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Pity the poor private investor
Coronavirus driven capital raising on the ASX has been a boon for listed companies (wanting to shore up their balance sheet), a treat for investment banks and brokers (lucrative fees), and a boon for institutional shareholders (new shares at a substantial discount to market) who've made a quick and easy return of 10% or more.
Not so fortunate are the legion of individual shareholders - be they mums and dads, retirees, or SMSF members - who didn't get the offer of a quick return to make up, even in part, for the shellacking they've received as a result of the coronavirus in the first place. Not only this, but in many cases they've had, or will have, their dividends slashed or cut completely, seen interest on any cash in the bank go down to virtually nothing, and for those whose jobs have been impacted, seen their wages and salaries reduced - or disappear completely.
And finally, to add insult to injury (maybe that term's a little harsh) their equity has been diluted along the way, and therefore in due course so will their future dividends. And it's not as if there's no spare capital around, SMSF's are currently holding almost record levels of liquidity.
However, it's not fair! Although as Bill Gates once remarked when returning to give advice to students at his old university: "Life's not fair. Get used to it!".
The other side of the argument, of course, is that the institutions and managed funds who have been on the receiving end of the bonus quick returns are actually investing on behalf retail investors. As such, it could be argued it all works out in the wash, even if that's not really the point. However it does provide another reason to leave investing to the experts (the fund managers) provided, as we are always at pains to point out, you do your homework (research) and don't put all your eggs in one basket (diversify across managers, funds and strategies).
Talking of funds and performances, the statistics and returns continue to show that when times are tough for the market, actively managed funds, absolute return and alternative strategies provide downside protection - which is of course when it's required.
For the 12 months to the end of April, the ASX200 absolute return index was down -9.06% (and as of today's date is not much better). On a strategy or sector basis, managed futures rose +4.59%, equity long/short fell -2.13%, market neutral -2.90%, and equity long-only -4.78%. Across all strategies, the 12-month return was -3.12%, and -2.67% for all absolute return funds. With the usual caveat on averages, the range has been extreme: -75% through to +30%, with 75% outperforming the ASX200.
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