PENSIONS
trustnet.com
as a possible recovery play,” said
Peter Lowman, chief investment
officer at Investment Quorum.
“We won’t do anything for a while
though, as there are too many
headwinds.”
“Commodities like a highinflation, high-growth
environment, with the likes
of China and other emerging
markets buying. We don’t have
that at the moment.”
JUST LONG ENOUGH
FE Analytics data shows that
even after the recent QE-inspired
rally in Japan, the Nikkei 225
is down 36.75 per cent from a
total return point of view from
its peak in 1989, while the IA
Technology & Telecoms sector
is down 35.56 per cent since
February 2002.
After reading what the experts
had to say, John replied that he
doesn’t plan to have his entire
pension in this fund for the
majority of his working life,
just for long enough to see a
significant rebound in the sector
– “probably about five years”, he
said. Of course, he may have to
wait a lot longer…
FURTHER WEAKNESS
“John needs to be very patient as
he could see further weakness. I
fear it may be dead money for a
while yet. There will eventually be
some spikes – but we are not quite
there,” Lowman added.
In addition, while it is generally
not a bad idea to invest in sectors
that have fallen out of favour, as
more often than not they bounce
PERFORMANCE OF JPM NATURAL RESOURCES
SINCE 2011
10%
0%
-10%
-20%
-30%
-40%
-50%
-60%
Jan 15
Jul
Jan 14
Jul
Jan 13
Jul
-70%
Jan 12
Patrick Connolly, head of
communications at Chase de
Vere, also says he can see where
John is coming from.
“Although I would never
recommend that my clients do
what John is doing, because he is
young, his pension pot is small
at the moment and because he is
investing monthly, he is taking
advantage of lower prices.”
“JPM Natural Resources has
had a number of terrible years,
but it is right to invest in sectors
when they have done poorly.
However, I would have said it
was a good time to invest in
this fund last year and the year
before that. It has fallen a lot
since then.”
Both Willis and Connolly add
that John’s approach means
he does not have the luxury of
being able to forget about his
pension for any length of time.
“What you have to factor in
is that he needs to keep a close
eye on it and review it regularly,”
Willis explained.
“Once JPM Natural Resources
has had a few years of strong
performance, he should think
about diversifying.”
“I think he would be better
off taking a more diversified
approach so he has different
parts of his portfolio working for
him at different times, allowing
him to build up the risk/return
profile.”
One of John’s reasons for buying
into the commodities sector is
that with prices so depressed at
the moment, the only way is up.
Does this mean that the experts
are also flocking back to the
sector? Not quite…
“We did have a look at
commodities a few months ago
Jul
LOWER PRICES
back, this rebound is far from
guaranteed.
“Quite often, the sectors that are
leading the markets before the
crash aren’t the ones that lead in
the next rally,” said Willis.
Connolly adds: “There are many
sectors that have not returned
to their former glory. Japan is a
good example – the Nikkei was
at 39,000 in 1989, but 25 years
later it is around the 20,000 mark.
Most tech funds have recovered
from the dotcom bubble now, but
some haven’t and of course some
individual companies have gone
out of business.”
“JOHN NEEDS TO BE
VERY PATIENT AS HE
COULD SEE FURTHER
WEAKNESS. I FEAR IT
MAY BE DEAD MONEY
FOR A WHILE YET”
Jan 11
“It’s not a completely
imprudent thing he’s doing
because with commodities doing
so badly over the past couple of
years, he’s probably buying at a
good level,” said Ben Willis, head
of research at Whitechurch.
Source: FE Analytics
5