naturally showing signs of nervousness. It is impossible to predict exactly when markets are likely to rebound but unless they are already in the market, investors will be unlikely to benefit from the best part of the rally, which tends to bring with it the most dramatic returns.
“Those who are already invested in assets which, on paper, seem to have lost value should sit tight, as the wait is likely to pay off when markets return to a growth cycle. On the other hand, investors holding cash should, with the help of their financial adviser, re-assess the suitability of these large positions and review their investment strategy.
“It is back to that old adage, which rightly says ‘it is not about timing the market, but about the time in the market’.”