I attended the most recent Taking Stock presentation by Investec Asset Management on Friday morning.

The main speakers were Malcolm Charles, Head of Fixed Income and Clyde Rossouw, Co-Head of Quality.  Malcolm’s portfolio manager duties includes the Diversified Income Fund. Clyde’s portfolio manager duties include the Investec Opportunity, Cautious Managed and Global Franchise Funds. Jeremy Gardiner also provided an interesting macro-backdrop to the where we are both globally and domestically right now.

The easy money has been made

One of the points which was made was that, since the global crisis of 2008, the easy money has been made. Global markets have run strongly driven by very accommodative monetary supply as we have seen interest rates at generational lows.

As can be seen in Graph 1 below, when looking at asset class returns over the last 10-years as long as you were invested in something you got a better return than cash or inflation. Over the last 12-months, however, the picture has been less glamorous.

Source: Investec Asset Management

Going nowhere slowly

Investors in domestic funds will also be aware that the South African equity market has gone sideways for the last three years, delivering returns less than cash. Between June 2014 and June 2017 the JSE All Share Index went nowhere and demonstrated a significant degree of volatility.

Source: Investec Asset Management

(Aside: The ALSI actually broke this trend in July 2017 when it closed above 55,000 points for the first time since 2015. July was a strong month on local markets with the ALSI up by more than 7%).

Retail investors are cautious

Both empirical (cash balances, money market flows) and anecdotal evidence are all pointing clearly to retail investors (individuals, entrepreneurs and corporates)  not allocating cash right now as people “await some certainty”. Much of the “certainty” they are hoping to see is in the political arena, whilst the asset managers worth their salt seem to be focusing on valuations.

The pros are taking emotion out of the equation and finding opportunities

Comment: Whilst investing in certain times is often a comfortable pastime, it’s rarely rewarding. Experienced long-term investors know that to consistently stick to the chosen long-term strategy is much less risky than trying to time the markets. When I look at the latest fund fact sheets of the multi-asset managers I follow, I note that the professional investors are not sitting on huge pools of cash which would indicate to me that they are still finding opportunities to invest.

I would not be betting against them and would rather entrust them with my capital and let them make the calls of which asset classes are likely to give the necessary growth we need for the future.


Disclaimer: The information provided is not intended to address the circumstances of any particular individual or entity and should not be considered to be advice in any way. No person should act upon this information without first obtaining professional advice.

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