Targeted returned funds have become the flavour of the month among unit trust investors, which could be a sign that investors are growing nervous about the strong run in equities and are fearing a correction.
In February the asset allocation funds targeting absolute or real returns suffered a small cash outflow but investors pumped a net R893m into them in March. Absolute returns do not have a benchmark while real returns usually target an inflation-beating return.
Eben Maré, who manages STANLIB's Dynamic Return Fund, says it's difficult to pin down the exact reason for their popularity but attributes it to investors who have benefited from the run-up in the market switching to a vehicle that presents lower risk. At time of writing the JSE all share index was closing in on the 30 000-point level, having started the year at around 21 500 points.
"They are keen now to benefit from further appreciation in the market but on a smaller scale.
"If I had to allocate money now I would go for these funds because there's more risk management in them. The fact is, the market's run hard and people are probably skittish but still want some upside potential."
In terms of performance, financial equity funds had the best month-on-month return of 8,76% and is the leader over the past 12 months with a handsome return of 55,92%.
Value stocks are also providing joy for investors with a 12-month return of 51,6%, but it's interesting to see small company funds in third place with a 48,6% 12-month return. The money hasn't really been following them though: they had a net inflow of R19m but are down R345m over 12 months.